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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 SEPTEMBER 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)
Balanced Fund
Statement of Assets and Liabilities................. 1
Statement of Operations............................. 2
Statement of Changes in Net Assets...................3
Per-Unit Data and Ratios.............................4
Index Equity Fund
Statement of Assets and Liabilities................. 5
Statement of Operations............................. 6
Statement of Changes in Net Assets...................7
Per-Unit Data and Ratios.............................8
Intermediate Bond Fund
Statement of Assets and Liabilities................. 9
Statement of Operations............................ 10
Statement of Changes in Net Assets..................11
Per-Unit Data and Ratios............................12
International Equity Fund
Statement of Assets and Liabilities................ 13
Statement of Operations............................ 14
Statement of Changes in Net Assets..................15
Per-Unit Data and Ratios............................16
Large-Cap Growth Equity Fund
Statement of Assets and Liabilities................ 17
Statement of Operations............................ 18
Statement of Changes in Net Assets..................19
Per-Unit Data and Ratios............................20
Large-Cap Value Equity Fund
Statement of Assets and Liabilities................ 21
Statement of Operations............................ 22
Statement of Changes in Net Assets..................23
Per-Unit Data and Ratios............................24
Mid-Cap Growth Equity Fund
Statement of Assets and Liabilities................ 25
Statement of Operations............................ 26
Statement of Changes in Net Assets..................27
Per-Unit Data and Ratios............................28
i
Page No.
--------
Mid-Cap Value Equity Fund
Statement of Assets and Liabilities................ 29
Statement of Operations............................ 30
Statement of Changes in Net Assets..................31
Per-Unit Data and Ratios............................32
Small-Cap Equity Fund
Statement of Assets and Liabilities................ 33
Statement of Operations............................ 34
Statement of Changes in Net Assets..................35
Per-Unit Data and Ratios............................36
Stable Asset Return Fund
Statement of Assets and Liabilities................ 37
Statement of Operations............................ 38
Statement of Changes in Net Assets..................39
Per-Unit Data and Ratios............................40
Structured Portfolio Service - Conservative Portfolio
Statement of Assets and Liabilities................ 41
Statement of Operations............................ 42
Statement of Changes in Net Assets..................43
Per-Unit Data and Ratios............................44
Structured Portfolio Service - Moderate Portfolio
Statement of Assets and Liabilities................ 45
Statement of Operations............................ 46
Statement of Changes in Net Assets..................47
Per-Unit Data and Ratios............................48
Structured Portfolio Service - Aggressive Portfolio
Statement of Assets and Liabilities................ 49
Statement of Operations............................ 50
Statement of Changes in Net Assets..................51
Per-Unit Data and Ratios............................52
Notes to Unaudited Financial Statements...................53
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...............61
Item 4. Procedures and Controls...........................66
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.........66
Item 5. Other Information.................................66
Item 6. Exhibits and Reports on Form 8-K..................68
SIGNATURES.....................................................69
CERTIFICATIONS.................................................70
ii
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS (UNAUDITED)
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
BALANCED FUND
STATEMENT OF ASSETS AND LIABILITIES
UNAUDITED
SEPTEMBER 30, 2002
------------------
Assets
Investments, at value (cost $459,177,972) $401,270,984
Cash 258,652
Receivable for investments sold 204,257
Receivable for fund units sold 0
Dividends and interest receivable 1,529,440
Other assets 19,136
------------------
Total assets 403,282,469
------------------
Liabilities
Payable for investments purchased 49,356,389
Payable for fund units purchased 1,104,862
Accrued expenses 365,802
Other liabilities 5,147
------------------
Total liabilities 50,832,200
------------------
Net Assets $352,450,269
==================
Net asset value, redemption price and offering price
per unit of beneficial interest ($352,450,269/6,585,440
units outstanding) $ 53.52
==================
The accompanying notes are an integral part of these financial statements.
1
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
BALANCED FUND
STATEMENT OF OPERATIONS
UNAUDITED
FOR THE PERIOD FOR THE PERIOD
JULY 1, 2002 JANUARY 1, 2002
TO SEPTEMBER 30, 2002 TO SEPTEMBER 30, 2002
------------------------------------------------
Investment income:
Dividend income $ 714,141 $ 2,342,368
Interest income 2,273,179 7,529,749
------------------------------------------------
Total investment income 2,987,320 9,872,117
Expenses:
Investment advisory fee 217,056 717,420
State Street Bank& Trust Company - program fee 331,531 1,027,246
American Bar Retirement Association - program fee 47,539 151,145
Trustee, management and administration fees 85,832 266,265
Other expenses and taxes 58,119 184,927
------------------------------------------------
Total expenses 740,077 2,347,003
------------------------------------------------
Net investment income 2,247,243 7,525,114
------------------------------------------------
Realized and unrealized gain (loss) on investments:
Net realized gain on investments sold 304,424 814,997
Unrealized depreciation of investments
during the period (43,882,615) (90,585,758)
------------------------------------------------
Net loss on investments (43,578,191) (89,770,761)
------------------------------------------------
Net decrease in net assets resulting
from operations $(41,330,948) $(82,245,647)
================================================
The accompanying notes are an integral part of these financial statements.
2
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
BALANCED FUND
STATEMENT OF CHANGES IN NET ASSETS`
UNAUDITED
FOR THE PERIOD FOR THE PERIOD
JULY 1, 2002 JANUARY 1, 2002
TO SEPTEMBER 30, 2002 TO SEPTEMBER 30, 2002
-----------------------------------------------
Decrease in net assets from:
Operations:
Net investment income $ 2,247,243 $ 7,525,114
Net realized gain on investments 304,424 814,997
Unrealized depreciation of
investments during the period (43,882,615) (90,585,758)
-------------------------------------
Net decrease in net assets resulting
from operations (41,330,948) (82,245,647)
-------------------------------------
Participant transactions:
Proceeds from sales of units 3,631,816 15,736,590
Cost of units redeemed (21,439,880) (39,197,257)
Net decrease in net assets resulting
from participant transactions (17,808,064) (23,460,667)
-------------------------------------
Total decrease in net assets (59,139,012) (105,706,314)
Net Assets:
Beginning of period 411,589,281 458,156,583
-------------------------------------
End of period $ 352,450,269 $ 352,450,269
=====================================
Number of units:
Outstanding-beginning of period 6,907,629 6,995,400
Sold 63,788 251,841
Redeemed (385,977) (661,801)
Outstanding-end of period 6,585,440 6,585,440
=====================================
The accompanying notes are an integral part of these financial statements.
3
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
BALANCED FUND
PER-UNIT DATA AND RATIOS
UNAUDITED
Selected data for a unit outstanding throughout the period:
FOR THE PERIOD FOR THE PERIOD
JULY 1, 2002 JANUARY 1, 2002
TO SEPTEMBER 30, 2002 TO SEPTEMBER 30, 2002
------------------------------------------------
Investment income $0.45 $1.43
Expenses (0.11) (0.34)
------------------------------------------------
Net investment income 0.34 1.09
Net realized and unrealized loss on investments (6.40) (13.06)
------------------------------------------------
Net decrease in unit value (6.06) (11.97)
Net asset value at beginning of period 59.58 65.49
------------------------------------------------
Net asset value at end of period $53.52 $53.52
================================================
Ratio of expenses to average net assets* 0.78% 0.74%
Ratio of net investment income to average net assets* 2.37% 2.38%
Portfolio turnover** 53% 135%
Total return (10.00%) (18.00%)
Number of units outstanding at end of period
(in thousands) 6,585 6,585
- ---------------------------------------------------------------
*Annualized
**Not annualized
The accompanying notes are an integral part of these financial statements.
4
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
INDEX EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
UNAUDITED
SEPTEMBER 30, 2002
--------------------
Assets
Investments, at value (cost $318,108,189) $198,134,240
Cash 0
Receivable for investments sold 1,874,113
Receivable for fund units sold 0
Dividends and interest receivable 0
Other assets 3,723
--------------------
Total assets 200,012,076
--------------------
Liabilities
Payable for investments purchased 0
Payable for fund units purchased 667,609
Accrued expenses 100,293
Other liabilities 0
--------------------
Total liabilities 767,902
--------------------
Net Assets $199,244,174
====================
Net asset value, redemption price and offering
price per unit of beneficial interest
($199,244,174/10,328,339 units outstanding) $ 19.29
====================
The accompanying notes are an integral part of these financial statements.
5
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
INDEX EQUITY FUND
STATEMENT OF OPERATIONS
UNAUDITED
FOR THE PERIOD FOR THE PERIOD
JULY 1, 2002 JANUARY 1, 2002
TO SEPTEMBER 30, TO SEPTEMBER 30,
2002 2002
-----------------------------------------
Investment income:
Dividend income $0 $595
Interest income 0 0
-----------------------------------------
Total investment income 0 595
Expenses:
Investment advisory fee 0 0
State Street Bank & Trust Company - program fee 190,923 598,391
American Bar Retirement Association - program fee 27,372 88,067
Trustee, management and administration fees 49,430 155,139
Other expenses and taxes 30,730 92,335
-----------------------------------------
Total expenses 298,455 933,932
-----------------------------------------
Net investment loss (298,455) (933,337)
-----------------------------------------
Realized and unrealized loss on investments:
Net realized loss on investments sold (5,113,719) (7,582,780)
Unrealized depreciation of investments during the period (36,698,632) (67,653,430)
-----------------------------------------
Net loss on investments (41,812,351) (75,236,210)
-----------------------------------------
Net decrease in net assets resulting from operations $(42,110,806) $(76,169,547)
=========================================
The accompanying notes are an integral part of these financial statements.
6
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
INDEX EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
UNAUDITED
FOR THE PERIOD FOR THE PERIOD
JULY 1, 2002 JANUARY 1, 2002
TO SEPTEMBER 30, TO SEPTEMBER 30,
2002 2002
--------------------------------------
Decrease in net assets from:
Operations:
Net investment loss $ (298,455) $ (933,337)
Net realized loss on investments (5,113,719) (7,582,780)
Unrealized depreciation of investments
during the period (36,698,632) (67,653,430)
--------------------------------------
Net decrease in net assets resulting
from operations (42,110,806) (76,169,547)
--------------------------------------
Participant transactions:
Proceeds from sales of units 6,973,440 27,762,284
Cost of units redeemed (7,963,423) (15,525,787)
Net increase (decrease) in net assets
resulting from participant transactions (989,983) 12,236,497
--------------------------------------
Total decrease in net assets (43,100,789) (63,933,050)
Net Assets:
Beginning of period 242,344,963 263,177,224
--------------------------------------
End of period $ 199,244,174 $ 199,244,174
======================================
Number of units:
Outstanding-beginning of period 10,387,829 9,881,870
Sold 333,098 1,138,905
Redeemed (392,588) (692,436)
Outstanding-end of period 10,328,339 10,328,339
======================================
The accompanying notes are an integral part of these financial statements.
7
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
INDEX EQUITY FUND
PER-UNIT DATA AND RATIOS
UNAUDITED
Selected data for a unit outstanding throughout the period:
FOR THE PERIOD FOR THE PERIOD
JULY 1, 2002 JANUARY 1, 2002
TO SEPTEMBER 30, TO SEPTEMBER 30,
2002 2002
------------------------------------
Investment income $ 0.00 $ 0.00
Expenses (0.03) (0.09)
------------------------------------
Net investment loss (0.03) (0.09)
Net realized and unrealized loss on investments (4.01) (7.25)
------------------------------------
Net decrease in unit value (4.04) (7.34)
Net asset value at beginning of period 23.33 26.63
------------------------------------
Net asset value at end of period $ 19.29 $ 19.29
====================================
Ratio of expenses to average net assets* 0.54% 0.51%
Ratio of net investment income to average net assets* (0.54)% (0.51)%
Portfolio turnover** 4% 7%
Total return (17.31)% (27.57)%
Number of units outstanding at end of period (in thousands) 10,328 10,328
------------------------------------
- ----------
* Annualized
** Not annualized. Reflects purchases and sales of units of the collective
investment fund in which the fund invests, rather than turnover of the
underlying portfolio of such collective investment fund.
The accompanying notes are an integral part of these financial statements.
8
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
INTERMEDIATE BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
UNAUDITED
SEPTEMBER 30, 2002
------------------------
Assets
Investments, at value (cost $333,981,695) $336,953,194
Cash 8,857,756
Receivable for investments sold 19,488,773
Receivable for fund units sold 493,326
Dividends and interest receivable 1,727,599
Other assets 2,875
------------------------
Total assets 367,523,523
------------------------
Liabilities
Payable for investments purchased 159,243,629
Payable for fund units purchased 197,464
Other liabilities 177,424
------------------------
Total liabilities 163,549,848
------------------------
Net Assets $203,973,675
========================
Net asset value, redemption price and offering
price per unit of beneficial interest
($203,973,675/12,075,816 units outstanding) $ 16.89
========================
The accompanying notes are an integral part of these financial statements.
9
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
INTERMEDIATE BOND FUND
STATEMENT OF OPERATIONS
UNAUDITED
FOR THE PERIOD FOR THE PERIOD
JULY 1, 2002 JANUARY 1, 2002
TO SEPTEMBER 30, 2002 TO SEPTEMBER 30, 2002
------------------------------------------------
Investment income:
Dividend income $45,348 $4,271,713
Interest income 1,694,456 1,694,878
------------------------------------------------
Total investment income 1,739,804 5,966,591
Expenses:
Investment advisory fee 147,299 147,299
State Street Bank & Trust Company - program fee 175,088 459,848
American Bar Retirement Association - program fee 25,068 67,460
Trustee, management and administration fees 45,284 119,103
Other expenses and taxes 28,155 71,209
------------------------------------------------
Total expenses 420,894 864,919
------------------------------------------------
Net investment income 1,318,910 5,101,672
------------------------------------------------
Realized and unrealized gain on investments:
Net realized gain on investments sold 11,532,399 11,571,694
Unrealized depreciation of investments
during the period (4,120,141) (1,162,760)
------------------------------------------------
Net gain on investments 7,412,258 10,408,934
------------------------------------------------
Net increase in net assets resulting from operations $8,731,168 $15,510,606
================================================
The accompanying notes are an integral part of these financial statements.
10
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
INTERMEDIATE BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
UNAUDITED
FOR THE PERIOD FOR THE PERIOD
JULY 1, 2002 JANUARY 1, 2002
TO SEPTEMBER 30, 2002 TO SEPTEMBER 30, 2002
------------------------------------------------
Increase in net assets from:
Operations:
Net investment income $1,318,910 $5,101,672
Net realized gain on investments 11,532,399 11,571,694
Unrealized depreciation of investments
during the period (4,120,141) (1,162,760)
------------------------------------------------
Net increase in net assets resulting
from operations 8,731,168 15,510,606
------------------------------------------------
Participant transactions:
Proceeds from sales of units 11,216,520 22,462,128
Cost of units redeemed (2,734,759) (10,424,313)
Net increase in net assets resulting
from participant transactions 8,481,761 12,037,815
------------------------------------------------
Total increase in net assets 17,212,929 27,548,421
Net Assets:
Beginning of period 186,760,746 176,425,254
------------------------------------------------
End of period $203,973,675 $203,973,675
================================================
Number of units:
Outstanding-beginning of period 11,552,763 11,324,956
Sold 687,844 1,399,627
Redeemed (164,791) (648,767)
Outstanding-end of period 12,075,816 12,075,816
==========================================
The accompanying notes are an integral part of these financial statements.
11
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
INTERMEDIATE BOND FUND
PER-UNIT DATA AND RATIOS
UNAUDITED
Selected data for a unit outstanding throughout the period:
FOR THE PERIOD FOR THE PERIOD
JULY 1, 2002 JANUARY 1, 2002
TO SEPTEMBER 30, 2002 TO SEPTEMBER 30, 2002
------------------------------------------------
Investment income $0.14 $0.51
Expenses (0.04) (0.07)
------------------------------------------------
Net investment income 0.10 0.44
Net realized and unrealized gain on investments 0.62 0.87
------------------------------------------------
Net increase in unit value 0.72 1.31
Net asset value at beginning of period 16.17 15.58
------------------------------------------------
Net asset value at end of period $16.89 $16.89
================================================
Ratio of expenses to average net assets* 0.84% 0.61%
Ratio of net investment income to average net assets* 2.63% 3.62%
Portfolio turnover** 308% 332%
Total return 4.35% 8.29%
Number of units outstanding at end of period
(in thousands) 12,076 12,076
- ----------------
* Annualized
** Not annualized. Reflects purchases and sales of shares of the registered
investment company in which the fund invested until July 1, 2002 rather
than turnover of the underlying portfolio of such registered investment
company.
The accompanying notes are an integral part of these financial statements.
12
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
INTERNATIONAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
UNAUDITED
SEPTEMBER 30, 2002
------------------------
Assets
Investments, at value (cost $88,833,409) $38,135,875
Cash 542
Foreign currency, at value (cost $553,239) 34,986,130
Receivable for investments sold 0
Receivable for fund units sold 1,081,599
Dividends and interest receivable 807,579
Other assets 4,289
------------------------
Total assets 75,016,014
------------------------
Liabilities
Payable for investments purchased 1,884,383
Payable for fund units purchased 10,075
Accrued expenses 74,965
Other liabilities 8,683
------------------------
Total liabilities 1,978,106
------------------------
Net Assets $73,037,908
========================
Net asset value, redemption price and offering
price per unit of beneficial interest
($73,037,908/5,612,969 units outstanding) $13.01
========================
The accompanying notes are an integral part of these financial statements.
13
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
INTERNATIONAL EQUITY FUND
STATEMENT OF OPERATIONS
UNAUDITED
FOR THE PERIOD FOR THE PERIOD
JULY 1, 2002 JANUARY 1, 2002
TO SEPTEMBER 30, 2002 TO SEPTEMBER 30, 2002
------------------------------------------------
Investment income:
Dividend income $156,912 $616,228
Interest income 4,890 16,602
------------------------------------------------
Total investment income 161,802 632,830
Expenses:
Investment advisory fee 38,669 122,706
State Street Bank & Trust Company - program fee 58,476 174,665
American Bar Retirement Association - program fee 10,602 30,620
Trustee, management and administration fees 18,439 53,963
Other expenses and taxes 27,287 97,717
------------------------------------------------
Total expenses 153,473 479,671
------------------------------------------------
Net investment income 8,329 153,159
------------------------------------------------
Realized and unrealized gain (loss) on investments:
Net realized loss on investments sold (5,363,462) (12,388,302)
Unrealized depreciation of investments
during the period (12,009,293) (9,612,862)
------------------------------------------------
Net loss on investments (17,372,755) (22,001,164)
------------------------------------------------
Net decrease in net assets resulting from operations $(17,364,426) $(21,848,005)
================================================
The accompanying notes are an integral part of these financial statements.
14
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
INTERNATIONAL EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
UNAUDITED
FOR THE PERIOD FOR THE PERIOD
JULY 1, 2002 JANUARY 1, 2002
TO SEPTEMBER 30, 2002 TO SEPTEMBER 30, 2002
------------------------------------------------
Decrease in net assets from:
Operations:
Net investment income $8,329 $153,159
Net realized loss on investments (5,363,462) (12,388,302)
Unrealized depreciation of investments
during the period (12,009,293) (9,612,862)
------------------------------------------------
Net decrease in net assets resulting
from operations (17,364,426) (21,848,005)
------------------------------------------------
Participant transactions:
Proceeds from sales of units 17,385,099 40,852,730
Cost of units redeemed (14,378,629) (34,967,535)
Net increase in net assets resulting
from participant transactions 3,006,470 5,885,195
------------------------------------------------
Total decrease in net assets (14,357,956) (15,962,810)
Net Assets:
Beginning of period 87,395,864 89,000,718
------------------------------------------------
End of period $73,037,908 $73,037,908
================================================
Number of units:
Outstanding-beginning of period 5,394,851 5,223,848
Sold 1,233,031 2,655,107
Redeemed (1,014,913) (2,265,986)
Outstanding-end of period 5,612,969 5,612,969
================================================
The accompanying notes are an integral part of these financial statements.
15
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
INTERNATIONAL EQUITY FUND
PER-UNIT DATA AND RATIOS
UNAUDITED
Selected data for a unit outstanding throughout the period:
FOR THE PERIOD FOR THE PERIOD
JULY 1, 2002 JANUARY 1, 2002
TO SEPTEMBER 30, 2002 TO SEPTEMBER 30, 2002
-----------------------------------------------
Investment income $0.03 $0.12
Expenses (0.03) (0.09)
-----------------------------------------------
Net investment income 0.00 0.03
Net realized and unrealized loss on investments (3.19) (4.06)
-----------------------------------------------
Net decrease in unit value (3.19) (4.03)
Net asset value at beginning of period 16.20 17.04
-----------------------------------------------
Net asset value at end of period $13.01 $13.01
===============================================
Ratio of expenses to average net assets* 0.77% 0.75%
Ratio of net investment income to average net assets* 0.04% 0.24%
Portfolio turnover** 21% 40%
Total return (19.67%) (23.62%)
Number of units outstanding at end of period
(in thousands) 5,613 5,613
- ----------------
* 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.
The accompanying notes are an integral part of these financial statements.
16
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
LARGE-CAP GROWTH EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
UNAUDITED
SEPTEMBER 30, 2002
------------------------
Assets
Investments, at value (cost $859,478,291) $630,434,072
Cash 8,333
Receivable for investments sold 3,277,261
Receivable for fund units sold 0
Dividends and interest receivable 675,012
Other assets 24,005
------------------------
Total assets 634,418,683
------------------------
Liabilities
Payable for investments purchased 1,652,238
Payable for fund units purchased 1,631,852
Accrued expenses 733,853
Other liabilities 34,754
------------------------
Total liabilities 4,052,697
------------------------
Net Assets $630,365,986
========================
Net asset value, redemption price and offering
price per unit of beneficial interest
($630,365,986/20,712,450 units outstanding) $30.43
========================
The accompanying notes are an integral part of these financial statements.
17
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
LARGE-CAP GROWTH EQUITY FUND
STATEMENT OF OPERATIONS
UNAUDITED
FOR THE PERIOD FOR THE PERIOD
JULY 1, 2002 JANUARY 1, 2002
TO SEPTEMBER 30, 2002 TO SEPTEMBER 30, 2002
-----------------------------------------------
Investment income:
Dividend income $2,048,549 $6,554,615
Interest income 67,863 312,585
-----------------------------------------------
Total investment income 2,116,412 6,867,200
Expenses:
Investment advisory fee 357,648 1,248,513
State Street Bank & Trust Company - program fee 619,440 2,084,969
American Bar Retirement Association - program fee 88,824 307,064
Trustee, management and administration fees 160,418 540,502
Other expenses and taxes 107,543 366,678
-----------------------------------------------
Total expenses 1,333,873 4,547,726
Net investment income 782,539 2,319,474
-----------------------------------------------
Realized and unrealized loss on investments:
Net realized loss on investments sold (10,560,146) (65,805,333)
Unrealized depreciation of investments
during the period (120,588,176) (264,918,645)
-----------------------------------------------
Net loss on investments (131,148,322) (330,723,978)
-----------------------------------------------
Net decrease in net assets resulting
from operations ($130,365,783) ($328,404,504)
===============================================
The accompanying notes are an integral part of these financial statements.
18
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
LARGE-CAP GROWTH EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
UNAUDITED
FOR THE PERIOD FOR THE PERIOD
JULY 1, 2002 JANUARY 1, 2002
TO SEPTEMBER 30, 2002 TO SEPTEMBER 30, 2002
-----------------------------------------------
Decrease in net assets from:
Operations:
Net investment income $782,539 $2,319,474
Net realized loss on investments (10,560,146) (65,805,333)
Unrealized depreciation of investments
during the period (120,588,176) (264,918,645)
-----------------------------------------------
Net decrease in net assets resulting
from operations (130,365,783) (328,404,504)
-----------------------------------------------
Participant transactions:
Proceeds from sales of units (707,994) 20,640,035
Cost of units redeemed (31,470,438) (80,135,265)
Net decrease in net assets resulting
from participant transactions (32,178,432) (59,495,230)
-----------------------------------------------
Total decrease in net assets (162,544,215) (387,899,734)
Net Assets:
Beginning of period 792,910,201 1,018,265,720
-----------------------------------------------
End of period $630,365,986 $630,365,986
===============================================
Number of units:
Outstanding-beginning of period 21,688,435 22,363,376
Sold (17,770) 477,231
Redeemed (958,215) (2,128,157)
Outstanding-end of period 20,712,450 20,712,450
===============================================
The accompanying notes are an integral part of these financial statements.
19
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
LARGE-CAP GROWTH EQUITY FUND
PER-UNIT DATA AND RATIOS
UNAUDITED
Selected data for a unit outstanding throughout the period:
FOR THE PERIOD FOR THE PERIOD
JULY 1, 2002 JANUARY 1, 2002
TO SEPTEMBER 30, 2002 TO SEPTEMBER 30, 2002
-----------------------------------------------
Investment income $0.10 $0.31
Expenses (0.06) (0.21)
-----------------------------------------------
Net investment income 0.04 0.10
Net realized and unrealized loss on investments (6.17) (15.20)
-----------------------------------------------
Net decrease in unit value (6.13) (15.10)
Net asset value at beginning of period 36.56 45.53
-----------------------------------------------
Net asset value at end of period $30.43 $30.43
===============================================
Ratio of expenses to average net assets* 0.75% 0.71%
Ratio of net investment income to average net assets* 0.44% 0.36%
Portfolio turnover** 5% 24%
Total return (16.75)% (33.16)%
Number of units outstanding at end of period
(in thousands) 20,712 20,712
- ----------------
* Annualized
** Not annualized
The accompanying notes are an integral part of these financial statements.
20
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
LARGE-CAP VALUE EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
UNAUDITED
SEPTEMBER 30, 2002
------------------------
Assets
Investments, at value (cost $230,738,130) $184,970,682
Cash 0
Receivable for investments sold 383
Receivable for fund units sold 1,106,287
Dividends and interest receivable 321,436
Other assets 3,427
------------------------
Total assets 186,402,215
------------------------
Liabilities
Payable for investments purchased 37,749
Payable for fund units purchased 815,095
Accrued expenses 134,484
Other liabilities 0
------------------------
Total liabilities 987,328
------------------------
Net Assets $185,414,887
========================
Net asset value, redemption price and offering
price per unit of beneficial interest
($185,414,887/8,889,839 units outstanding) $20.86
========================
The accompanying notes are an integral part of these financial statements.
21
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
LARGE-CAP VALUE EQUITY FUND
STATEMENT OF OPERATIONS
UNAUDITED
FOR THE PERIOD FOR THE PERIOD
JULY 1, 2002 JANUARY 1, 2002
TO SEPTEMBER 30, 2002 TO SEPTEMBER 30, 2002
------------------------------------------------
Investment income:
Dividend income $1,045,965 $3,060,645
Interest income 12,822 67,603
------------------------------------------------
Total investment income 1,058,787 3,128,248
Expenses:
Investment advisory fee 124,122 390,878
State Street Bank & Trust Company - program fee 183,034 548,487
American Bar Retirement Association - program fee 26,249 80,710
Trustee, management and administration fees 47,394 142,249
Other expenses and taxes 29,464 84,918
------------------------------------------------
Total expenses 410,263 1,247,242
------------------------------------------------
Net investment income 648,524 1,881,006
------------------------------------------------
Realized and unrealized gain (loss) on investments:
Net realized loss on investments sold (5,536,885) (3,896,890)
Unrealized depreciation of investments
during the period (39,922,209) (51,891,964)
------------------------------------------------
Net loss on investments (45,459,094) (55,788,854)
------------------------------------------------
Net decrease in net assets resulting
from operations $(44,810,570) $(53,907,848)
================================================
The accompanying notes are an integral part of these financial statements.
22
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
LARGE-CAP VALUE EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
UNAUDITED
FOR THE PERIOD FOR THE PERIOD
JULY 1, 2002 JANUARY 1, 2002
TO SEPTEMBER 30, 2002 TO SEPTEMBER 30, 2002
-----------------------------------------------
Decrease in net assets from:
Operations:
Net investment income $648,524 $1,881,006
Net realized loss on investments (5,536,885) (3,896,890)
Unrealized depreciation of investments
during the period (39,922,209) (51,891,964)
-----------------------------------------------
Net decrease in net assets resulting
from operations (44,810,570) (53,907,848)
-----------------------------------------------
Participant transactions:
Proceeds from sales of units 9,873,157 71,090,581
Cost of units redeemed (18,500,049) (53,165,489)
Net increase (decrease) in net assets
resulting from participant transactions (8,626,892) 17,925,092
-----------------------------------------------
Total decrease in net assets (53,437,462) (35,982,756)
Net Assets:
Beginning of period 238,852,349 221,397,643
-----------------------------------------------
End of period $185,414,887 $185,414,887
===============================================
Number of units:
Outstanding-beginning of period 9,280,026 8,321,228
Sold 425,616 2,677,397
Redeemed (815,803) (2,108,786)
Outstanding-end of period 8,889,839 8,889,839
================================================
The accompanying notes are an integral part of these financial statements.
23
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
LARGE-CAP VALUE EQUITY FUND
PER-UNIT DATA AND RATIOS
UNAUDITED
Selected data for a unit outstanding throughout the period:
FOR THE PERIOD FOR THE PERIOD
JULY 1, 2002 JANUARY 1, 2002
TO SEPTEMBER 30, 2002 TO SEPTEMBER 30, 2002
------------------------------------------------
Investment income $0.12 $0.36
Expenses (0.05) (0.14)
------------------------------------------------
Net investment income 0.07 0.22
Net realized and unrealized loss on investments (4.95) (5.97)
------------------------------------------------
Net decrease in unit value (4.88) (5.75)
Net asset value at beginning of period 25.74 26.61
------------------------------------------------
Net asset value at end of period $20.86 $20.86
================================================
Ratio of expenses to average net assets* 0.78% 0.74%
Ratio of net investment income to average net assets* 1.24% 1.11%
Portfolio turnover** 3% 17%
Total return (18.97%) (21.61%)
Number of units outstanding at end of period
(in thousands) 8,890 8,890
- ----------------
* Annualized
** Not annualized. With respect to the portion of the fund's assets invested
in a collective investment fund, reflects purchases and sales of the
collective investment fund in which the fund invests, rather than turnover
of the underlying portfolio of such collective investment fund.
The accompanying notes are an integral part of these financial statements.
24
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
MID-CAP GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
UNAUDITED
SEPTEMBER 30, 2002
-----------------------
Assets1
Investments, at value (cost $6,514,461) $6,322,453
Cash 0
Receivable for investments sold 166,106
Receivable for fund units sold 0
Dividends and interest receivable 1,535
Other assets 300
-----------------------
Total assets 6,490,394
-----------------------
Liabilities
Payable for investments purchased 124,488
Payable for fund units purchased 27,868
Accrued expenses 11,485
Other liabilities 15
-----------------------
Total liabilities 163,856
-----------------------
Net Assets $6,326,538
=======================
Net asset value, redemption price and offering
price per unit of beneficial interest
($6,326,538/591,056 units outstanding) $10.70
=======================
The accompanying notes are an integral part of these financial statements.
25
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
MID-CAP GROWTH FUND
STATEMENT OF OPERATIONS
UNAUDITED
FOR THE PERIOD
JULY 15, 2002
(FUND INCEPTION)
TO SEPTEMBER 30, 2002
-----------------------
Investment income:
Dividend income $2,754
Interest income 4,415
-----------------------
Total investment income 7,169
Expenses:
Investment advisory fee 8,356
State Street Bank & Trust Company - program fee 4,244
American Bar Retirement Association - program fee 785
Trustee, management and administration fees 1,188
Other expenses and taxes 759
-----------------------
Total expenses 15,332
-----------------------
Net investment loss (8,163)
-----------------------
Realized and unrealized loss on investments:
Net realized loss on investments sold (520,432)
Unrealized depreciation of investments
during the period (192,008)
-----------------------
Net loss on investments (712,440)
-----------------------
Net decrease in net assets resulting
from operations $(720,603)
=======================
The accompanying notes are an integral part of these financial statements.
26
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
MID-CAP GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
UNAUDITED
FOR THE PERIOD
JULY 15, 2002
(FUND INCEPTION)
TO SEPTEMBER 30, 2002
-----------------------
Increase in net assets from:
Operations:
Net investment loss $ (8,163)
Net realized loss on investments (520,432)
Unrealized depreciation of investments
during the period (192,008)
-----------------------
Net decrease in net assets resulting
from operations (720,603)
-----------------------
Participant transactions:
Proceeds from sales of units 7,359,470
Cost of units redeemed (312,329)
Net increase in net assets resulting
from participant transactions 7,047,141
-----------------------
Total increase in net assets 6,326,538
Net Assets:
Beginning of period 0
-----------------------
End of period $6,326,538
=======================
Number of units:
Outstanding-beginning of period 0
Sold 619,446
Redeemed (28,390)
Outstanding-end of period 591,056
=======================
The accompanying notes are an integral part of these financial statements.
27
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
MID-CAP GROWTH FUND
PER-UNIT DATA AND RATIOS
UNAUDITED
Selected data for a unit outstanding throughout the period:
FOR THE PERIOD
JULY 15, 2002
(FUND INCEPTION)
TO SEPTEMBER 30, 2002
-----------------------
Investment income $0.01
Expenses (0.03)
-----------------------
Net investment income (loss) (0.02)
Net realized and unrealized gain (loss) on investments (1.28)
-----------------------
Net increase (decrease) in unit value (1.30)
Net asset value at beginning of period 12.00
-----------------------
Net asset value at end of period $10.70
=======================
Ratio of expenses to average net assets* 1.14%
Ratio of net investment income (loss) to average net assets* (0.61)
Portfolio turnover** 43%
Total return (10.83%)
Number of units outstanding at end of period
(in thousands) 591
- ----------------
* Annualized
** Not annualized.
The accompanying notes are an integral part of these financial statements.
28
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
MID CAP VALUE EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
UNAUDITED
SEPTEMBER 30, 2002
------------------
Assets
Investments, at value (cost $7,507,968,) $7,037,178
Cash 30
Receivable for investments sold 57,633
Receivable for fund units sold 65,744
Dividends and interest receivable 7,058
Other assets 31
------------------
Total assets 7,167,674
------------------
Liabilities
Payable for investments purchased 202,826
Payable for fund units purchased 59,017
Accrued expenses 13,649
Other liabilities 0
------------------
Total liabilities 275,492
------------------
Net Assets $6,892,182
==================
Net asset value, redemption price and offering price
per unit of beneficial interest ($6,892,182/739,398
units outstanding) $ 9.32
==================
The accompanying notes are an integral part of these financial statements.
29
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
MID CAP VALUE EQUITY FUND
STATEMENT OF OPERATIONS
UNAUDITED
FOR THE PERIOD
JULY 15, 2002
(FUND INCEPTION)
TO SEPTEMBER 30, 2002
---------------------
Investment income:
Dividend income $ 18,179
Interest income 4,850
---------------------
Total investment income 23,029
Expenses:
Investment advisory fee 10,286
State Street Bank & Trust Company - program fee 4,838
American Bar Retirement Association - program fee 687
Trustee, management and administration fees 1,248
Other expenses and taxes 774
---------------------
Total expenses 17,833
---------------------
Net investment income 5,196
---------------------
Realized and unrealized loss on investments:
Net realized loss on investments sold (8,007)
Unrealized depreciation of investments during the period (470,790)
---------------------
Net loss on investments (478,797)
---------------------
Net decrease in net assets resulting from operations ($473,601)
=====================
The accompanying notes are an integral part of these financial statements.
30
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
MID CAP VALUE EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
UNAUDITED
FOR THE PERIOD
JULY 15, 2002
(FUND INCEPTION)
TO SEPTEMBER 30, 2002
---------------------
Increase in net assets from:
Operations:
Net investment income $5,196
Net realized loss on investments (8,007)
Unrealized depreciation of investments during the period (470,790)
---------------------
Net decrease in net assets resulting from operations (473,601)
---------------------
Participant transactions:
Proceeds from sales of units 7,486,398
Cost of units redeemed (120,615)
Net increase in net assets resulting from participant transactions 7,365,783
---------------------
Total increase in net assets 6,892,182
Net Assets:
Beginning of period 0
---------------------
End of period $6,892,182
=====================
Number of units:
Outstanding-beginning of period 0
Sold 751,757
Redeemed (12,359)
Outstanding-end of period 739,398
=====================
The accompanying notes are an integral part of these financial statements.
31
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
MID CAP VALUE EQUITY FUND
PER-UNIT DATA AND RATIOS
UNAUDITED
Selected data for a unit outstanding throughout the period: FOR THE PERIOD
JULY 15, 2002
(FUND INCEPTION)
TO SEPTEMBER 30, 2002
---------------------
Investment income $0.03
Expenses (0.03)
---------------------
Net investment income 0.00
Net realized and unrealized gain (loss) on investments (0.68)
---------------------
Net increase (decrease) in unit value (0.68)
Net asset value at beginning of period 10.00
---------------------
Net asset value at end of period $9.32
=====================
Ratio of expenses to average net assets* 1.28%
Ratio of net investment income to average net assets* 0.37%
Portfolio turnover** 1%
Total return (6.78)%
Number of units outstanding at end of period (in thousands) 739
- ----------------
* Annualized
** Not annualized.
The accompanying notes are an integral part of these financial statements.
32
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
SMALL CAP EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
UNAUDITED
SEPTEMBER 30, 2002
------------------
Assets
Investments, at value (cost $294,136,316) $214,583,990
Cash 1,340
Receivable for investments sold 2,174,135
Receivable for fund units sold 0
Dividends and interest receivable 191,579
Other assets 4,568
------------------
Total assets 216,955,612
------------------
Liabilities
Payable for investments purchased 3,091,930
Payable for fund units purchased 502,733
Accrued expenses 389,895
Other liabilities 35,093
------------------
Total liabilities 4,019,651
------------------
Net Assets $212,935,961
==================
Net asset value, redemption price and offering price
per unit of beneficial interest ($212,935,961/5,288,100
units outstanding) $40.27
==================
The accompanying notes are an integral part of these financial statements.
33
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
SMALL CAP EQUITY FUND
STATEMENT OF OPERATIONS
UNAUDITED
FOR THE PERIOD FOR THE PERIOD
JULY 1, 2002 JANUARY 1, 2002
TO SEPTEMBER 30, 2002 TO SEPTEMBER 30, 2002
------------------------------------------------
Investment income:
Dividend income $452,097 $1,308,126
Interest income 69,646 538,926
------------------------------------------------
Total investment income 521,743 1,847,052
Expenses:
Investment advisory fee 253,707 898,829
State Street Bank & Trust Company - program fee 207,239 698,136
American Bar Retirement Association - program fee 29,731 102,877
Trustee, management and administration fees 53,674 181,066
Other expenses and taxes 32,926 106,850
------------------------------------------------
Total expenses 577,277 1,987,758
------------------------------------------------
Net investment loss (55,534) (140,706)
------------------------------------------------
Realized and unrealized loss on investments:
Net realized loss on investments sold (26,249,973) (30,141,209)
Unrealized depreciation of investments during the period (30,981,123) (76,624,474)
------------------------------------------------
Net loss on investments (57,231,096) (106,765,683)
------------------------------------------------
Net decrease in net assets resulting from operations $(57,286,630) ($106,906,389)
================================================
The accompanying notes are an integral part of these financial statements.
34
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
SMALL CAP EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
UNAUDITED
FOR THE PERIOD FOR THE PERIOD
JULY 1, 2002 JANUARY 1, 2002
TO SEPTEMBER 30, 2002 TO SEPTEMBER 30, 2002
------------------------------------------------
Decrease in net assets from:
Operations:
Net investment loss $(55,534) $(140,706)
Net realized loss on investments (26,249,973) (30,141,209)
Unrealized depreciation of investments during the period (30,981,123) (76,624,474)
------------------------------------------------
Net decrease in net assets resulting from operations (57,286,630) (106,906,389)
------------------------------------------------
Participant transactions:
Proceeds from sales of units 310,223 12,446,765
Cost of units redeemed (10,745,332) (23,862,875)
Net decrease in net assets resulting from participant transactions (10,435,109) (11,416,110)
------------------------------------------------
Total decrease in net assets (67,721,739) (118,322,499)
Net Assets:
Beginning of period 280,657,700 331,258,460
------------------------------------------------
End of period $212,935,961 $212,935,961
================================================
Number of units:
Outstanding-beginning of period 5,526,663 5,548,719
Sold 9,189 219,932
Redeemed (247,752) (480,551)
Outstanding-end of period 5,288,100 5,288,100
================================================
The accompanying notes are an integral part of these financial statements.
35
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
SMALL CAP EQUITY FUND
PER-UNIT DATA AND RATIOS
UNAUDITED
Selected data for a unit outstanding throughout the period: For the period For the period
July 1, 2002 January 1, 2002
to September 30, 2002 to September 30, 2002
------------------------------------------------
Investment income $0.10 $0.34
Expenses (0.11) (0.36)
------------------------------------------------
Net investment loss (0.01) (0.02)
Net realized and unrealized loss on investments (10.50) (19.41)
------------------------------------------------
Net decrease in unit value (10.51) (19.43)
Net asset value at beginning of period 50.78 59.70
------------------------------------------------
Net asset value at end of period $40.27 $40.27
================================================
Ratio of expenses to average net assets* 0.97% 0.97%
Ratio of net investment income to average net assets* (0.09)% (0.07)%
Portfolio turnover** 21% 69%
Total return (20.74)% (32.58)%
Number of units outstanding at end of period (in thousands) 5,288 5,288
- -----------------
* Annualized
** Not annualized
The accompanying notes are an integral part of these financial statements.
36
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
STABLE ASSET RETURN FUND
STATEMENT OF ASSETS AND LIABILITIES
UNAUDITED
September 30, 2002
------------------
Assets
Investments, at value (cost $873,363,662.) $873,363,662
Cash $ 0
Interest Receivable 3,107,186
Receivable for fund units sold 0
Other assets 12,456
------------------
Total assets 876,483,304
------------------
Liabilities
Payable for fund units redeemed 1,197,047
Accrued expenses 410,176
------------------
Total liabilities 1,607,223
------------------
Net Assets $874,876,081
==================
Net asset value, redemption price and offering price
per unit of beneficial interest ($874,876,081/31,727,261
units outstanding) 27.57
==================
The accompanying notes are an integral part of these financial statements.
37
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
STABLE ASSET RETURN FUND
STATEMENT OF OPERATIONS
UNAUDITED
FOR THE PERIOD FOR THE PERIOD
JULY 1, 2002 JANUARY 1, 2002
TO SEPTEMBER 30, 2002 TO SEPTEMBER 30, 2002
------------------------------------------------
Interest income $9,559,004 $28,664,343
------------------------------------------------
Expenses:
State Street Bank & Trust Company - program fee 750,840 1,994,857
American Bar Retirement Association - program fee 107,539 292,735
Trustee, management and administration fees 194,242 516,729
Other expenses and taxes 120,769 308,739
------------------------------------------------
Total expenses 1,173,390 3,113,060
------------------------------------------------
Net investment income $8,385,614 $25,551,283
================================================
The accompanying notes are an integral part of these financial statements.
38
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
STABLE ASSET RETURN FUND
STATEMENT OF CHANGES IN NET ASSETS
UNAUDITED
FOR THE PERIOD FOR THE PERIOD
JULY 1, 2002 JANUARY 1, 2002
TO SEPTEMBER 30, 2002 TO SEPTEMBER 30, 2002
------------------------------------------------
Increase in net assets from:
Operations:
Net investment income and net increase in net
assets resulting from operations 8,385,614 25,551,283
------------------------------------------------
Participant transactions:
Proceeds from sales of units 75,284,029 158,480,052
Cost of units redeemed (23,466,867) (107,015,018)
Net increase in net assets resulting from
participant transactions 51,817,162 51,465,034
------------------------------------------------
Total increase in net assets 60,202,776 77,016,317
------------------------------------------------
Net Assets:
Beginning of period 814,673,305 797,859,764
------------------------------------------------
End of period $874,876,081 $874,876,081
================================================
Number of units:
Outstanding-beginning of period 29,835,864 29,854,186
Sold 2,746,441 5,825,701
Redeemed (855,044) (3,952,626)
Outstanding-end of period 31,727,261 31,727,261
================================================
The accompanying notes are an integral part of these financial statements.
39
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
STABLE ASSET RETURN FUND
PER-UNIT DATA AND RATIOS
UNAUDITED
Selected data for a unit outstanding throughout the period: FOR THE PERIOD FOR THE PERIOD
JULY 1, 2002 JANUARY 1, 2002
TO SEPTEMBER 30, 2002 TO SEPTEMBER 30, 2002
------------------------------------------------
Investment income $0.30 $0.94
Expenses (0.04) (0.10)
------------------------------------------------
Net investment income 0.26 0.84
Net realized and unrealized gain on investments 0.00 0.00
------------------------------------------------
Net increase in unit value 0.26 0.84
Net asset value at beginning of period 27.31 26.73
------------------------------------------------
Net asset value at end of period $27.57 $27.57
================================================
Ratio of expenses to average net assets* .55% .51%
Ratio of net investment income to average net assets* 3.90% 4.18%
Total return 3.92% 4.25%
Number of units outstanding at end of period (in thousands) 31,727 31,727
- ----------------
* Annualized
The accompanying notes are an integral part of these financial statements.
40
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
STRUCTURED PORTFOLIO SERVICE- CONSERVATIVE PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
UNAUDITED
SEPTEMBER 30, 2002
------------------
Assets
Investments, at value (cost $31,164,313) $29,965,230
Cash 0
Receivable for investments sold 802,489
Receivable for fund units sold 5,600
Dividends and interest receivable 0
Other assets 0
------------------
Total assets 30,773,319
------------------
Liabilities
Payable for investments purchased 808,089
Payable for fund units purchased 0
Accrued expenses 0
Other liabilities 0
------------------
Total liabilities 808,089
------------------
Net Assets $29,965,230
==================
Net asset value, redemption price and offering price
per unit of beneficial interest ($29,965,230/1,949,923
units outstanding) $ 15.37
==================
The accompanying notes are an integral part of these financial statements.
41
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
STRUCTURED PORTFOLIO SERVICE- CONSERVATIVE PORTFOLIO
STATEMENT OF OPERATIONS
UNAUDITED
FOR THE PERIOD FOR THE PERIOD
JULY 1, 2002 JANUARY 1, 2002
TO SEPTEMBER 30, 2002 TO SEPTEMBER 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 417,434 1,116,737
Unrealized depreciation of investments during the period (1,868,402) (3,108,560)
------------------------------------------------
Net loss on investments (1,450,968) (1,991,823)
------------------------------------------------
Net decrease in net assets resulting from operations $(1,450,968) $(1,991,823)
================================================
The accompanying notes are an integral part of these financial statements.
42
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
STRUCTURED PORTFOLIO SERVICE- CONSERVATIVE PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
UNAUDITED
FOR THE PERIOD FOR THE PERIOD
JULY 1, 2002 JANUARY 1, 2002
TO SEPTEMBER 30, 2002 TO SEPTEMBER 30, 2002
-----------------------------------------------
Increase (decrease) in net assets from:
Operations:
Net investment income $0 $0
Net realized gain on investments 417,434 1,116,737
Unrealized depreciation of investments during the period (1,868,402) (3,108,560)
-----------------------------------------------
Net decrease in net assets resulting from operations (1,450,968) (1,991,823)
-----------------------------------------------
Participant transactions:
Proceeds from sales of units 3,715,671 6,722,983
Cost of units redeemed (2,179,737) (6,108,354)
Net increase in net assets resulting from participant transactions 1,535,934 614,629
-----------------------------------------------
Total increase (decrease) in net assets 84,966 (1,377,194)
Net Assets:
Beginning of period 29,880,264 31,342,424
-----------------------------------------------
End of period $29,965,230 $29,965,230
===============================================
Number of units:
Outstanding-beginning of period 1,850,967 1,906,106
Sold 237,509 420,182
Redeemed (138,553) (376,365)
Outstanding-end of period 1,949,923 1,949,923
===============================================
The accompanying notes are an integral part of these financial statements.
43
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
STRUCTURED PORTFOLIO SERVICE- CONSERVATIVE PORTFOLIO
PER-UNIT DATA AND RATIOS
UNAUDITED
Selected data for a unit outstanding throughout the period: For the period For the period
July 1, 2002 January 1, 2002
to September 30, 2002 to September 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 (0.77) (1.07)
-----------------------------------------------
Net decrease in unit value (0.77) (1.07)
Net asset value at beginning of period 16.14 16.44
-----------------------------------------------
Net asset value at end of period $15.37 $15.37
===============================================
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** 12% 31%
Total return (4.79)% (6.54)%
Number of units outstanding at end of period (in thousands) 1,950 1,950
- ----------------
* 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.
The accompanying notes are an integral part of these financial statements.
44
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
STRUCTURED PORTFOLIO SERVICE- MODERATE PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
UNAUDITED
SEPTEMBER 30, 2002
------------------
Assets
Investments, at value (cost $119,250,528) $103,063,326
Cash 0
Receivable for investments sold 2,943,948
Receivable for fund units sold 15,462
Dividends and interest receivable 0
Other assets 0
------------------
Total assets 106,022,736
------------------
Liabilities
Payable for investments purchased 2,959,410
Payable for fund units purchased 0
Accrued expenses 0
Other liabilities 0
------------------
Total liabilities 2,959,410
------------------
Net Assets $103,063,326
==================
Net asset value, redemption price and offering price
per unit of beneficial interest ($103,063,326/6,951,162
units outstanding) $ 14.83
==================
The accompanying notes are an integral part of these financial statements.
45
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
STRUCTURED PORTFOLIO SERVICE- MODERATE PORTFOLIO
STATEMENT OF OPERATIONS
UNAUDITED
FOR THE PERIOD FOR THE PERIOD
JULY 1, 2002 JANUARY 1, 2002
TO SEPTEMBER 30, 2002 TO SEPTEMBER 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 3,349,859 5,632,571
Unrealized depreciation of investments during the period (14,608,582) (22,798,596)
------------------------------------------------
Net loss on investments (11,258,723) (17,166,025)
------------------------------------------------
Net decrease in net assets resulting from operations $(11,258,723) $(17,166,025)
================================================
The accompanying notes are an integral part of these financial statements.
46
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
STRUCTURED PORTFOLIO SERVICE- MODERATE PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
UNAUDITED
FOR THE PERIOD FOR THE PERIOD
JULY 1, 2002 JANUARY 1, 2002
TO SEPTEMBER 30, 2002 TO SEPTEMBER 30, 2002
------------------------------------------------
Decrease in net assets from:
Operations:
Net investment income $0 $0
Net realized gain on investments 3,349,859 5,632,571
Unrealized depreciation of investments during the period (14,608,582) (22,798,596)
------------------------------------------------
Net decrease in net assets resulting from operations (11,258,723) (17,166,025)
------------------------------------------------
Participant transactions:
Proceeds from sales of units 3,900,810 18,072,439
Cost of units redeemed (4,456,720) (8,698,568)
Net increase (decrease) in net assets resulting from
participant transactions (555,910) 9,373,871
------------------------------------------------
Total decrease in net assets (11,814,633) (7,792,154)
Net Assets:
Beginning of period 114,877,959 110,855,480
------------------------------------------------
End of period $103,063,326 $103,063,326
================================================
Number of units:
Outstanding-beginning of period 6,993,818 6,417,587
Sold 248,274 1,072,468
Redeemed (290,930) (538,893)
Outstanding-end of period 6,951,162 6,951,162
================================================
The accompanying notes are an integral part of these financial statements.
47
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
STRUCTURED PORTFOLIO SERVICE- MODERATE PORTFOLIO
PER-UNIT DATA AND RATIOS
UNAUDITED
Selected data for a unit outstanding throughout the period: For the period For the period
July 1, 2002 January 1, 2002
to September 30, 2002 to September 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 (1.60) (2.44)
------------------------------------------------
Net decrease in unit value (1.60) (2.44)
Net asset value at beginning of period 16.43 17.27
------------------------------------------------
Net asset value at end of period $14.83 $14.83
================================================
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** 13% 23%
Total return (9.73)% (14.17)%
Number of units outstanding at end of period (in thousands) 6,951 6,951
- ----------------
* 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.
The accompanying notes are an integral part of these financial statements.
48
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
STRUCTURED PORTFOLIO SERVICE- AGGRESSIVE PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
UNAUDITED
SEPTEMBER 30, 2002
------------------
Assets
Investments, at value (cost $97,951,607) $78,303,648
Cash 0
Receivable for investments sold 1,409,244
Receivable for fund units sold 0
Dividends and interest receivable 0
Other assets 0
------------------
Total assets 79,712,892
------------------
Liabilities
Payable for investments purchased 1,292,639
Payable for fund units purchased 116,605
Accrued expenses 0
Other liabilities 0
------------------
Total liabilities 1,409,244
------------------
Net Assets $78,303,648
==================
Net asset value, redemption price and offering price
per unit of beneficial interest ($78,303,648/5,562,585
units outstanding) $ 14.08
==================
The accompanying notes are an integral part of these financial statements.
49
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
STRUCTURED PORTFOLIO SERVICE- AGGRESSIVE PORTFOLIO
STATEMENT OF OPERATIONS
UNAUDITED
FOR THE PERIOD FOR THE PERIOD
JULY 1, 2002 JANUARY 1, 2002
TO SEPTEMBER 30, 2002 TO SEPTEMBER 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 1,117,694 2,502,811
Unrealized depreciation of investments during the period (14,938,240) (24,910,600)
------------------------------------------------
Net loss on investments (13,820,546) (22,407,789)
------------------------------------------------
Net decrease in net assets resulting from operations $(13,820,546) $(22,407,789)
================================================
The accompanying notes are an integral part of these financial statements.
50
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
STRUCTURED PORTFOLIO SERVICE- AGGRESSIVE PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
UNAUDITED
FOR THE PERIOD FOR THE PERIOD
JULY 1, 2002 JANUARY 1, 2002
TO SEPTEMBER 30, 2002 TO SEPTEMBER 30, 2002
------------------------------------------------
Decrease in net assets from:
Operations:
Net investment income $0 $0
Net realized gain on investments 1,117,694 2,502,811
Unrealized depreciation of investments during the period (14,938,240) (24,910,600)
------------------------------------------------
Net decrease in net assets resulting from operations (13,820,546) (22,407,789)
------------------------------------------------
Participant transactions:
Proceeds from sales of units 2,435,180 9,651,177
Cost of units redeemed (2,768,831) (8,081,093)
Net increase (decrease) in net assets resulting from
participant transactions (333,651) 1,570,084
------------------------------------------------
Total decrease in net assets (14,154,197) (20,837,705)
Net Assets:
Beginning of period 92,457,845 99,141,353
------------------------------------------------
End of period $78,303,648 $78,303,648
================================================
Number of units:
Outstanding-beginning of period 5,587,582 5,484,656
Sold 159,362 564,530
Redeemed (184,359) (486,601)
Outstanding-end of period 5,562,585 5,562,585
================================================
The accompanying notes are an integral part of these financial statements.
51
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST
STRUCTURED PORTFOLIO SERVICE- AGGRESSIVE PORTFOLIO
PER-UNIT DATA AND RATIOS
UNAUDITED
Selected data for a unit outstanding throughout the period: FOR THE PERIOD FOR THE PERIOD
JULY 1, 2002 JANUARY 1, 2002
TO SEPTEMBER 30, 2002 TO SEPTEMBER 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 (2.47) (4.00)
------------------------------------------------
Net decrease in unit value (2.47) (4.00)
Net asset value at beginning of period 16.55 18.08
------------------------------------------------
Net asset value at end of period $14.08 $14.08
================================================
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** 12% 23%
Total return (14.93)% (22.12)%
Number of units outstanding at end of period (in thousands) 5,563 5,563
- ----------------
* 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.
The accompanying notes are an integral part of these financial statements.
52
AMERICAN BAR ASSOCIATION MEMBERS/STATE STREET COLLECTIVE TRUST
NOTES TO FINANCIAL STATEMENTS
THIRD QUARTER
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. Ten separate collective
investment Funds (the "Funds") and the Structured Portfolio Service (the
"Portfolios") are established under the Trust. The Structured Portfolio Service
offers three approaches to diversifying investments by selecting various
allocations among the Funds. The Funds and Portfolios are investment options
under the American Bar Association Members Retirement Program (the "Program")
which is sponsored by the American Bar Retirement Association ("ABRA"). The
objectives and principal strategies of the Funds and Portfolios are as follows:
BALANCED FUND--current income and long-term capital appreciation through
investment in common stocks, other equity-type securities and debt securities.
INDEX EQUITY FUND--replication of the total return of the Russell 3000 Index.
Currently invests in the State Street Bank and Trust Company Russell 3000 Index
Securities Lending Fund (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--Formerly invested in the PIMCO Total Return Fund (the
"Total Return Fund"), a registered investment company. The fund invests
primarily in debt securities of varying maturities, with an average portfolio
duration of three to six years, with the objective of achieving a competitive
total return from current income and capital appreciation.
INTERNATIONAL EQUITY FUND--long term growth of capital through investment in
common stocks and other equity securities of established non-U.S. companies.
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.
LARGE-CAP GROWTH EQUITY FUND (FORMERLY THE 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.
LARGE-CAP VALUE EQUITY FUND (FORMERLY THE VALUE EQUITY FUND)--long term growth
of capital and dividend income through investment in common stocks, primarily of
large capitalization companies believed to be undervalued. Currently invests in
common stocks and the State Street Bank and Trust Company Russell 1000 Value
Index Securities Lending Fund, (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.
MID-CAP GROWTH EQUITY FUND--long term growth of capital through investment in
common stocks and other equity type securities, primarily of mid capitalization
companies believed to have strong earnings growth potential.
53
MID-CAP VALUE EQUITY FUND--long term growth of capital through investment in
common stocks, primarily of mid capitalization companies believed to be
attractively priced relative to their future earnings power.
SMALL-CAP EQUITY FUND (FORMERLY THE AGGRESSIVE EQUITY FUND)--long term growth of
capital through investment in common stocks of small capitalization companies
believed to have strong appreciation potential.
STABLE ASSET RETURN FUND ("SARF")--current income consistent with preserving
principal and maintaining liquidity through investment in high quality 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.
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 was the Trust's former policy to attempt to
maintain a constant price of $1.00 per unit for SARF. Effective July 15, 2002,
SARF no longer will seek to maintain a net asset value of $1.00 per Unit. The
principal consequence of the change to SARF will be that instead of accounting
for the reinvestment of accrued income by issuing additional Units each Business
Day, SARF's accrued net income 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. 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
54
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.
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 maybe settled in the month after the issue date. Interest
income is not accrued until the settlement date.
55
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 pursuant to Section
501(a) of the Internal Revenue Code. Accordingly, no provision for Federal
income taxes is required.
E. DISTRIBUTIONS TO PARTICIPANTS
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 and the Intermediate Bond Fund may enter into TBA (to be
announced) commitments to purchase securities for a fixed unit price at a future
date beyond customary settlement time. Although the unit price for a TBA has
been established, the principal value has not been finalized. However, the
amount of the TBA commitment will not fluctuate more than 1.0% from the
principal amount. These Funds hold, and maintain until the settlement date, cash
or liquid securities in an amount sufficient to meet the purchase price. TBA
commitments may be considered securities in themselves and involve a risk of
loss if the value of the security to be purchased declines prior to the
settlement date, and such risk is in addition to the risk of decline in the
value of these Fund's other assets. Risks may also arise upon entering into
these contracts from the potential inability of counterparties to meet the terms
of their contracts. During the period prior to settlement, the Fund will not be
entitled to accrue interest and/or receive principal payments. Unsettled TBA
commitments are valued at the current market value of the underlying securities,
generally according to the procedures under "Security Valuation" above. These
Funds may dispose of a commitment prior to settlement if the Fund's advisor
deems it appropriate to do so. Upon settlement date, these Funds may take
delivery of the securities or defer (roll) the delivery to the next month.
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).
56
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 September 30, 2002
is as follows:
NUMBER OF EXPIRATION FUTURES NOTIONAL NET UNREALIZED
CONTRACTS DATE CONTRACTS COST POSITION APPRECIATION
--------- ---- --------- ---- -------- ------------
9 Dec.-2002 S&P 500 $1,959,917 Long $41,909
Index Futures
At September 30, 2002, the Growth Equity Fund had assigned an U.S. Treasury
Bill, with a principal amount of $199,791, 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.
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, Bankers Trust Company, a wholly-owned subsidiary
of Deutsche Bank AG, Pacific Investment Management Company, Ariel Capital
Management, and Turner Investment Partners to advise it with respect to its
investment responsibility and has allocated the assets of certain of the Funds
among the investment advisors. Each investment advisor recommends to State
Street Bank investments and reinvestments of the assets allocated to it in
accordance with the investment policies of the respective Fund as described
above. State Street Bank exercises discretion with respect to the selection and
retention of the investment advisors and may remove, upon consultation with
ABRA, an investment advisor at any time.
A fee is paid to each investment advisor for certain of the Funds based on the
value of the assets allocated to that investment advisor and the respective
breakpoints agreed to in the Advisor's contract. These fees are accrued on a
daily basis and paid monthly from the assets. Actual fees paid to each
investment advisor during the year are disclosed in the prospectus. Fee rate
ranges based on the respective breakpoints are as follows:
INVESTMENT ADVISOR FEE RATE RANGE
Capital Guardian Trust Company (Large-Cap Growth Equity,
Small-Cap Equity and Balanced) ........................... .225% to .50%*
57
Dresdner RCM Global Investors LLC (Large-Cap Growth Equity) .25% to .70%
Dresdner RCM Global Investors LLC (International Equity) ... .40% to .75%
Sit Investment Associates (Small-Cap Equity) ............... .60% to 1.00%
Morgan Stanley Investment Management (Balanced) ............ .125% to .50%
Lincoln Capital Management Company (Large-Cap Growth Equity) .15% to .4675%
Alliance Capital Management L.P. (Large-Cap Value Equity) .. .15% to .50%
Bankers Trust Company (Large-Cap Growth Equity) ............ .010% to .075%**
Pacific Investment Management Co. (Intermediate Bond) ...... .25% to .50%
Ariel Capital Management (Mid-Cap Equity) .................. .50% to .75%
Turner Investment Partners (Mid-Cap Growth) ................ .55% to .65%
* 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 $33,485 relating to this fee for the
nine-month period ended September 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:
RATE FOR ABRA
PERIOD ENDING
VALUE OF PROGRAM ASSETS SEPTEMBER 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 $1,123,403 for the nine-month period ended
September 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 nine-month period ended September 30, 2002 totaled $47,890 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 the participant advisor service.
58
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 ...................... .155%
Next $1.8 billion ....................... .058
Over $2.8 billion ....................... .025
State Street Bank received trustee, management and administration fees which
aggregated $9,664,309 for the nine-month period ended September 30, 2002. These
fees are allocated to each Fund based on net asset value.
The Portfolios are not charged a separate annual fee.
4. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities excluding
U.S. Government and short-term investments were as follows:
- --------------------------------------------------------------------------------
Nine-Month Period
Ending September 30, 2002
- --------------------------------------------------------------------------------
Purchases Sales
- --------------------------------------------------------------------------------
Balanced Fund ........................... 271,640,811 290,459,247
- --------------------------------------------------------------------------------
Index Equity Fund ....................... 27,200,078 17,362,356
- --------------------------------------------------------------------------------
Intermediate Bond Fund .................. 531,674,574 536,726,910
- --------------------------------------------------------------------------------
International Equity Fund ............... 49,710,741 43,781,412
- --------------------------------------------------------------------------------
Large-Cap Growth Equity Fund ............ 174,481,553 219,586,204
- --------------------------------------------------------------------------------
Large-Cap Value Equity Fund ............. 61,681,052 38,855,288
- --------------------------------------------------------------------------------
Mid-Cap Growth Equity ................... 9,572,712 2,761,499
Fund
- --------------------------------------------------------------------------------
Mid-Cap Value Equity .................... 7,012,583 57,633
Fund
- --------------------------------------------------------------------------------
Small-Cap Equity Fund ................... $206,002,402 $199,252,739
- --------------------------------------------------------------------------------
Stable Asset Return Fund ................ -- --
- --------------------------------------------------------------------------------
Conservative Structured Portfolio Service 10,053,218 9,438,589
- --------------------------------------------------------------------------------
Moderate Structured Portfolio Service ... 35,618,398 26,244,527
- --------------------------------------------------------------------------------
Aggressive Structured Portfolio Service . 23,176,437 21,606,353
- --------------------------------------------------------------------------------
The aggregate cost of purchases and proceeds from sales of U.S. Government
securities were as follows:
- --------------------------------------------------------------------------------
Nine-Month Period
Ending September 30, 2002
- --------------------------------------------------------------------------------
Purchases Sales
- --------------------------------------------------------------------------------
Intermediate Bond Fund .................. 115,525,965 86,361,539
- --------------------------------------------------------------------------------
Balanced Fund ........................... 53,144,830 64,561,849
- --------------------------------------------------------------------------------
Growth Equity Fund ...................... 856,481 1,159,812
- --------------------------------------------------------------------------------
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
59
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 Small-Cap 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.
60
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
As bad as the second quarter of 2002 was for the broad domestic equity market,
the third quarter proved even worse. The weaker than expected economic recovery
in the United States was a primary problem along with faltering consumer and
business confidence. Large capitalization stocks faired better than their small
capitalization counterparts while value stocks suffered slightly greater losses
than growth stocks. The hardest hit sectors were technology, producer durables
and materials & processing. Despite posting losses, health care and consumer
staples were the sectors that faired the best in the quarter. The bond market
had substantial positive returns. Investors came out of the equity markets and
in a flight to quality went into the fixed income market. U.S. Treasuries
benefitted from the flight to quality were the best performing fixed income
sector for the quarter. Like the domestic equity markets, the International
equity markets had significant negative returns in both the developed and
emerging markets.
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 September 30, 2002, the Balanced Fund experienced a total
return, net of Expenses, of (10.17)%. 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 (8.63)%. For the nine months
ended September 30, 2002, the 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
(18.27)% compared to a total return of (14.40)% 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 health care, finance and technology. Securities representing the largest
holdings based on market value in the Balanced Fund at September 30, 2002
included Pfizer Inc., Astrazeneca PLC, Washington Mutual Inc., SLM Corp. and
Bank One Corp. The fixed income portion was heavily invested in government
agency and mortgage related issues.
INDEX EQUITY FUND
The Index Equity Fund invests in common stocks of U.S. companies that are
included in the Russell 3000 Index, with the overall objective of achieving
long-term growth of capital. The Russell 3000 Index represents approximately 98%
of the U.S. equity market based on the market capitalization of the companies in
the Russell 3000 Index. The Fund experienced a total return, net of Expenses, of
(17.31)% for the quarter ended September 30, 2002. By comparison, the Russell
3000 Index produced a return of (17.23)% for the same period. For the nine
months ended September 30, 2002, the Fund experienced a total return, net of
Expenses, of (27.57)% compared to a total return of
61
(27.37)% 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. Prior to July 1, 2002,
contributions to the Fund were 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 September 30, 2002, the Intermediate Bond Fund experienced
a total return, net of Expenses, of 4.35%. As a comparison, the Lehman Brothers
Aggregate Bond Index produced a return of 4.58% for the same period. For the
nine months ended September 30, 2002, the Fund experienced a total return, net
of Expenses, of 8.29% compared to a total return of 8.55% 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. 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-end management investment company.
For the quarter ended September 30, 2002, the International Equity Fund
experienced a total return, net of Expenses, of (19.67)%. For the same period,
the total return of the Morgan Stanley Capital International All-Country World
Ex-U.S. Free Index (the "MSCI AC World Ex-U.S. Index") was (19.36)%. For the
nine months ended September 30, 2002, the Fund experienced a total return, net
of Expenses, of (23.62)% compared to a total return of (20.39)% 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 September 30, 2002, the most heavily weighted countries in the T. Rowe
Price International Stock Fund were the United Kingdom, Japan and France. The
securities representing the largest holdings based on market value were
GlaxoSmithKline PLC, Reed Elsevier, TotalFinaElf SA, Nestle and Shell Transport
& Trading Co. PLC.
62
As of September 30, 2002, the most heavily weighted countries in the separately
managed portion of the International Equity Fund were United Kingdom, Japan, and
France. The securities representing the largest holdings based on market value
were ENI SPA, Reckitt Benckiser PLC, TotalFinaElf SA, Novartis AG and BP PLC.
LARGE-CAP GROWTH EQUITY FUND (FORMERLY GROWTH EQUITY FUND)
The Fund invests primarily in common stocks and other equity-type securities
issued by large capitalization (greater than $1 billion), 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 Large-Cap Growth Equity Fund
(approximately 33 1/3%) is invested to replicate the Russell 1000 Growth Index,
which is composed of those Russell 1000 securities with a greater than average
growth orientation. The remainder of the Large-Cap Growth Equity Fund is
actively managed. The Large-Cap Growth Equity Fund seeks to achieve, over an
extended period of time, total returns comparable to or superior to those
attained by broad measures of the domestic stock market.
For the quarter ended September 30, 2002, the Large-Cap Growth Equity Fund
experienced a total return, net of Expenses, of (16.75)%. By comparison, the
Russell 1000 Growth Index produced a return of (15.05)% for the same period. For
the nine months ended September 30, 2002, the Fund experienced a total return,
net of Expenses, of (33.16)% compared to a total return of (32.70)% 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 Large-Cap Growth Equity Fund were
health care, technology and consumer discretionary. Securities representing the
largest holdings based on market value in the Fund at September 30, 2002
included Pfizer Inc., General Electric Co., Microsoft Corp., Johnson & Johnson
Inc. and Wal Mart Stores Inc.
LARGE-CAP VALUE EQUITY FUND (FORMERLY 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 large
capitalization (greater than $1 billion) companies that State Street and its
investment advisor consider undervalued. A portion of the Large-Cap Value Equity
Fund (approximately 25%) is invested to replicate the Russell 1000 Value Index,
which 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 September 30, 2002, the Large-Cap Value Equity Fund
experienced a total return, net of Expenses, of (18.97)%. By comparison, the
Russell 1000 Value Index produced a return of (18.77)% for the same period. For
the nine months ended September 30, 2002, the Fund experienced a total return,
net of Expenses, of (21.61)% compared to a total return of (22.65)% for the
Russell 1000 Value Index. The Russell 1000 Value Index does not include an
allowance for the fees that an investor would pay for investing in the
securities that comprise the index.
The most heavily weighted sectors in the separately managed portion of the
Large-Cap Value Equity Fund were finance, consumer discretionary and energy.
Securities representing the largest holdings in the separately managed portion
of the Fund based on market value at September 30, 2002 included Exxon Mobil
Corp., Bank of America Corp., Citigroup Inc., Chevron Texaco Corp., and Wachovia
Corp.
MID-CAP GROWTH EQUITY FUND
The Fund invests primarily in common stocks and other equity-type securities
issued by companies with market capitalization between $1 billion and $12
billion at the time of investment that the Fund believes have a strong earnings
growth potential. The Mid-Cap Growth Equity Fund seeks to achieve, over an
extended period of time, total returns comparable to or superior to those
attained by broad measures of the domestic stock market.
63
The Fund commenced operations on July 15, 2002. For the period from commencement
of operations through September 30, 2002, the Mid-Cap Growth Equity Fund
experienced a total return, net of Expenses, of (10.83)%. By comparison, the
Russell Midcap Growth Index produced a return of (9.96)% for the same period.
The Russell Midcap 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 Mid-Cap Growth Equity Fund were health
care, consumer discretionary and technology. Securities representing the largest
holdings based on market value in the Fund at September 30, 2002 included Intuit
Inc., St. Jude Medical Inc., Starbucks Corp., Electonic Arts Inc. and Wellpoint
Health Networks Inc.
MID-CAP VALUE EQUITY FUND
The Fund invests primarily in common stocks and other equity-type securities
issued by companies with market capitalization between $1 billion and $12
billion at the time of investment. The Fund invests primarily in sectors and
securities that State Street and its investment advisor consider undervalued.
The Mid-Cap Value Equity Fund seeks to outperform, over extended periods of
time, broad measures of the domestic stock market.
The Fund commenced operations on July 15, 2002. For the period from commencement
of operations through September 30, 2002, the Mid-Cap Value Equity Fund
experienced a total return, net of Expenses, of (6.78)%. By comparison, the
Russell Midcap Value Index produced a return of (10.14)% for the same period.
The Russell Midcap Value Index does not include an allowance for the fees that
an investor would pay for investing in the securities that comprise the index.
The most heavily weighted sectors in the separately managed portion of the
Mid-Cap Value Equity Fund were consumer discretionary, industrials and finance.
Securities representing the largest holdings based on market value in the Fund
at September 30, 2002 included The Rouse Company, Black & Decker Corp., Apogent
Technologies Inc., MBNA Corp., and XL Capital LTD.
SMALL-CAP EQUITY FUND (FORMERLY AGGRESSIVE EQUITY FUND)
The Fund invests primarily in common stocks and equity-type securities of
companies with market capitalizations of $2.5 billion or less at the time of
investment. 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 September 30, 2002, the Small-Cap Equity Fund experienced
a total return, net of Expenses, of (20.74)%. By comparison, the Russell 2000
Index produced a total return of (21.40)% for the same period. For the nine
months ended September 30, 2002, the Fund experienced a total return, net of
Expenses, of (32.58)% compared to a total return of (25.10)% for the Russell
2000 Index. The Russell 2000 Index does not include any allowance for the fees
that an investor would pay for investing in the stocks that comprise the index.
The most heavily weighted sectors in the Small-Cap Equity Fund were consumer
discretionary, technology and finance. Securities representing the largest
holdings based on market value in the Small-Cap Equity Fund at September 30,
2002 included Biosite Inc., Americredit Corp., Performance Food Group Co., New
York Community Bancorp Inc. and THQ Inc.
STABLE ASSET RETURN FUND
The Stable Asset Return Fund invests primarily in investment contracts issued by
insurance companies, banks or other financial institutions. The Stable Asset
Return
64
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 September 30, 2002, the Stable Asset Return Fund produced
an annualized return, net of Expenses, of 3.92%. By comparison, the Money Fund
Report Money Market Fund "Tier One" Average (the "Money Fund Report Average")
for the same period was 1.10%. For the nine months ended September 30, 2002, the
Fund experienced a total return, net of Expenses, of 3.18% compared to a total
return of 0.88% 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.
STRUCTURED PORTFOLIO SERVICE
The portfolios of the Structured Portfolio Service invest in the funds described
above according to conservative, moderate and aggressive portfolio allocations
as follows:
- ----------------------------------------------------------
CONSERVATIVE PORTFOLIO ALLOCATION
- ----------------------------------------------------------
Stable Asset Return Fund 30%
- ----------------------------------------------------------
Intermediate Bond Fund 35%
- ----------------------------------------------------------
Large-Cap Value Equity Fund 7%
- ----------------------------------------------------------
Large-Cap Growth Equity Fund 7%
- ----------------------------------------------------------
Index Equity Fund 14%
- ----------------------------------------------------------
International Equity Fund 7%
- ----------------------------------------------------------
- ----------------------------------------------------------
Moderate Portfolio Allocation
- ----------------------------------------------------------
Stable Asset Return Fund 10%
- ----------------------------------------------------------
Intermediate Bond Fund 30%
- ----------------------------------------------------------
Large-Cap Value Equity Fund 9%
- ----------------------------------------------------------
Large-Cap Growth Equity Fund 9%
- ----------------------------------------------------------
Index Equity Fund 23%
- ----------------------------------------------------------
Mid-Cap Value Equity Fund 2%
- ----------------------------------------------------------
Mid-Cap Growth Equity Fund 2%
- ----------------------------------------------------------
International Equity Fund 15%
- ----------------------------------------------------------
- ----------------------------------------------------------
Aggressive Portfolio Allocation
- ----------------------------------------------------------
Intermediate Bond Fund 15%
- ----------------------------------------------------------
Large-Cap Value Equity Fund 13%
- ----------------------------------------------------------
Large-Cap Growth Equity Fund 13%
- ----------------------------------------------------------
65
- ----------------------------------------------------------
Index Equity Fund 30%
- ----------------------------------------------------------
Mid-Cap Value Equity Fund 3%
- ----------------------------------------------------------
Mid-Cap Growth Equity Fund 3%
- ----------------------------------------------------------
Small-Cap Equity Fund 3%
- ----------------------------------------------------------
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 September 30, 2002, the Structured Portfolio Service
experienced a total return, net of Expenses, of (4.79)% for the Conservative
Portfolio, (9.73)% for the Moderate Portfolio, and (14.93)% for the Aggressive
Portfolio. For the nine months ended September 30, 2002, the Structured
Portfolio Service experienced a total return of (6.54)% for the Conservative
Portfolio, (14.17)% for the Moderate Portfolio and (22.12)% for the Aggressive
Portfolio.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures.
The Collective Trust's Chief Executive Officer and its Chief Financial Officer,
after evaluating the effectiveness of the Company's disclosure controls and
procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-14(c)
and 15d-14(c) as of a date within 90 days of the filing date of this quarterly
report on Form 10-Q (the "Evaluation Date"), have concluded that as of the
Evaluation Date, the Company's disclosure controls and procedures were adequate
and effective to ensure that material information relating to the Collective
Trust would be made known to them, particularly during the period in which this
quarterly report on Form 10-Q was being prepared.
(b) Changes in Internal Controls.
None.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the quarter ended September 30, 2002, the Collective Trust issued an
aggregate of approximately $182,000,000 in unregistered Units. Such Units were
offered and sold in reliance upon the exemption from registration under Rule 180
promulgated under the Securities Act relating to exemption from registration of
interests and participations issued in connection with certain H.R. 10 plans.
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
66
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 new 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 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 were
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
67
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
involve 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 seeks to maintain a net asset value of
$1.00 per Unit. This change did not affect the investment objective or strategy
of SARF, nor did 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.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. EXHIBITS
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.
68
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 November 14, 2002.
AMERICAN BAR ASSOCIATION MEMBERS/
STATE STREET COLLECTIVE TRUST
By: /s/ James S. Phalen
---------------------------------------
Name: James S. Phalen
Title: Chief Executive Officer
By: /s/ Beth M. Halberstadt
---------------------------------------
Name: Beth M. Halberstadt
Title: Chief Financial Officer
69
CERTIFICATIONS
I, James S. Phalen, as Chief Executive Officer of the American Bar Association
Members/ State Street Collective Trust, certify that:
1. I have reviewed this quarterly report on Form 10-Q of the American Bar
Association Members/ State Street Collective Trust;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: November 14, 2002
/s/ James S. Phalen
- -----------------------------
James S. Phalen
Chief Executive Officer
70
I, Beth M. Halberstadt, as Chief Financial Officer of the American Bar
Association Members/ State Street Collective Trust, certify that:
1. I have reviewed this quarterly report on Form 10-Q of the American Bar
Association Members/ State Street Collective Trust;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: November 14, 2002
/s/ Beth M. Halberstadt
- -----------------------------
Beth M. Halberstadt
Chief Financial Officer
71
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
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.