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S3. * UMASS/AMHERST * 312Qbb DEflS 31MS b Audited Financial Statements Massachusetts State Teachers' and Employees' Retirement Systems Trust Years ended June 30, 1996 and 1995 GOVERNflENT DOCUMENTi) COLLECTION MAY 0 1998 University cf Massachusetts Denoîiory Copy ^ Ernst& Young llp n I I I I I I Massachusetts State Teachers' and Employees' Retirement Systems Trust Audited Financial Statements Years ended June 30, 1996 and 1995 Contents Report ofIndependent Auditors 1 Audited Financial Statements Statements ofAssets and Liabilities 2 Statements ofOperations 4 Statements ofChanges inNet Assets 5 Financial Highlights 6 Notes to Financial Statements 8 Schedule ofInvestments 20 =U Ernst&Young up m 200Clarendon Street Phone: 6172662000 Boston Fax: 6172665843 Massachusetts02116-5072 Report ofIndependent Auditors To the Unitholders and the Trustee Massachusetts State Teachers' and Employees' Retirement Systems Trust We have audited the accompanying statements of assets and liabilities, including the schedule of investments as of June 30, 1996, of the Massachusetts State Teachers' and Employees' Retirement Systems Trust (the Trust) (comprised ofthe Capital Fund and the Cash Fund) as of June 30, 1996 and 1995, and the related statements of operations and changes in net assets, and the financial highlights for the years then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each ofthe three years in the period ended June 30, 1994 were audited by other auditors whose report, dated September 30, 1994, expressed an unqualified opinion on those statements. The other auditors' report included an explanatory paragraph that discussed the Trust's procedures for accounting for and reporting the vsdue of securities which are not readily ascertainable. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are fi-ee of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and fmancial highlights. An audit also includes assessing the accounting principles used and significant estimates made by We management, as well as evaluating the overall financial statement presentation. believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position ofthe Massachusetts State Teachers' and Employees' Retirement Systems Trust at June 30, 1996 and 1995, and the results of its operations, the changes in its net assets and its financial highlights for the years then ended, in conformity with generally accepted accounting principles. August 23, 1996 Ernst&Youngllp isa memberofErnst&Young International, Ltd. 1 3 Massachusetts State Teachers' and Employees' Retirement Systems Trust Statements ofAssets and Liabilities June 30, 1996 and 1995 Total Capital Fund Cash Fund 1996 1995 Assets Investments atmarket value: Domestic equities $ 4,129,821,442 $4,129,821,442 $ 3,469,980,703 Corporate bonds andnotes 1,007,734,408 1,007,734,408 1,133,500,404 U.S. Government and government agency securities 2,120,061,402 2,120,061,402 1,807,555,572 Municipal bonds 2,457,705 2,457,705 37,803,952 Certificates ofdeposit and othershort- term obligations 2,471,258 Options and futures contracts 1,/UU,o/4 Collateralized mortgage obligations 111-J <11Q7,i0£i0£7Q Real estate and limitedpartnership investments en S'7Q ocn Foreign securities OO/I £OQ QQ/4 iiOC tÂQ ion 7ni Af»fi Pooled investment funds //,oU4,ooy 7/7/,Aoflu/4l,foi/o^yO 07 714 Pooledmoney market funds "^CT '7117 /Ifi/; «>7//0;,537/7/,foinU*Z? 111 fi^C 78fi ZZ11,jÔZfoi,nU7/7/ Total investments 8,o2o,yiy,U15 n7oc,C57777,ooUmz oO,77AU1j,/44yniol,0o1l77 7 ^00 70 Cash 19,787,889 PT*U'lACrpliÔl'ln pCUiliirCrJPlTliCP^V, suilt mli?iiorIWl'^PCtLvVsailniu*e* (\^c^dUQdtL a\JtL 'S2 '?'S2 672 and "K14 930 277 in 1996 and 1\QyQyS^^ r1^po^Ln/pwrvtiiivVpÎ1yy 1 313 960 2 313 960 15 053 175 Receivahle for inve'^tments sold 45 416 955 45 416 955 57 356 431 "Mpf rp^^pivjihlp for fnrw^rH forpion Piirrpnpv 492 01 492 013 1 263 974 iyiviuciiUo, iiiicrcol diiu uiiici rcccivapico ?t,X17/11,X11l8o 54 171 118 44"^ 27'? Total assets O8,771z0y,"j2i1o1,AuioCiI 77o^,C57777,oU2 oo,o8nUe5,oonynU,0oÔ1J 7 0/11 •J/l^ d/t Liabilities Amountpayable to bank 5,982,248 5,982,248 Payable for investments purchased 90,375,236 90,375,236 111,757,115 Netpayable forforward foreign currency exchange contracts purchased 846,687 846,687 3,571,934 Written options, atvalue (premiums received of$1,007,225 at June 30, 1995) 793,037 Reserve forfixed income securities 4,565,072 Reverse repurchase agreement 627,856 627,856 Dividends payable 1,447,865 1,447,865 Accrued expenses and otherliabilities 2,915,833 2,915,833 2,411,166 Total liabilities 102,195,725 102,195,725 123,098,324 Net assets $8,627,117,336 $76,577,802 $8,703,695,138 $7,718,247,210 Costofinvestments $7,536,026,289 $76,577,802 $7,612,604,091 $6,919,578,988 2 p Massachusetts State Teachers' and Employees' Retirement Systems Trust Statements ofAssets and Liabilities (continued) June 30, 1996 and 1995 Total Capital Fund Cash Fund 1996 1995 I I Net assets consist ofthe following: Paid-in capital $5,303,900,856 $ 76,577,802 $ 5,380,478,658 $ 5,253,382,309 Accumulatednetrealized gain on investments and foreign currency transactions 2,232,702,553 2,232,702,553 1,692,931,883 Unrealized appreciation ofinvestments and translation ofassets and liabilities in foreign currencies 1,090,513,927 1,090,513,927 768,271,030 Undistributed net investment income 3,661,988 Total net assets $8,627,117,336 $ 76,577,802 $8,703,695,138 $ 7,718,247,210 Units ofparticipation outstanding owned by: Commonwealth ofMassachusetts State Employees' Annuity Fund 27,568,014 16,748,205 Commonwealth ofMassachusetts State Teachers' Annuity Fund 30,680,980 59,829,597 58,248,994 76,577,802 NetAsset Value, Offering Price and Redemption Price perUnit $ 148.11 $1.00 See accompanyingnotes. at