<PAGE>
N-30D Table of Contents
SSgA Fund Name N-30D page
- -------------- ----------
S&P 500 Index Fund . . . . . . . . . . . . . . . . . . . . . . . 2
Matrix Equity Fund . . . . . . . . . . . . . . . . . . . . . . . 28
Small Cap Fund . . . . . . . . . . . . . . . . . . . . . . . . . 48
Active International Fund . . . . . . . . . . . . . . . . . . . . 69
Emerging Markets Fund . . . . . . . . . . . . . . . . . . . . . . 98
Growth and Income Fund . . . . . . . . . . . . . . . . . . . . . 129
Intermediate Fund . . . . . . . . . . . . . . . . . . . . . . . . 148
US Government Money Market Fund . . . . . . . . . . . . . . . . . 168
Bond Market Fund . . . . . . . . . . . . . . . . . . . . . . . . 185
Yield Plus Fund . . . . . . . . . . . . . . . . . . . . . . . . . 206
Money Market Fund . . . . . . . . . . . . . . . . . . . . . . . . 225
US Treasury Money Market Fund . . . . . . . . . . . . . . . . . . 244
Prime Money Market Fund . . . . . . . . . . . . . . . . . . . . . 262
Tax Free Money Market Fund . . . . . . . . . . . . . . . . . . . 280
Life Solutions Funds . . . . . . . . . . . . . . . . . . . . . . 304
<PAGE>
SSgA-SM- FUNDS
S&P 500 INDEX FUND
Annual Report
August 31, 1997
Table of Contents
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion. . . . . . . . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . 22
Tax Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Fund Management and Service Providers. . . . . . . . . . . . . . . . . . 28
"SSgA-SM-" IS A SERVICE MARK OF STATE STREET CORPORATION AND IS LICENSED FOR USE
BY THE SSgA FUNDS.
THIS REPORT IS PREPARED FROM THE BOOKS AND RECORDS OF THE FUND AND IT IS
SUBMITTED FOR THE GENERAL INFORMATION OF SHAREHOLDERS. THIS INFORMATION IS FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR ACCOMPANIED BY A
SSgA FUNDS PROSPECTUS CONTAINING MORE COMPLETE INFORMATION CONCERNING THE
INVESTMENT OBJECTIVE AND OPERATIONS OF THE FUND, CHARGES AND EXPENSES. THE
PROSPECTUS SHOULD BE READ CAREFULLY BEFORE AN INVESTMENT IS MADE.
PERFORMANCE IS HISTORICAL AND ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL
GAINS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN WHEN PURCHASED.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. RUSSELL FUND DISTRIBUTORS,
INC., IS THE DISTRIBUTOR OF THE SSgA FUNDS.
<PAGE>
SSgA S&P 500 INDEX FUND
LETTER FROM THE CHAIRMAN OF STATE STREET GLOBAL ADVISORS
DEAR SHAREHOLDERS,
I am pleased to provide you with the SSgA Funds annual report for the fiscal
year ended August 31, 1997. Over the past year, the Funds have grown to include
seventeen portfolios covering a broad range of investment strategies from the
far corners of the emerging markets countries to the domestic stock and bond
markets. This report contains summaries on the market environment, performance
and financial statements for the S&P 500 Index Fund. I hope you find this
information a useful tool as you review your overall investment strategy.
The SSgA Funds opened three additional funds in fiscal 1997. These three asset
allocation funds, called Life Solutions Funds, were opened on July 1, 1997. Each
Life Solutions Fund seeks to achieve its investment objective by diversifying
its assets in shares of certain Funds of the Investment Company, referred to as
Underlying Funds.
The Life Solutions Income and Growth Fund seeks income and, secondarily,
long-term growth of capital.
The Life Solutions Balanced Fund seeks a balance of growth of capital and
income.
The Life Solutions Growth Fund seeks long-term growth of capital.
During the past fiscal year, the SSgA Funds were proud to announce that the SSgA
Matrix Fund and the SSgA Small Cap Fund achieved five year track records. We are
proud of our long-term record and look forward to having additional funds
complete their five year anniversary.
SSGA is strategically growing by continuing to build an organization that
delivers comprehensive services striving to meet your investment requirements.
In an effort to compete in this ever-changing complex world, we focus on our
expertise, our knowledge and our commitment to better serve your investment
needs.
As Chairman and Chief Executive Officer of State Street Global Advisors, which
serves as the investment adviser to the SSgA Funds, I would like to thank you
for choosing the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
SSgA S&P 500 INDEX FUND
MANAGEMENT OF THE FUNDS
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A TEAM APPROACH TO INVESTMENT MANAGEMENT
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio managers work together to develop and enhance the
techniques that drive our investment processes. The result is that the
portfolios we manage benefit from the knowledge of the entire team.
Mr. James May, Assistant Vice President, has been the portfolio manager
primarily responsible for investment decisions regarding the SSgA S&P 500 Index
Fund since May 1995. Mr. May has been a portfolio manager in the US Structured
Products Group of State Street since January 1994. He served as an Investment
Support Analyst in the US Passive Services Group from 1991 to 1993. He holds a
BS in Finance from Bentley College and an MBA from Boston College. There are
four other portfolio managers working with Mr. May.
Annual Report 5
<PAGE>
SSgA S&P 500 INDEX FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
OBJECTIVE: To replicate the total return of the S&P 500 Index.
INVESTS IN: Equity securities.
STRATEGY: The Fund's holdings are composed of the 500 stocks in the S&P 500
Index. The Index is designed to capture the price performance of a large
cross-section of the US publicly traded stock market.
[GRAPH]
DATES S&P 500 INDEX FUND S&P 500-Registered Trademark- INDEX**
Inception* $10,000 $10,000
1993 $10,806 $10,842
1994 $11,377 $11,435
1995 $13,779 $13,887
1996 $16,323 $16,488
1997 $22,901 $23,191
- --------------------------------------------------------------------------------
Total $85,186 $85,843
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SSgA
S&P 500 INDEX FUND
Period Ended Growth of Total
08/31/97 $10,000 Return
- ------------ ------------ ------------
1 Year $ 14,030 40.30%
Inception $ 22,901 19.43%+
STANDARD & POOR'S-Registered Trademark-
500 COMPOSITE STOCK PRICE INDEX
Period Ended Growth of Total
08/31/97 $10,000 Return
- ------------ ------------ ------------
1 Year $ 14,065 40.65%
Inception $ 23,191 19.75%+
SEE RELATED NOTES ON THE FOLLOWING PAGE.
PERFORMANCE REVIEW
The SSgA S&P 500 Index Fund seeks to replicate the total return of the S&P 500
Index. To accomplish this, the Fund utilizes a full replication approach. With
this strategy, the Fund seeks to hold each security in the S&P 500 Index in the
same capitalization weight as it appears in the Index.
The Fund closed the fiscal year with a 40.30% return, which closely mirrors the
S&P 500 Index return of 40.65%. The full replication approach allows the Fund's
performance to be very similar to the performance of the Index. The Fund's
slight deviation from the benchmark return is attributable principally to the
payment of Fund operating expenses. Index results do not reflect fees or
expenses of any kind.
6 Annual Report
<PAGE>
SSgA S&P 500 INDEX FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
PORTFOLIO HIGHLIGHTS
The 500 stocks of the S&P 500 Index represent approximately 77% of the market
value of all US common stocks. Standard and Poor's Corporation chooses the 500
stocks to capture the price performance of a large cross-section of the US
publicly traded stock market. The Index is also structured to approximate the
general distribution of industries in the US economy and does not necessarily
represent the 500 largest companies.
The large capitalization rally that began in late 1994 and early 1995 has
developed into one of the most remarkable rallies in the US equity market
history. Well-known blue chip stocks continue to lead the rally through 1997.
The blue chip stocks powered the S&P 500 Index returns over the past fiscal year
just as they did in 1996.
The past year was another record setting year. The month of July 1997 brought
the largest one month gain, 7.96%, in S&P 500 Index history. The Index continued
to post new closing highs throughout the year. Total capitalization of the S&P
500 is now more than $7 trillion.
Low unemployment figures combined with low inflation and moderate economic
growth have been the driving force behind the past performance of the US equity
markets.
However, the fear of inflation and an overheating economy add volatility to the
market.
The Manager believes the Fund has successfully fulfilled its investment
objective, to closely match the return of the S&P 500 Index.
TOP TEN EQUITY HOLDINGS
(AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31, 1997
General Electric Co. 2.8%
Microsoft Corp. 2.1
Exxon Corp. 2.1
Intel Corp. 2.0
Coca-Cola Co. (The) 1.9
Merck & Co., Inc. 1.5
Royal Dutch Petroleum Co. - ADR 1.5
Philip Morris Cos., Inc. 1.4
International Business Machines Corp. 1.4
Procter & Gamble Co. 1.2
--------------------
NOTES: THE FOLLOWING NOTES RELATE TO THE GROWTH OF $10,000 GRAPH AND TABLE ON
THE PRECEDING PAGE.
* The Fund commenced operations on December 30, 1992. Index comparison began
December 31, 1992.
** The Standard & Poor's-Registered Trademark- 500 Composite Stock Index is
composed of 500 common stocks which are chosen by Standard & Poor's
Corporation to best capture the price performance of a large cross-section
of the US publicly traded stock market. The Index is structured to
approximate the general distribution of industries in the US economy.
+ Annualized.
"Standard & Poor's-Registered Trademark-", "S&P-Registered Trademark-",
"S&P 500-Registered Trademark-", "Standard & Poor's 500" and "500" are
trademarks of Standard & Poor's Corporation and have been licensed for use by
The SSgA Fund. The Product is not sponsored, endorsed, sold or promoted by
Standard & Poor's, and Standard & Poor's makes no representation regarding the
advisability of investing in the Product.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Annual Report 7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of the SSgA Funds:
We have audited the accompanying statement of assets and liabilities and
statement of net assets of SSgA S&P 500 Index Fund (formerly The Seven Seas
Series S&P 500 Index Fund)(the "Fund"), as of August 31, 1997, and the related
statement of operations for the fiscal year then ended, the statements of
changes in net assets for each of the two fiscal years in the period then ended,
and the financial highlights for each of the four fiscal years in the period
then ended and for the period December 30, 1992 (commencement of operations) to
August 31, 1993. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
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 free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We 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 of the
Fund as of August 31, 1997, the results of its operations for the fiscal year
then ended, the changes in its net assets for each of the three fiscal years in
the period then ended, and the financial highlights for each of the four fiscal
years in the period then ended and for the period December 30, 1992
(commencement of operations) to August 31, 1993 in conformity with generally
accepted accounting principles.
Boston, Massachusetts /s/ COOPERS & LYBRAND L.L.P.
October 7, 1997
8 Annual Report
<PAGE>
SSgA
S&P 500 INDEX FUND
STATEMENT OF NET ASSETS
August 31, 1997
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
COMMON STOCKS - 93.9%
BASIC INDUSTRIES - 5.6%
Air Products & Chemicals, Inc. 19,200 $ 1,566
Alcan Aluminum, Ltd. 39,000 1,363
Allegheny Teldyne, Inc. 32,077 990
Aluminum Co. of America 30,400 2,500
ARMCO, Inc. (a) 17,100 102
ASARCO, Inc. 6,600 203
Barrick Gold Corp. 65,400 1,488
Battle Mountain Gold Co. 46,500 264
Bemis Co., Inc. 8,800 387
Bethlehem Steel Corp. (a) 22,600 271
Boise Cascade Corp. 7,900 313
Champion International Corp. 17,300 1,024
Cincinnati Milacron, Inc. 8,000 206
Crown Cork & Seal Co., Inc. 22,900 1,165
Cyprus Amax Minerals Co. 15,700 396
Dow Chemical Co. 40,800 3,611
du Pont (E.I.) de Nemours & Co. 198,200 12,350
Eastman Chemical Co. 14,225 851
Echo Bay Mines, Ltd. 21,400 108
Engelhard Corp. 24,125 504
FMC Corp. (a) 6,300 523
Freeport McMoRan Copper & Gold, Inc. Class B 35,600 997
Goodrich (B.F.) Co. 9,000 379
Great Lakes Chemical Corp. 9,800 456
Hercules, Inc. 17,400 899
Homestake Mining Co. 24,600 344
Illinois Tool Works, Inc. 44,100 2,133
Inco, Ltd. 28,300 766
Inland Steel Industries, Inc. 8,400 177
International Paper Co. 52,672 2,778
Kimberly-Clark Corp. 97,536 4,627
Mead Corp. 8,800 624
Minnesota Mining & Manufacturing Co. 73,200 6,579
Monsanto Co. 103,700 4,556
Morton International, Inc. 26,200 871
Nalco Chemical Co. 11,300 452
Newmont Mining Corp. 28,367 1,200
Nucor Corp. 15,700 890
Owens-Illinois, Inc. (a) 25,200 877
Phelps Dodge Corp. 10,500 845
Placer Dome, Inc. 40,800 678
Potlatch Corp. 4,500 210
PPG Industries, Inc. 31,900 2,010
Praxair, Inc. 26,900 1,437
Reynolds Metals Co. 12,500 884
Rohm & Haas Co. 11,000 1,054
Sigma Aldrich Corp. 18,500 604
Stone Container Corp. 15,500 267
Temple-Inland, Inc. 9,900 639
Union Camp Corp. 11,700 694
Union Carbide Corp. 21,300 1,093
USX-U.S. Steel Group 14,200 499
Westvaco Corp. 18,800 637
Willamette Industries, Inc. 10,000 798
Worthington Industries, Inc. 16,600 307
----------
72,446
----------
CAPITAL GOODS - 5.1%
Aeroquip-Vickers, Inc. 4,600 257
Ball Corp. 4,500 148
Boston Scientific Corp. (a) 33,700 2,376
Briggs & Stratton Corp. 4,500 217
Browning-Ferris Industries, Inc. 38,000 1,328
Case Corp. 13,500 905
Caterpillar, Inc. 66,900 3,884
Cooper Industries, Inc. 20,200 1,077
Crane Co. 7,700 340
Cummins Engine Co., Inc. 6,600 508
Deere & Co. 44,800 2,509
Dover Corp. 19,100 1,319
DSC Communications Corp. (a) 19,700 573
Emerson Electric Co. 77,600 4,244
Fluor Corp. 14,300 803
Foster Wheeler Corp. 6,700 306
Annual Report 9
<PAGE>
SSgA
S&P 500 INDEX FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
General Electric Co. 574,900 $ 35,931
General Signal Corp. 8,200 356
Grainger (W.W.), Inc. 8,800 782
Harnischfeger Industries, Inc. 8,300 333
Ingersoll-Rand Co. 18,800 1,130
ITT Industries, Inc. 21,100 665
Johnson Controls, Inc. 15,100 720
Millipore Corp. 7,000 346
NACCO Industries, Inc. Class A 1,600 138
National Service Industries, Inc. 7,200 319
Pall Corp. 21,100 500
Parker-Hannifin Corp. 13,300 855
Raychem Corp. 7,500 698
Timken Co. 11,900 445
Westinghouse Electric Corp. 111,200 2,863
----------
66,875
----------
CONSUMER BASICS - 19.7%
Abbott Laboratories 136,000 8,152
Albertson's, Inc. 43,200 1,485
Allergan, Inc. 11,000 356
ALZA Corp. (a) 14,200 412
American Home Products Corp. 113,200 8,150
American Stores Co. 49,000 1,161
Amgen, Inc. (a) 46,500 2,302
Archer-Daniels-Midland Co. 96,236 2,081
Bard (C.R.), Inc. 9,500 328
Bausch & Lomb, Inc. 10,500 431
Baxter International, Inc. 49,000 2,606
Becton, Dickinson & Co. 21,200 1,016
Beverly Enterprises, Inc. (a) 16,600 271
Biomet, Inc. 19,200 396
Black & Decker Corp. 16,000 613
Bristol-Myers Squibb Co. 175,500 13,338
Campbell Soup Co. 81,300 3,770
Cardinal Health, Inc. 18,700 1,239
Clorox Co. 9,300 1,221
Coca-Cola Co. (The) 434,600 24,908
Colgate-Palmolive Co. 51,000 3,200
Columbia/HCA Healthcare Corp. 116,932 3,691
ConAgra, Inc. 42,600 2,740
Corning, Inc. 39,700 2,099
CPC International, Inc. 25,200 2,246
CVS Corp. 28,700 1,618
Fleming Cos., Inc. 6,800 128
Fort James Corp. 34,800 1,462
General Mills, Inc. 28,600 1,834
Giant Food, Inc. Class A 10,000 325
Gillette Co. 97,900 8,107
Great Atlantic & Pacific Tea Co., Inc. 5,600 140
HEALTHSOUTH Corp. (a) 59,300 1,479
Heinz (H.J.) Co. 64,350 2,679
Hershey Foods Corp. 26,300 1,404
Humana, Inc. (a) 27,300 643
Johnson & Johnson 233,800 13,254
Kellogg Co. 73,000 3,267
Kroger Co. (a) 45,800 1,380
Lilly (Eli) & Co. 97,400 10,190
Mallinckrodt, Inc. 12,100 440
Manor Care, Inc. 12,000 370
Medtronic, Inc. 42,200 3,814
Merck & Co., Inc. 211,700 19,437
PepsiCo, Inc. 268,800 9,677
Pfizer, Inc. 226,700 12,554
Pharmacia & Upjohn, Inc. 88,825 3,026
Philip Morris Cos., Inc. 426,000 18,584
Pioneer Hi-Bred International, Inc. 14,700 1,260
Procter & Gamble Co. 118,800 15,808
Quaker Oats Co. 24,100 1,133
Ralston-Purina Group 18,300 1,647
Rubbermaid, Inc. 25,800 645
Sara Lee Corp. 84,300 3,393
Schering-Plough Corp. 128,000 6,144
Snap-On Tools Corp. 10,200 428
St. Jude Medical, Inc. (a) 16,350 622
10 Annual Report
<PAGE>
SSgA
S&P 500 INDEX FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Stanley Works 15,000 $ 638
SYSCO Corp. 30,000 1,065
Tenet Healthcare Corp. (a) 51,900 1,414
Tupperware Corp. 10,500 352
U.S. Surgical Corp. 12,000 395
Unilever NV 27,900 5,615
United Healthcare Corp. 31,900 1,551
UST Corp. 31,300 904
W. R. Grace & Co. 12,500 860
Warner-Lambert Co. 47,500 6,035
Whitman Corp. 17,400 426
Winn-Dixie Stores, Inc. 25,200 849
Wrigley (Wm.), Jr. Co. 20,700 1,501
----------
256,709
----------
CONSUMER DURABLES - 2.3%
AutoZone Inc. (a) 27,200 768
Chrysler Corp. 120,000 4,215
Cooper Tire & Rubber Co. 12,700 319
Dana Corp. 18,500 852
Eaton Corp. 13,100 1,180
Echlin, Inc. 10,500 389
Fleetwood Enterprises, Inc. 5,400 168
Ford Motor Co. 213,900 9,198
General Motors Corp. 127,400 7,994
Genuine Parts Co. 30,650 946
Goodyear Tire & Rubber Co. 26,700 1,645
Maytag Corp. 16,800 461
PACCAR, Inc. 12,990 616
Whirlpool Corp. 14,000 802
----------
29,553
----------
CONSUMER NON-DURABLES - 5.6%
Alberto Culver Co. Class B 9,200 269
Anheuser-Busch Cos., Inc. 87,000 3,708
Avon Products, Inc. 22,900 1,467
Brown-Forman Distillers, Inc. Class B 11,600 560
Brunswick Corp. 16,500 503
Charming Shoppes, Inc. (a) 15,100 91
Circuit City Stores, Inc. 18,100 645
Coors (Adolph) Co. Class B 7,100 262
Costco Companies, Inc. (a) 38,100 1,372
Dayton Hudson Corp. 38,100 2,172
Dillard's, Inc. Class A 19,000 760
Eastman Kodak Co. 57,700 3,772
Federated Department Stores, Inc. (a) 37,300 1,567
Fruit of the Loom, Inc. Class A (a) 12,600 337
Gap, Inc. 48,500 2,155
Hasbro, Inc. 21,600 581
Home Depot, Inc. (The) 127,399 6,012
Ikon Office Solutions, Inc. 23,200 603
International Flavors & Fragrances, Inc. 19,000 971
Jostens, Inc. 6,014 145
Kmart Corp. (a) 87,200 1,210
Limited, Inc. (The) 47,727 1,086
Liz Claiborne, Inc. 12,500 557
Longs Drug Stores, Inc. 6,500 165
Lowe's Cos., Inc. 31,200 1,078
Mattel, Inc. 51,807 1,732
May Department Stores Co. 40,700 2,190
Mercantile Stores, Inc. 6,200 387
Newell Co. 26,900 1,059
NIKE, Inc. Class B 50,500 2,695
Nordstrom, Inc. 13,500 790
(J.C.) Penney Co., Inc. 43,300 2,598
Pep Boys - Manny, Moe & Jack 9,600 254
Polaroid Corp. 7,400 391
Reebok International, Ltd. 9,300 409
Rite Aid Corp. 22,400 1,121
Russell Corp. 6,000 171
Seagram Co., Ltd. 65,100 2,274
Sears Roebuck & Co. 68,600 3,893
Annual Report 11
<PAGE>
SSgA
S&P 500 INDEX FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Springs Industries, Inc. 3,300 $ 155
Stride Rite Corp. 7,100 84
SuperValu, Inc. 10,700 420
TJX Cos., Inc. 26,200 721
Toys "R" Us, Inc. (a) 50,800 1,756
V.F. Corp. 11,000 972
Wal-Mart Stores, Inc. 397,600 14,115
Walgreen Co. 86,400 2,327
Woolworth Corp. (a) 24,800 555
----------
73,117
----------
CONSUMER SERVICES - 2.1%
AMR Corp. (a) 16,200 1,632
Darden Restaurants, Inc. 26,800 270
Delta Air Lines, Inc. 13,400 1,159
Disney (Walt) Co. 118,462 9,099
Harrah's Entertainment, Inc. (a) 17,300 388
HFS, Inc. (a) 27,200 1,515
Hilton Hotels Corp. 43,800 1,344
ITT Corp. New (a) 20,800 1,307
King World Productions, Inc. 6,300 250
Marriot International, Inc. 22,600 1,504
McDonald's Corp. 119,900 5,673
Mirage Resorts, Inc. (a) 32,300 866
Southwest Airlines Co. 26,300 736
USAirways Group, Inc. (a) 13,600 464
Wendy's International, Inc. 24,000 578
----------
26,785
----------
ENERGY - 8.5%
Amerada Hess Corp. NPV 16,800 977
Amoco Corp. 86,400 8,170
Anadarko Petroleum Corp. 10,900 800
Apache Corp. 16,500 655
Ashland, Inc. 13,400 672
Atlantic Richfield Co. 56,250 4,219
Baker Hughes, Inc. 29,600 1,254
Burlington Resources, Inc. 21,200 1,073
Chevron Corp. 114,800 8,890
Dresser Industries, Inc. 30,300 1,265
Enserch Exploration, Inc. (a) 5,100 46
Exxon Corp. 435,300 26,635
Halliburton Co. 44,900 2,144
Helmerich & Payne, Inc. 4,900 346
Kerr-McGee Corp. 8,700 541
Louisiana Land & Exploration Co. 5,700 436
McDermott International, Inc. 10,800 348
Mobil Corp. 138,000 10,040
Occidental Petroleum Corp. 56,600 1,327
Oryx Energy Co. (a) 17,600 465
Pennzoil Co. 7,800 602
Phillips Petroleum Co. 45,600 2,169
Rowan Cos., Inc. (a) 14,000 418
Royal Dutch Petroleum Co. - ADR 376,100 19,087
Schlumberger, Ltd. 85,900 6,545
Sun Co., Inc. 14,155 550
Texaco, Inc. 45,900 5,290
Union Pacific Resources Group, Inc. 44,918 1,123
Unocal Corp. 43,400 1,695
USX-Marathon Group 50,800 1,654
Western Atlas, Inc. (a) 9,500 753
----------
110,189
----------
FINANCE - 15.1%
Aetna, Inc. 26,502 2,529
Ahmanson (H.F.) & Co. 17,300 878
Allstate Corp. 76,694 5,603
American Express Co. 82,700 6,430
American General Corp. 43,387 2,091
American International Group, Inc. 122,925 11,601
AON Corp. 28,700 1,462
Banc One Corp. 100,072 5,366
Bank of New York Co., Inc. 68,100 3,039
12 Annual Report
<PAGE>
SSgA
S&P 500 INDEX FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
BankAmerica Corp. 124,700 $ 8,207
BankBoston Corp. 26,300 2,186
Bankers Trust New York Corp. 13,300 1,380
Barnett Banks, Inc. 34,200 2,330
Beneficial Corp. 8,900 637
Chase Manhattan Corp. 75,764 8,424
Chubb Corp. (The) 30,200 2,020
CIGNA Corp. 13,000 2,384
Citicorp 80,800 10,312
Comerica, Inc. 18,000 1,275
Conseco, Inc. 31,200 1,342
CoreStates Financial Corp. 35,735 2,198
Countrywide Credit Industries, Inc. 17,800 600
Equifax, Inc. 26,000 765
Federal Home Loan Mortgage Corp. 121,400 3,953
Federal National Mortgage Association 186,500 8,206
Fifth Third Bancorp 28,400 1,654
First Chicago NBD Corp. 54,548 3,914
First Union Corp. 100,050 4,809
Fleet Financial Group, Inc. 45,875 2,956
General Re Corp. 14,300 2,772
Golden West Financial Corp. 10,300 848
Green Tree Financial Corp. 24,500 1,076
Hartford Financial Services Group (The), Inc. 20,300 1,619
Household International Corp. 18,400 2,041
Huntington Bancshares, Inc. 29,100 938
Jefferson-Pilot Corp. 13,250 922
KeyCorp 39,499 2,395
Lincoln National Corp. 17,500 1,171
Loews Corp. 19,900 2,029
Marsh & McLennan Cos., Inc. 29,800 2,034
MBIA, Inc. 7,400 838
MBNA Corp. 58,637 2,254
Mellon Bank Corp. 45,500 2,190
Merrill Lynch & Co., Inc. 58,100 3,573
MGIC Investment Corp. 20,100 1,011
Morgan (J.P.) & Co., Inc. 32,200 3,453
Morgan Stanley, Dean Witter, Discover and Co. 99,756 4,801
National City Corp. 37,900 2,141
NationsBank Corp. 128,340 7,620
Norwest Corp. 65,300 3,751
PNC Bank Corp. 57,500 2,487
Progressive Corp. 13,100 1,297
Providian Financial Corp. 15,700 585
Republic New York Corp. 9,700 1,038
SAFECO Corp. 22,200 1,086
Salomon, Inc. 18,300 1,096
Schwab (Charles) Corp. 30,200 1,282
St. Paul Cos., Inc. 14,800 1,086
State Street Corp. 29,300 1,461
SunAmerica, Inc. 23,600 1,271
SunTrust Banks, Inc. 38,700 2,419
Torchmark Corp. 23,600 889
Transamerica Financial Corp. 11,900 1,173
Travelers, Inc. 112,784 7,162
U.S. Bancorp of Oregon 42,739 3,742
UNUM Corp. 24,500 1,011
USF&G Corp. 19,400 426
Wachovia Corp. 27,800 1,730
Washington Mutual, Inc. 43,460 2,597
Wells Fargo & Co. 15,566 3,958
----------
195,824
----------
GENERAL BUSINESS - 3.4%
American Greetings Corp. Class A 12,500 433
Automatic Data Processing, Inc. 51,400 2,342
Block (H&R) Co., Inc. 17,500 687
Clear Channel Communications, Inc. 16,500 1,121
Comcast Corp. Special Class A 63,600 1,487
Computer Sciences Corp. (a) 12,900 959
CUC International, Inc. (a) 71,400 1,678
Deluxe Corp. 13,800 455
Donnelley (R.R.) & Sons Co. 24,900 970
Annual Report 13
<PAGE>
SSgA
S&P 500 INDEX FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Dow Jones & Co., Inc. 16,200 $ 694
Dun & Bradstreet Corp. 29,100 815
Ecolab, Inc. 10,900 491
First Data Corp. 78,500 3,223
Gannett Co., Inc. 24,800 2,416
Harcourt General, Inc. 12,500 594
Harland (John H.) Co. 4,400 87
Interpublic Group Cos., Inc. 22,000 1,072
Knight-Ridder, Inc. 15,700 795
McGraw-Hill, Inc. 17,100 1,048
Meredith Corp. 8,400 252
Moore Corp., Ltd. 16,600 329
New York Times Co. Class A 16,200 765
Safety-Kleen Corp. 9,200 186
SBC Communications, Inc. 160,341 8,719
Service Corp. International 42,800 1,370
Tele-Communications, Inc. Class A New (a) 114,400 1,995
Time Warner, Inc. 97,300 5,011
Times Mirror Co. Series A 16,300 826
Tribune Co. 21,700 1,073
Viacom, Inc. Class B (a) 61,411 1,819
----------
43,712
----------
MISCELLANEOUS - 0.7%
Cognizant Corp. 28,800 1,209
Fortune Brands, Inc. 35,700 1,227
Tenneco, Inc. 30,800 1,496
Tyco International, Ltd. 42,900 3,365
Waste Management, Inc. 79,400 2,541
----------
9,838
----------
SHELTER - 0.5%
Armstrong World Industries, Inc. 6,700 459
Centex Corp. 4,600 250
Georgia Pacific Corp. 16,200 1,478
Kaufman & Broad Home Corp. 6,100 122
Louisiana Pacific Corp. 18,200 403
Masco Corp. 28,500 1,266
Owens-Corning Fiberglas Corp. 8,700 353
Pulte Corp. 3,600 132
Sherwin-Williams Co. 29,500 809
Weyerhaeuser Co. 34,200 1,975
----------
7,247
----------
TECHNOLOGY - 16.5%
3Com Corp. (a) 58,425 2,918
Adobe Systems, Inc. 12,400 487
Advanced Micro Devices, Inc. (a) 24,500 917
AlliedSignal, Inc. 49,400 4,079
Amdahl Corp. (a) 20,400 251
AMP, Inc. 37,832 1,892
Andrew Corp. (a) 15,268 377
Apple Computer, Inc. (a) 20,900 455
Applied Materials, Inc. (a) 31,300 2,954
Autodesk, Inc. 8,000 349
Avery Dennison Corp. 17,500 719
Bay Networks, Inc. (a) 33,900 1,199
Boeing Co. 174,376 9,493
Cabletron Systems, Inc. (a) 28,300 856
Ceridian Corp. (a) 13,500 467
Cisco Systems, Inc. (a) 116,600 8,781
COMPAQ Computer Corp. (a) 119,950 7,857
Computer Associates International, Inc. 63,575 4,252
Data General Corp. (a) 9,300 334
Dell Computer Corp. (a) 58,400 4,792
Digital Equipment Corp. (a) 26,300 1,131
EG&G, Inc. 7,700 164
EMC Corp. (a) 43,500 2,232
General Dynamics Corp. 10,900 868
Guidant Corp. 12,700 1,115
Harris Corp. 6,600 575
Hewlett-Packard Co. 177,300 10,871
Honeywell, Inc. 22,000 1,521
14 Annual Report
<PAGE>
SSgA
S&P 500 INDEX FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Intel Corp. 287,200 $ 26,404
International Business Machines Corp. 174,200 17,572
Lockheed Martin Corp. 33,723 3,497
LSI Logic Corp. (a) 25,700 827
Lucent Technologies, Inc. 111,768 8,704
Micron Technology, Inc. (a) 36,100 1,609
Microsoft Corp. (a) 210,100 27,773
Motorola, Inc. 104,500 7,668
National Semiconductor Corp. (a) 26,100 894
NextLevel Systems, Inc. (a) 24,900 499
Northern Telecom, Ltd. 45,400 4,500
Northrop Grumman Corp. 11,700 1,370
Novell, Inc. (a) 67,000 626
Oracle Systems Corp. (a) 171,337 6,521
Parametric Technology Corp. (a) 21,900 1,013
Perkin-Elmer Corp. 7,300 540
Pitney Bowes, Inc. 25,100 1,917
Raytheon Co. 40,900 2,249
Rockwell International Corp. 36,600 2,196
Scientific-Atlanta, Inc. 13,000 283
Seagate Technology (a) 43,500 1,661
Shared Medical Systems 3,700 181
Silicon Graphics, Inc. (a) 31,600 867
Sun Microsystems, Inc. (a) 64,500 3,088
Tandem Computers, Inc. (a) 21,300 724
Tandy Corp. 9,500 631
Tektronix, Inc. 5,500 306
Tellabs, Inc. (a) 32,500 1,936
Texas Instruments, Inc. 33,500 3,806
Textron, Inc. 28,300 1,763
Thermo Electron Corp. (a) 25,700 1,034
Thomas & Betts Corp. 8,900 498
TRW, Inc. 21,300 1,110
Unisys Corp. (a) 29,300 331
United Technologies Corp. 41,600 3,247
Xerox Corp. 56,500 4,266
----------
214,017
----------
TRANSPORTATION - 1.0%
Burlington Northern, Inc. 27,569 2,528
Caliber Systems, Inc. 6,500 271
CSX Corp. 37,700 2,156
Federal Express Corp. (a) 20,300 1,349
Laidlaw, Inc. 58,600 857
Navistar International Corp. (a) 11,850 294
Norfolk Southern Corp. 21,700 2,127
Ryder System, Inc. 12,900 460
Union Pacific Corp. 44,000 2,857
----------
12,899
----------
UTILITIES - 7.8%
Airtouch Communications, Inc. (a) 88,000 2,975
Alltel Corp. 32,300 1,021
American Electric Power Co., Inc. 33,900 1,481
Ameritech Corp. 96,600 6,056
AT&T Corp. 283,500 11,056
Baltimore Gas & Electric Co. 24,800 670
Bell Atlantic Corp. 136,282 9,863
BellSouth Corp. 174,500 7,678
Carolina Power & Light Co. 25,400 857
Central & Southwest Corp. 40,100 830
CINergy Corp. 27,826 920
Coastal Corp. 19,100 1,103
Columbia Gas System, Inc. 9,300 614
Consolidated Edison Co. 41,700 1,277
Consolidated Natural Gas Co. 16,100 951
Dominion Resources, Inc. 32,600 1,174
DTE Energy Co. 24,400 723
Duke Power Co. 62,874 3,045
Eastern Enterprises, Inc. 2,900 103
Edison International 70,600 1,703
Enron Corp. 54,200 2,090
Entergy Corp. 42,100 1,045
FPL Group, Inc. 32,000 1,488
Frontier Corp. 27,500 607
GPU, Inc. 22,800 767
Annual Report 15
<PAGE>
SSgA
S&P 500 INDEX FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
GTE Corp. 166,900 $ 7,437
Houston Industries, Inc. 50,610 1,025
MCI Communications Corp. 120,100 3,423
Niagara Mohawk Power Corp. (a) 24,300 217
NICOR, Inc. 7,900 287
Northern States Power Co. 12,800 616
Ohio Edison Co. 25,600 563
ONEOK, Inc. 4,600 149
Pacific Enterprises 14,200 468
PacifiCorp. 53,200 1,104
Peco Energy Co. 39,400 938
Peoples Energy Corp. 5,300 200
PG&E Corp. 76,500 1,774
PP&L Resources, Inc. 27,200 597
Public Service Enterprise Group, Inc. 39,900 990
Sonat, Inc. 14,800 737
Southern Co. 117,300 2,471
Sprint Corp. 75,500 3,548
Texas Utilities Co. 43,030 1,501
U.S. West Communications Group 83,800 3,001
U.S. West Media Group (a) 104,200 2,084
Unicom Corp. 37,000 874
Union Electric Co. 18,800 699
Williams Cos. (The) 28,490 1,327
WorldCom, Inc. (a) 155,497 4,655
----------
100,782
----------
TOTAL COMMON STOCKS
(cost $860,222) 1,219,993
----------
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
SHORT-TERM INVESTMENTS - 6.3%
Dreyfus Cash Management Plus, Inc.
Money Market Fund (b) $ 40,078 $ 40,078
United States Treasury Bills (b)(c)(d)
5.010% due 09/18/97 4,000 3,990
5.439% due 09/18/97 500 499
Valiant Money Market Fund Class A (b) 37,467 37,467
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $82,034) 82,034
----------
TOTAL INVESTMENTS
(identified cost $942,256)(e) - 100.2% 1,302,027
OTHER ASSETS AND LIABILITIES, NET - (0.2%) (2,456)
----------
NET ASSETS - 100.0% $1,299,571
----------
----------
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) Rate noted is yield-to-maturity (unaudited).
(d) Held as collateral by the custodian in connection with futures contracts
purchased by the Fund.
(e) See Note 2 for federal income tax information.
Abbreviations:
ADR - American Depositary Receipt
NPV - No Par Value
The accompanying notes are an integral part of the financial statements.
16 Annual Report
<PAGE>
SSgA
S&P 500 INDEX FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
---------- ------------
FUTURES CONTRACTS
(Notes 2 and 3)
S&P 500 Financial Futures Contracts
Expiration date 09/97 65 $ 1,626
S&P 500 Financial Futures Contracts
Expiration date 12/97 119 (857)
----------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased (*) $ 769
----------
----------
(*) At August 31, 1997, United States Treasury Bills valued at $4,489 were held
as collateral by the custodian in connection with open futures contracts
held by the Fund.
The accompanying notes are an integral part of the financial statements.
Annual Report 17
<PAGE>
SSgA
S&P 500 INDEX FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1997
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $942,256)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . $ 1,302,027
Receivables:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,542
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,615
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Daily variation margin on futures contracts (Notes 2 and 3). . . . . . . . . . . . . . . . . . . . . . . 307
--------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,312,594
LIABILITIES
Payables:
Investments purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,380
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,419
Accrued fees to affiliates (Note 4). . . . . . . . . . . . . . . . . . . . . . . . 159
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
--------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,023
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,299,571
--------------
--------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,653
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,649
Unrealized appreciation (depreciation) on:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 359,771
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 769
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 884,660
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,299,571
--------------
--------------
NET ASSET VALUE, offering and redemption price per share:
($1,299,570,686 divided by 68,540,569 shares of $.001 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18.96
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18 Annual Report
<PAGE>
SSgA
S&P 500 INDEX FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Fiscal Year Ended August 31, 1997
Amounts in
thousands
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $106). . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,387
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 369
--------------
Total Investment Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,756
EXPENSES (Notes 2 and 4):
Advisory fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,006
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Amortization of deferred organization expenses . . . . . . . . . . . . . . . . . . 7
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
--------------
Expenses before reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,603
Expense reductions (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,006)
--------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,597
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,159
--------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,380
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,806 50,186
--------------
Net change in unrealized appreciation or depreciation of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251,849
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,068 252,917
-------------- --------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 303,103
--------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . . . $ 323,262
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 19
<PAGE>
SSgA
S&P 500 INDEX FUND
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Fiscal Years Ended August 31,
Amounts in thousands
1997 1996
----------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,159 $ 14,122
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,186 41,151
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . . . . 252,917 39,901
----------------- -----------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . 323,262 95,174
----------------- -----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (18,416) (13,346)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . (34,690) (15,876)
----------------- -----------------
Total Distributions to Shareholders . . . . . . . . . . . . . . . . . . . . . . (53,106) (29,222)
----------------- -----------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions . . . . . . . . 324,732 93,531
----------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . 594,888 159,483
NET ASSETS
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 704,683 545,200
----------------- -----------------
End of year (including undistributed net investment income of
$5,653 and $3,910, respectively). . . . . . . . . . . . . . . . . . . . . . . . $ 1,299,571 $ 704,683
----------------- -----------------
----------------- -----------------
</TABLE>
<TABLE>
<CAPTION>
FUND SHARE TRANSACTIONS 1997 1996
------------------------------------- -------------------------------------
SHARES DOLLARS SHARES DOLLARS
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Proceeds from shares sold. . . . . . . . . 44,662 $ 754,517 28,849 $ 405,664
Proceeds from reinvestment
of distributions. . . . . . . . . . . . 3,360 51,321 2,045 27,581
Payments for shares redeemed . . . . . . . (28,392) (481,106) (24,529) (339,714)
----------------- ----------------- ----------------- -----------------
Total net increase (decrease). . . . . . . 19,630 $ 324,732 6,365 $ 93,531
----------------- ----------------- ----------------- -----------------
----------------- ----------------- ----------------- -----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20 Annual Report
<PAGE>
SSgA
S&P 500 INDEX FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each fiscal
year or period and other performance information derived from the financial statements.
1997 1996 1995 1994 1993*
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . $ 14.41 $ 12.81 $ 10.89 $ 10.72 $ 10.00
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . .32 .32 .29 .26 .15
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . . . . . 5.22 1.98 1.95 .29 .65
---------- ---------- ---------- ---------- ----------
Total Income From Investment Operations. . . . 5.54 2.30 2.24 .55 .80
---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . . . . . . (.32) (.31) (.29) (.26) (.08)
Net realized gain on investments. . . . . . . . . (.67) (.39) (.03) (.07) --
In excess of net realized gain on investments . . -- -- -- (.05) --
---------- ---------- ---------- ---------- ----------
Total Distributions. . . . . . . . . . . . . . (.99) (.70) (.32) (.38) (.08)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . $ 18.96 $ 14.41 $ 12.81 $ 10.89 $ 10.72
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . 40.30 18.46 21.11 5.29 8.06
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of year ($000 omitted). . . . . . 1,299,571 704,683 545,200 361,712 238,666
Ratios to average net assets (%)(b):
Operating expenses, net (c). . . . . . . . . . .16 .18 .19 .15 .15
Operating expenses, gross (c). . . . . . . . . .26 .28 .29 .25 .35
Net investment income . . . . . . . . . . . . 2.00 2.32 2.76 2.69 3.02
Portfolio turnover (b). . . . . . . . . . . . . . 7.54 28.72 38.56 7.97 48.10
Per share amount of expense reductions
($ omitted)(c) . . . . . . . . . . . . . . . . .0162 .0135 .0107 .0097 .0098
Average commission rate paid per share
of security ($ omitted). . . . . . . . . . . . .0188 .0115 N/A N/A N/A
</TABLE>
* For the period December 30, 1992 (commencement of operations) to
August 31, 1993.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended August 31, 1993 are annualized.
(c) See Note 4 for current period amounts.
Annual Report 21
<PAGE>
SSgA
S&P 500 INDEX FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1997
1. ORGANIZATION
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 17 investment portfolios which are in operation as
of August 31, 1997. In December 1996, the Investment Company changed its
name from "The Seven Seas Series Fund" to the "SSgA Funds." These financial
statements report on one portfolio, the SSgA S&P 500 Index Fund (the
"Fund"). The Investment Company is a registered and diversified open-end
investment company, as defined in the Investment Company Act of 1940, as
amended (the "1940 Act"), that was organized as a Massachusetts business
trust on October 3, 1987 and operates under a First Amended and Restated
Master Trust Agreement, dated October 13, 1993, as amended (the
"Agreement"). The Investment Company's Agreement permits the Board of
Trustees to issue an unlimited number of full and fractional shares of
beneficial interest at a $.001 par value.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
SECURITY VALUATION: United States equity securities listed and traded
principally on any national securities exchange are valued on the basis of
the last sale price or, lacking any sale, at the closing bid price, on the
primary exchange on which the security is traded. United States
over-the-counter equities, fixed-income securities and options are valued
on the basis of the closing bid price. Futures contracts are valued on the
basis of the last sale price.
International securities traded on a national securities exchange are
valued on the basis of the last sale price. International securities traded
over the counter are valued on the basis of the mean of bid prices. In the
absence of a last sale or mean bid price, respectively, such securities may
be valued on the basis of prices provided by a pricing service if those
prices are believed to reflect the market value of such securities.
Money market instruments maturing within 60 days of the valuation date are
valued at amortized cost, a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed, unless the Board of
Trustees determines that amortized cost does not represent fair value.
The Fund may value securities for which market quotations are not readily
available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
SECURITIES TRANSACTIONS: Securities transactions are recorded on a trade
date basis. Realized gains and losses from securities transactions are
recorded on the basis of identified cost.
INVESTMENT INCOME: Dividend income is recorded on the ex-dividend date and
interest income is recorded daily on the accrual basis.
22 Annual Report
<PAGE>
SSgA
S&P 500 INDEX FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
AMORTIZATION AND ACCRETION: All zero-coupon bond discounts and original
issue discounts are accreted for both tax and financial reporting purposes.
All short- and long-term market premiums/discounts are amortized/accreted
for both tax and financial reporting purposes.
FEDERAL INCOME TAXES: Since the Investment Company is a Massachusetts
business trust, each sub-trust is a separate corporate taxpayer and
determines its net investment income and capital gains (or losses) and the
amounts to be distributed to each fund's shareholders without regard to the
income and capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company, as
defined by the Internal Revenue Code of 1986, as amended. This requires the
Fund to distribute all of its taxable income. Therefore the Fund paid no
federal taxes and no federal income tax provision was required.
The Fund's aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of August 31, 1997 are as follows:
NET
UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
-------------- -------------- -------------- --------------
$ 944,067,601 $ 370,274,616 $ (12,315,426) $ 357,959,190
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date. Dividends
are generally declared and paid quarterly. Capital gain distributions are
generally declared and paid annually. An additional distribution may be
paid by the Fund to avoid imposition of federal income tax on any remaining
undistributed net investment income and capital gains.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP"). As
a result, net investment income and net realized gain (or loss) from
investment transactions for a reporting period may differ significantly
from distributions during such period. The differences between tax
regulations and GAAP relate primarily to investments in options futures and
certain securities sold at a loss. Accordingly, the Fund may periodically
make reclassifications among certain of its capital accounts without
impacting its net asset value.
EXPENSES: Most expenses can be directly attributed to the individual Fund.
Expenses which cannot be directly attributed are allocated among all funds
based principally on their relative net assets.
DEFERRED ORGANIZATION EXPENSES: The Fund incurred expenses in connection
with its organization and initial registration. These costs have been
deferred and are being amortized over 60 months on a straight-line basis.
REPURCHASE AGREEMENTS: The Fund may engage in repurchase and tri-party
repurchase agreements with several financial institutions whereby the Fund,
through its custodian or third-party custodian, receives delivery of the
underlying securities. The market value of these securities (including
accrued interest) on acquisition date is required to be an amount equal to
at least 102% of the repurchase price. The Fund's
Annual Report 23
<PAGE>
SSgA
S&P 500 INDEX FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
Adviser will monitor repurchase agreements daily to determine that the
market value (including accrued interest) of the underlying securities
remains equal to at least 102% of the repurchase price at Fedwire closing
time. The Adviser or third-party custodian will notify the seller to
immediately increase the collateral on the repurchase agreement to 102% of
the repurchase price if collateral falls below 102%.
DERIVATIVES: To the extent permitted by the investment objectives,
restrictions and policies set forth in the Fund's Prospectus and Statement
of Additional Information, the Fund may participate in various
derivative-based transactions. Derivative securities are instruments or
agreements whose value is derived from an underlying security or index.
These instruments offer unique characteristics and risks that assist the
Fund to meet its investment objective.
The Fund typically uses derivatives for cash equitization. Cash
equitization is a technique that is used by the Fund through the use of
options and futures to earn "market-like" returns with the Fund's excess
and liquidity reserve cash balances. By purchasing certain instruments, a
fund may more effectively achieve the desired portfolio characteristics
that allow the fund to meet its investment objective. The Fund uses futures
and options contracts solely for the purpose of cash management. The
primary risks associated with the use of derivatives are generally
categorized as market risk.
FUTURES: The Fund is currently utilizing exchange-traded futures contracts.
The primary risks associated with the use of futures contracts are an
imperfect correlation between the change in market value of the securities
held by the Fund and the prices of futures contracts and the possibility of
an illiquid market. Changes in initial settlement value are accounted for
as unrealized appreciation (depreciation) until the contracts are
terminated, at which time realized gains and losses are recognized.
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the year ended August 31, 1997, purchases and
sales of investment securities, excluding short-term investments, futures
contracts and repurchase agreements, aggregated to $337,615,697 and
$70,257,081, respectively.
FUTURES TRANSACTIONS: The Fund's transactions in futures contracts for the
year ended August 31, 1997, were as follows:
FUTURES CONTRACTS
-----------------------------
AGGREGATE
NUMBER OF FACE VALUE OF
CONTRACTS CONTRACTS (1)
------------- -------------
Outstanding at August 31, 1996 92 $ 30,531,042
Contracts opened 774 301,447,330
Contracts closed (682) (249,085,333)
------------- -------------
Outstanding at August 31, 1997 184 $ 82,893,039
------------- -------------
------------- -------------
(1) The aggregate face value of contracts is computed on the date each
contract was opened.
24 Annual Report
<PAGE>
SSgA
S&P 500 INDEX FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
4. RELATED PARTIES
ADVISER: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company (the "Adviser") under which the Adviser
directs the investments of the Fund in accordance with its investment
objectives, policies, and limitations. For these services, the Fund pays a
fee to the Adviser, calculated daily and paid monthly, at the annual rate
of .10% of its average daily net assets. For the year ended August 31,
1997, the Adviser voluntarily agreed to waive up to the full amount of its
advisory fee to the extent that total expenses exceed .15% of its average
daily net assets on an annual basis. The Investment Company also has
contracts with the Adviser to provide custody, shareholder servicing and
transfer agent services to the Fund. These amounts are presented on the
accompanying Statement of Operations.
ADMINISTRATOR: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator") under
which the Administrator supervises all non-portfolio investment aspects of
the Investment Company's operations and provides adequate office space and
all necessary office equipment and services, including telephone service,
utilities, stationery supplies, and similar items. The Investment Company
pays the Administrator the following fees for services supplied by the
Administrator pursuant to the Administration Agreement: (i) an annual fee,
payable monthly on a pro rata basis, based on the following percentages of
the average daily net assets of all domestic funds: $0 up to and including
$500 million - .06%; over $500 million to and including $1 billion - .05%;
over $1 billion - .03%; (ii) less an amount equal to the sum of certain
distribution-related expenses incurred by the Investment Company's
Distributor on behalf of the Fund (up to a maximum of 10% of the
asset-based fee determined in (i)); (iii) out-of-pocket expenses; and (iv)
start-up costs for new funds.
DISTRIBUTOR AND SHAREHOLDER SERVICING: The Investment Company has entered
into a Distribution Agreement with Russell Fund Distributors (the
"Distributor") which is a wholly-owned subsidiary of the Administrator to
promote and offer shares of the Investment Company. The Distributor may
have entered into sub-distribution agreements with other non-related
parties. The amounts paid to the Distributor are included in the
accompanying Statement of Operations.
The Investment Company has also adopted a Distribution Plan pursuant to
Rule 12b-1 (the "Plan") under the 1940 Act. Under this Plan, the Investment
Company is authorized to make payments to the Distributor, or any
Shareholder Servicing Agent, as defined in the Plan, for providing
distribution and marketing services, for furnishing assistance to investors
on an ongoing basis, and for the reimbursement of direct out-of-pocket
expenses incurred by the Distributor in connection with the distribution
and marketing of shares of the Investment Company and the servicing of
investor accounts.
The Fund has entered into service agreements with the Adviser, the
Adviser's Retirement Investment Services Division ("RIS"), and the Adviser's
Metropolitan Division of Commercial Banking ("Commercial Banking")
(collectively the "Agents"), as well as several unaffiliated service
providers. For these services, the Fund pays .025%, .050%, and .050% to the
Adviser, RIS, and Commercial Banking, respectively based upon the average
daily value of all Fund shares held by or for customers of these Agents.
For the year ended
Annual Report 25
<PAGE>
SSgA
S&P 500 INDEX FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
August 31, 1997, the Fund incurred expenses of $251,096 and $44,674, or a
total of $295,770, from the Adviser and RIS, respectively. The Fund did not
incur any expenses from Commercial Banking during this period. The
remaining amount of $39,955 was paid to other third-party providers.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The Trustees or a majority of the
Fund's shareholders have the right, however, to terminate the Distribution
Plan and all payments thereunder at any time. The Fund will not be
obligated to reimburse the Distributor for carryover expenses subsequent to
the Distribution Plan's termination or noncontinuance. There were no
carryover expenses as of August 31, 1997.
AFFILIATED BROKERAGE: The Fund placed a portion of its portfolio
transactions with SSBSI, an affiliated broker dealer of the Fund's Adviser.
The commissions paid to SSBSI were $9,764 for the year ended August 31,
1997.
BOARD OF TRUSTEES: The Investment Company pays each Trustee not affiliated
with the Investment Company a retainer of $44,000 annually, $1,000 for each
board meeting attended, an additional $1,000 for attending the annual audit
committee meeting, and reimbursement for out-of-pocket expenses. These
expenses are allocated among all of the Funds based upon their relative net
assets.
ACCRUED FEES PAYABLE TO AFFILIATES AND TRUSTEES AS OF AUGUST 31, 1997 WERE
AS FOLLOWS:
Administration fees $ 33,907
Custodian fees 40,455
Distribution fees 21,138
Shareholder servicing fees 60,073
Transfer agent fees 3,107
---------
$ 158,680
---------
---------
BENEFICIAL INTEREST: As of August 31, 1997, two shareholders were each
record owners of approximately 13% of the total outstanding shares of the
Fund.
5. DIVIDENDS
On September 2, 1997, the Board of Trustees declared a dividend of $.0817
from net investment income, payable on September 10, 1997, to shareholders
of record on September 3, 1997.
26 Annual Report
<PAGE>
SSgA
S&P 500 INDEX FUND
TAX INFORMATION
August 31, 1997 (Unaudited)
The Fund paid distributions of $.6206 per share from net long-term capital gains
during its taxable year ended August 31, 1997. Pursuant to Section 852 of the
Internal Revenue Code, the Fund designates $32,079,573 as capital gain dividends
for its taxable year ended August 31, 1997.
Please consult a tax advisor for questions about federal or state income tax
laws.
Annual Report 27
<PAGE>
SSgA S&P 500 INDEX FUND
Two International Place, 35th Floor
Boston, Massachusetts 02110
(800) 997-7327
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
George W. Weber, Senior Vice President and Treasurer
J. David Griswold, Vice President and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND OFFICE OF SHAREHOLDER INQUIRIES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 647-7327
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(800) 997-7327
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
28 Annual Report
<PAGE>
SSgA-SM- FUNDS
MATRIX EQUITY FUND
Annual Report
August 31, 1997
Table of Contents
Page
Chairman's Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion . . . . . . . . . . . . . . . . . . . . 6
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . 8
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . 15
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . 16
Tax Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Fund Management and Service Providers . . . . . . . . . . . . . . . . . 22
"SSgA-SM-" IS A SERVICE MARK OF STATE STREET CORPORATION AND IS LICENSED FOR USE
BY THE SSgA FUNDS.
THIS REPORT IS PREPARED FROM THE BOOKS AND RECORDS OF THE FUND AND IT IS
SUBMITTED FOR THE GENERAL INFORMATION OF SHAREHOLDERS. THIS INFORMATION IS FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR ACCOMPANIED BY A
SSgA FUNDS PROSPECTUS CONTAINING MORE COMPLETE INFORMATION CONCERNING THE
INVESTMENT OBJECTIVE AND OPERATIONS OF THE FUND, CHARGES AND EXPENSES. THE
PROSPECTUS SHOULD BE READ CAREFULLY BEFORE AN INVESTMENT IS MADE.
PERFORMANCE IS HISTORICAL AND ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL
GAINS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN WHEN PURCHASED.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. RUSSELL FUND DISTRIBUTORS,
INC., IS THE DISTRIBUTOR OF THE SSgA FUNDS.
<PAGE>
SSgA MATRIX EQUITY FUND
LETTER FROM THE CHAIRMAN OF STATE STREET GLOBAL ADVISORS
DEAR SHAREHOLDERS,
I am pleased to provide you with the SSgA Funds annual report for the fiscal
year ended August 31, 1997. Over the past year, the Funds have grown to include
seventeen portfolios covering a broad range of investment strategies from the
far corners of the emerging markets countries to the domestic stock and bond
markets. This report contains summaries on the market environment, performance
and financial statements for the Matrix Equity Fund. I hope you find this
information a useful tool as you review your overall investment strategy.
The SSgA Funds opened three additional funds in fiscal 1997. These three asset
allocation funds, called Life Solutions Funds, were opened on July 1, 1997. Each
Life Solutions Fund seeks to achieve its investment objective by diversifying
its assets in shares of certain Funds of the Investment Company, referred to as
Underlying Funds.
The Life Solutions Income and Growth Fund seeks income and, secondarily,
long-term growth of capital.
The Life Solutions Balanced Fund seeks a balance of growth of capital and
income.
The Life Solutions Growth Fund seeks long-term growth of capital.
During the past fiscal year, the SSgA Funds were proud to announce that the SSgA
Matrix Fund and the SSgA Small Cap Fund achieved five year track records. We are
proud of our long-term record and look forward to having additional funds
complete their five year anniversary.
SSGA is strategically growing by continuing to build an organization that
delivers comprehensive services striving to meet your investment requirements.
In an effort to compete in this ever-changing complex world, we focus on our
expertise, our knowledge and our commitment to better serve your investment
needs.
As Chairman and Chief Executive Officer of State Street Global Advisors, which
serves as the investment adviser to the SSgA Funds, I would like to thank you
for choosing the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
SSgA MATRIX EQUITY FUND
MANAGEMENT OF THE FUNDS
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A TEAM APPROACH TO INVESTMENT MANAGEMENT
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio managers work together to develop and enhance the
techniques that drive our investment processes. The result is that the
portfolios we manage benefit from the knowledge of the entire team.
Mr. Douglas Holmes, Managing Director, was the portfolio manager primarily
responsible for investment decisions regarding the Matrix Equity Fund for the
fiscal year ended August 31, 1997. Mr. Holmes has been with State Street since
1984 and has managed State Street's matrix portfolios for the past seven years.
Mr. Peter M. Stonberg, Principal, is currently transitioning into the role of
lead portfolio manager for the Fund. Mr. Stonberg joined State Street in 1981
and has over 30 years of investment experience. He is a graduate of Carleton
College and holds an MBA from Columbia University. There are seven other
portfolio managers working with Mr. Stonberg.
Annual Report 5
<PAGE>
SSgA MATRIX EQUITY FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
OBJECTIVE: Provide total returns that exceed over time the S&P 500 Index.
INVESTS IN: Equity securities.
STRATEGY: Fund Managers concentrate investments in what they view as the best
opportunities in our model's universe of 1,000 companies. At the end of the
fiscal year, the Fund held 178 stocks with market capitalizations ranging from
$676 million to $204 billion. The Fund's mean market capitalization was $18.6
billion.
[GRAPH]
DATES MATRIX EQUITY FUND S&P 500-Registered Trademark- INDEX**
Inception* $10,000 $10,000
1992 $9,780 $10,093
1993 $12,152 $11,628
1994 $12,687 $12,264
1995 $15,074 $14,895
1996 $17,285 $17,685
1997 $24,675 $24,874
- --------------------------------------------------------------------------------
Total $101,653 $101,439
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SSgA
MATRIX EQUITY FUND
Period Ended Growth of Total
08/31/97 $10,000 Return
- ------------ ------------ ------------
1 Year $ 14,275 42.75%
5 Years $ 25,227 20.33%+
Inception $ 24,675 18.49%+
STANDARD & POOR'S-Registered Trademark-
500 COMPOSITE STOCK PRICE INDEX
Period Ended Growth of Total
08/31/97 $10,000 Return
- ------------ ------------ ------------
1 Year $ 14,065 40.65%
5 Years $ 24,646 19.77%+
Inception $ 24,874 18.63%+
SEE RELATED NOTES ON THE FOLLOWING PAGE.
PERFORMANCE REVIEW
For the fiscal year ended August 31, 1997, the SSgA Matrix Equity Fund had a
total return of 42.75% as compared to the S&P 500 Index results of 40.65%. The
Fund outperformed the Index in part because of the fund's overweighting in the
technology sector of the market versus the Index and superior stock selection.
In the S&P 500 Index, the technology sector was the best performing sector over
the past fiscal year with a return of nearly 77%. Technology was followed by the
financial sector, which returned over 54%. The Fund held a neutral weighting in
this sector versus the Index with enhanced performance coming from superior
stock selection. The Fund's stock selection process has been shown to work
particularly well in these areas, among others, and their strong performance had
a favorable impact on the Fund.
In addition, excess returns relative to the benchmark also resulted from
improvements made to the investment process
6 Annual Report
<PAGE>
SSgA MATRIX EQUITY FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
during the last half of 1996 and early 1997. Chief among the improvements was
the development of a new method for classifying industries within our investment
universe. It was recognized that the standard approach for industry
classification, developed in the 1980's, no longer accurately reflected the
composition of the US equity market. The rapid evolution of certain business
segments reduced the effectiveness of historical industry classifications. The
standard classification of producer goods, for example, included Intel and
Caterpillar. The realignment of industry classifications to reflect the current
business environment enabled us to gain a better understanding of how growth and
value factors affect the performance of these industries.
PORTFOLIO HIGHLIGHTS
The stock market's Bull run continued through the last year with barely a pause.
While large capitalization stocks dominated the Index in 1996 and continue to
dominate in 1997, returns are more evenly spread so far in 1997. Historically,
the spread between large and medium capitalization stock returns is 1%, however
in recent periods this reached as much as 8-9%. Market volatility throughout the
last year wreaked havoc on investors' nerves. Many record highs were set in the
market, as well as the S&P 500 Index experiencing its third largest daily
decline in history, 2.3%, last April.
The Fund's matrix process ranks securities on both value and growth measures.
The combination of these rankings creates a hypothetical expected return for
each stock. The Manager believes this process for calculating expected return
has been an accurate predictor of returns, which enabled the Fund to outperform
the S&P 500 Index in fiscal year 1997 after all costs.
In summary, the past year has demonstrated the benefit of using both growth and
value measures to select securities as well as maintaining characteristics and
industry weights similar to those of the S&P 500 Index. The Fund has
participated in the continued favorable performance of the market as a whole,
and it has been able to extract excess returns in areas, such as the financial
and technology sectors, where we exhibit the greatest stock selection ability.
TOP TEN EQUITY HOLDINGS
(AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31, 1997
Intel Corp. 2.7%
Merck & Co., Inc. 2.4
Exxon Corp. 2.1
Bristol-Myers Squibb Co. 2.1
General Electric Co. 2.0
COMPAQ Computer Corp. 1.7
BankAmerica Corp. 1.6
Microsoft Corp. 1.6
American Express Co. 1.5
Mobil Corp. 1.4
------------------------
NOTES: THE FOLLOWING NOTES RELATE TO THE GROWTH OF $10,000 GRAPH AND TABLE ON
THE PRECEDING PAGE.
* The Fund commenced operations on May 4, 1992. Index comparison began
May 1, 1992.
** The Standard & Poor's-Registered Trademark- 500 Composite Stock Index is
composed of 500 common stocks which are chosen by Standard and Poor's
Corporation to best capture the price performance of a large cross-section
of the US publicly traded stock market. The Index is structured to
approximate the general distribution of industries in the US economy.
+ Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Annual Report 7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of the SSgA Funds:
We have audited the accompanying statement of assets and liabilities and
statement of net assets of SSgA Matrix Equity Fund (formerly The Seven Seas
Series Matrix Equity Fund)(the "Fund"), as of August 31, 1997, and the related
statement of operations for the fiscal year then ended, the statements of
changes in net assets for each of the two fiscal years in the period then ended,
and the financial highlights for each of the five fiscal years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
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 free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1997 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We 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 of the
Fund as of August 31, 1997, the results of its operations for the fiscal year
then ended, the changes in its net assets for each of the two fiscal years in
the period then ended, and the financial highlights for each of the five fiscal
years in the period then ended, in conformity with generally accepted accounting
principles.
Boston, Massachusetts /s/ COOPERS & LYBRAND L.L.P.
October 7, 1997
8 Annual Report
<PAGE>
SSgA
MATRIX EQUITY FUND
STATEMENT OF NET ASSETS
August 31, 1997
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
COMMON STOCKS - 99.8%
BASIC INDUSTRIES - 5.5%
Bethlehem Steel Corp. (a) 130,700 $ 1,568
Dow Chemical Co. 59,800 5,292
Lubrizol Corp. 34,600 1,516
Premark International, Inc. 81,800 2,434
Rohm & Haas Co. 42,300 4,053
Union Carbide Corp. 89,900 4,613
USX-U.S. Steel Group 116,700 4,099
----------
23,575
----------
CAPITAL GOODS - 6.6%
Aeroquip-Vickers, Inc. 35,900 2,006
Case Corp. 24,800 1,663
Caterpillar, Inc. 94,200 5,469
Cooper Industries, Inc. 80,100 4,270
Cummins Engine Co., Inc. 17,100 1,316
General Electric Co. 139,400 8,713
National Service Industries, Inc. 21,000 929
Newport News Shipbuilding, Inc. 3,700 72
Parker-Hannifin Corp. 23,000 1,479
Timken Co. 67,800 2,538
----------
28,455
----------
CONSUMER BASICS - 17.8%
Abbott Laboratories 28,300 1,696
Allegiance Corp. 64,900 2,036
American Home Products Corp. 42,600 3,067
Biomet, Inc. 11,700 241
Bristol-Myers Squibb Co. 120,800 9,181
Cardinal Health, Inc. 24,600 1,630
Clorox Co. 10,400 1,365
Coca-Cola Co. (The) 85,500 4,900
ConAgra, Inc. 52,300 3,364
Dean Foods Co. 38,800 1,722
Fort James Corp. 73,837 3,101
Interstate Bakeries Corp. 51,200 3,002
Johnson & Johnson 47,700 2,704
Kroger Co. (a) 15,700 473
Lincare Holdings, Inc. (a) 57,800 2,746
McKesson Corp. 35,600 3,335
Merck & Co., Inc. 114,500 10,513
Philip Morris Cos., Inc. 132,300 5,772
Procter & Gamble Co. 13,900 1,850
Quaker Oats Co. 63,000 2,961
Schering-Plough Corp. 97,300 4,670
Tenet Healthcare Corp. (a) 69,905 1,905
Wellpoint Health Networks, Inc. Class A (a) 76,213 4,143
----------
76,377
----------
CONSUMER DURABLES - 1.4%
Ford Motor Co. 131,900 5,672
PACCAR, Inc. 9,500 450
----------
6,122
----------
CONSUMER NON-DURABLES - 9.1%
Costco Companies, Inc. (a) 142,300 5,123
Dayton Hudson Corp. 52,300 2,981
Dillard's, Inc. Class A 115,300 4,612
Footstar, Inc. (a) 39,000 968
Hasbro, Inc. 58,600 1,575
Intimate Brands, Inc. Class A 108,700 2,391
Liz Claiborne, Inc. 43,000 1,916
Newell Co. 50,900 2,004
Ross Stores, Inc. 3,600 105
Sears Roebuck & Co. 94,100 5,340
SuperValu, Inc. 68,900 2,704
TJX Cos., Inc. 168,600 4,637
Toys "R" Us, Inc. (a) 69,500 2,402
V.F. Corp. 26,100 2,307
----------
39,065
----------
Annual Report 9
<PAGE>
SSgA
MATRIX EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
CONSUMER SERVICES - 0.3%
Disney (Walt) Co. 15,500 $ 1,191
----------
1,191
----------
ENERGY - 9.5%
Amoco Corp. 28,500 2,695
Apache Corp. 53,500 2,123
Atlantic Richfield Co. 21,620 1,622
Chevron Corp. 12,300 952
ENSCO International, Inc. 17,500 1,111
Exxon Corp. 151,500 9,270
Global Marine, Inc. (a) 56,400 1,604
Lyondell Petrochemical Co. 202,800 4,918
Mobil Corp. 81,200 5,907
Noble Drilling Corp. (a) 35,600 1,012
Phillips Petroleum Co. 58,500 2,782
Reading & Bates Corp. (a) 16,200 588
Rowan Cos., Inc. (a) 65,300 1,951
Texaco, Inc. 23,700 2,731
Western Atlas, Inc. (a) 16,500 1,309
----------
40,575
----------
FINANCE - 15.6%
Allstate Corp. 47,800 3,492
American Express Co. 82,000 6,376
AmSouth Bancorp 57,600 2,423
BankAmerica Corp. 107,000 7,042
Bankers Trust New York Corp. 52,800 5,478
Bear Stearns Cos., Inc. 97,900 3,873
CIGNA Corp. 16,100 2,952
Comerica, Inc. 63,400 4,490
ContiFinancial Corp. (a) 19,800 651
Donaldson, Lufkin & Jenrette, Inc. 27,500 1,633
Equitable Companies, Inc. 49,200 2,140
Everest Reinsurance Holdings, Inc. 73,300 2,653
First Union Corp. 56,600 2,720
Green Tree Financial Corp. 94,300 4,143
Lehman Brothers Holdings, Inc. 35,900 1,575
Marsh & McLennan Cos., Inc. 23,500 1,604
Money Store, Inc. 82,600 2,354
National City Corp. 37,400 2,113
Old Republic International Corp. 13,200 474
Republic New York Corp. 33,100 3,544
SLM Holding Corp. 29,200 3,957
Travelers Property Casualty Corp. Class A 35,000 1,408
----------
67,095
----------
GENERAL BUSINESS - 4.1%
AccuStaff, Inc. (a) 77,400 2,056
Belo (A.H.) Corp. Class A 29,800 1,278
Central Newspapers, Inc. Class A 9,800 667
Dun & Bradstreet Corp. 118,100 3,307
Gannett Co., Inc. 35,500 3,459
Interpublic Group Cos., Inc. 26,100 1,272
SBC Communications, Inc. 53,119 2,888
Valassis Communications, Inc. (a) 24,500 744
Washington Post Co. Class B 4,700 1,978
----------
17,649
----------
SHELTER - 0.5%
USG Corp. (a) 54,900 2,354
----------
2,354
----------
TECHNOLOGY - 19.8%
AVX Corp. 42,000 1,478
BMC Software, Inc. (a) 29,400 1,838
Cadence Design Systems, Inc. (a) 47,400 2,254
COMPAQ Computer Corp. (a) 114,650 7,510
Computer Associates International, Inc. 86,000 5,751
Compuware Corp. (a) 42,300 2,607
General Dynamics Corp. 53,500 4,260
10 Annual Report
<PAGE>
SSgA
MATRIX EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Intel Corp. 128,400 $ 11,805
Lexmark International Group, Inc. Class A (a) 18,700 655
Litton Industries, Inc. (a) 31,100 1,551
McAfee Associates, Inc. 60,900 3,441
Micron Electronics, Inc. (a) 111,100 1,805
Microsoft Corp. (a) 52,400 6,927
Motorola, Inc. 9,000 660
Quantum Corp. (a) 144,500 5,058
SCI Systems, Inc. (a) 100,200 3,939
Shared Medical Systems 30,900 1,514
Silicon Graphics, Inc. (a) 215,300 5,907
Storage Technology Corp. (a) 97,300 4,956
Sun Microsystems, Inc. (a) 117,200 5,611
Tektronix, Inc. 18,400 1,022
Western Digital Corp. (a) 89,500 4,307
----------
84,856
----------
TRANSPORTATION - 1.8%
CNF Transportation, Inc. 19,600 708
Ryder System, Inc. 113,300 4,043
Tidewater, Inc. 24,400 1,281
Trinity Industries, Inc. 42,100 1,674
----------
7,706
----------
UTILITIES - 7.8%
Airtouch Communications, Inc. (a) 80,500 2,722
Ameritech Corp. 67,000 4,200
AT&T Corp. 37,900 1,478
Bell Atlantic Corp. 65,799 4,762
BellSouth Corp. 72,000 3,168
Coastal Corp. 46,200 2,668
Consolidated Edison Co. 90,000 2,756
Entergy Corp. 39,900 990
GTE Corp. 31,300 1,395
Long Island Lighting Co. 77,500 1,913
Ohio Edison Co. 47,700 1,049
Public Service Enterprise Group, Inc. 77,300 1,918
U.S. West Communications Group 87,200 3,123
Unicom Corp. 54,600 1,291
----------
33,433
----------
TOTAL COMMON STOCKS
(cost $344,401) 428,453
----------
PRINCIPAL
AMOUNT
(000)
----------
SHORT-TERM INVESTMENTS - 2.2%
Dreyfus Cash Management Plus, Inc.
Money Market Fund (b) $ 6,308 6,308
Valiant Money Market Fund Class A (b) 3,322 3,322
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $9,630) 9,630
----------
TOTAL INVESTMENTS
(identified cost $354,031)(c) - 102.0% 438,083
OTHER ASSETS AND LIABILITIES, NET - (2.0%) (8,686)
----------
NET ASSETS - 100.0% $ 429,397
----------
----------
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) See Note 2 for federal income tax information.
The accompanying notes are an integral part of the financial statements.
Annual Report 11
<PAGE>
SSgA
MATRIX EQUITY FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1997
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $354,031)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . $ 438,083
Receivables:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 701
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,360
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 371
--------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 446,515
LIABILITIES
Payables:
Investments purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,624
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,088
Accrued fees to affiliates and trustees (Note 4) . . . . . . . . . . . . . . . . . 380
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
--------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,118
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 429,397
--------------
--------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,157
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,225
Unrealized appreciation (depreciation) on investments. . . . . . . . . . . . . . . . . . . . . . . . . . 84,052
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 288,940
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 429,397
--------------
--------------
NET ASSET VALUE, offering and redemption price per share:
($429,397,404 divided by 23,325,259 shares of $.001 par
value shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18.41
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 Annual Report
<PAGE>
SSgA
MATRIX EQUITY FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Fiscal Year Ended August 31, 1997
Amounts in
thousands
<S> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,760
EXPENSES (Notes 2 and 4):
Advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,660
Administrative fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Custodian fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Distribution fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Registration fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Shareholder servicing fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . 196
Transfer agent fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180
Trustees' fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Amortization of deferred organization expenses. . . . . . . . . . . . . . . . . . 3
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
--------------
Expenses before reductions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,385
Expense reductions (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,330)
--------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,055
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,705
--------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,309
Net change in unrealized appreciation or depreciation of investments . . . . . . . . . . . . . . . . . . 61,311
--------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122,620
--------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . . . $ 127,325
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 13
<PAGE>
SSgA
MATRIX EQUITY FUND
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Fiscal Years Ended August 31,
Amounts in thousands
1997 1996
----------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,705 $ 4,112
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,309 24,526
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . . . . 61,311 2,856
----------------- -----------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . 127,325 31,494
----------------- -----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,696) (3,841)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . (22,485) (21,257)
----------------- -----------------
Total Distributions to Shareholders . . . . . . . . . . . . . . . . . . . . . . (27,181) (25,098)
----------------- -----------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions . . . . . . . . 67,365 57,151
----------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . 167,509 63,547
NET ASSETS
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 261,888 198,341
----------------- -----------------
End of year (including undistributed net investment income
of $1,157 and $1,148, respectively). . . . . . . . . . . . . . . . . . . . . . . $ 429,397 $ 261,888
----------------- -----------------
----------------- -----------------
</TABLE>
<TABLE>
<CAPTION>
FUND SHARE TRANSACTIONS 1997 1996
------------------------------------- -------------------------------------
SHARES DOLLARS SHARES DOLLARS
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Proceeds from shares sold. . . . . . . . . 31,200 $ 545,016 7,991 $ 108,493
Proceeds from reinvestment
of distributions. . . . . . . . . . . . 1,760 25,673 1,766 23,537
Payments for shares redeemed . . . . . . . (28,170) (503,324) (5,456) (74,879)
----------------- ----------------- ----------------- -----------------
Total net increase (decrease). . . . . . . 4,790 $ 67,365 4,301 $ 57,151
----------------- ----------------- ----------------- -----------------
----------------- ----------------- ----------------- -----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 Annual Report
<PAGE>
SSgA
MATRIX EQUITY FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each fiscal
year or period and other performance information derived from the financial statements.
1997 1996 1995 1994 1993*
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . $ 14.13 $ 13.93 $ 12.06 $ 11.95 $ 9.78
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . .21 .24 .28 .24 .18
Net realized and unrealized gain (loss)
on investments. . . . . . . . . . . . . . . . . 5.43 1.64 1.93 .28 2.17
---------- ---------- ---------- ---------- ----------
Total Income From Investment Operations . . . . 5.64 1.88 2.21 .52 2.35
---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . (.22) (.24) (.28) (.23) (.18)
Net realized gain on investments . . . . . . . . . (1.14) (1.44) (.06) (.09) --
In excess of net realized gain on investments. . . -- -- -- (.09) --
---------- ---------- ---------- ---------- ----------
Total Distributions . . . . . . . . . . . . . . (1.36) (1.68) (.34) (.41) (.18)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . $ 18.41 $ 14.13 $ 13.93 $ 12.06 $ 11.95
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . 42.75 14.67 18.81 4.41 24.24
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of year ($000 omitted) . . . . . . 429,397 261,888 198,341 130,764 62,549
Ratios to average net assets (%):
Operating expenses, net (b) . . . . . . . . . . .58 .66 .68 .58 .60
Operating expenses, gross (b) . . . . . . . . . .96 1.04 1.06 .96 1.25
Net investment income . . . . . . . . . . . . . 1.33 1.76 2.25 2.16 2.13
Portfolio turnover rate (%). . . . . . . . . . . . 117.27 150.68 129.98 127.20 57.65
Per share amount of expense reductions
($ omitted)(b). . . . . . . . . . . . . . . . . .0590 .0510 .0466 .0410 .0539
Average commission rate paid per share
of security ($ omitted) . . . . . . . . . . . . .0376 .0404 N/A N/A N/A
</TABLE>
(a) Periods less than one year are not annualized.
(b) See Note 4 for current period amounts.
Annual Report 15
<PAGE>
SSgA
MATRIX EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1997
1. ORGANIZATION
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 17 investment portfolios which are in operation as
of August 31, 1997. In December 1996, the Investment Company changed its
name from "The Seven Seas Series Fund" to the "SSgA Funds." These financial
statements report on one portfolio, the SSgA Matrix Equity Fund (the
"Fund"). The Investment Company is a registered and diversified open-end
investment company, as defined in the Investment Company Act of 1940, as
amended (the "1940 Act"), that was organized as a Massachusetts business
trust on October 3, 1987 and operates under a First Amended and Restated
Master Trust Agreement, dated October 13, 1993, as amended (the
"Agreement"). The Investment Company's Agreement permits the Board of
Trustees to issue an unlimited number of full and fractional shares of
beneficial interest at a $.001 par value.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
SECURITY VALUATION: United States equity securities listed and traded
principally on any national securities exchange are valued on the basis of
the last sale price or, lacking any sale, at the closing bid price, on the
primary exchange on which the security is traded. United States
over-the-counter equities are valued on the basis of the closing bid price.
International securities traded on a national securities exchange are
valued on the basis of the last sale price. International securities traded
over the counter are valued on the basis of the mean of bid prices. In the
absence of a last sale or mean bid price, respectively, such securities may
be valued on the basis of prices provided by a pricing service if those
prices are believed to reflect the market value of such securities.
Money market instruments maturing within 60 days of the valuation date are
valued at amortized cost, a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed, unless the Board of
Trustees determines that amortized cost does not represent fair value.
The Fund may value securities for which market quotations are not readily
available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
SECURITIES TRANSACTIONS: Securities transactions are recorded on a trade
date basis. Realized gains and losses from securities transactions are
recorded on the basis of identified cost.
16 Annual Report
<PAGE>
SSgA
MATRIX EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
INVESTMENT INCOME: Dividend income is recorded on the ex-dividend date and
interest income is recorded daily on the accrual basis.
AMORTIZATION AND ACCRETION: All zero-coupon bond discounts and original
issue discounts are accreted for both tax and financial reporting purposes.
All short- and long-term market premiums/discounts are amortized/accreted
for both tax and financial reporting purposes.
FEDERAL INCOME TAXES: Since the Investment Company is a Massachusetts
business trust, each sub-trust is a separate corporate taxpayer and
determines its net investment income and capital gains (or losses) and the
amounts to be distributed to each fund's shareholders without regard to the
income and capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company, as
defined by the Internal Revenue Code of 1986, as amended. This requires the
Fund to distribute all of its taxable income. Therefore, the Fund paid no
federal income taxes and no federal income tax provision was required.
The Fund's aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of August 31, 1997 are as follows:
NET
UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
-------------- -------------- -------------- --------------
$ 354,036,541 $ 88,230,704 $ (4,184,748) $ 84,045,956
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date. Dividends
are generally declared and paid quarterly. Capital gain distributions are
generally declared and paid annually. An additional distribution may be
paid by the Fund to avoid imposition of federal income tax on any remaining
undistributed net investment income and capital gains.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP"). As
a result, net investment income and net realized gain (or loss) on
investment and foreign currency-related transactions for a reporting period
may differ significantly from distributions during such period. The
differences between tax regulations and GAAP relate primarily to
investments in foreign-denominated investments, and certain securities sold
at a loss. Accordingly, the Fund may periodically make reclassifications
among certain of its capital accounts without impacting its net asset
value.
Annual Report 17
<PAGE>
SSgA
MATRIX EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
EXPENSES: Most expenses can be directly attributed to the individual Fund.
Expenses which cannot be directly attributed are allocated among all funds
based principally on their relative net assets.
DEFERRED ORGANIZATION EXPENSES: The Fund incurred expenses in connection
with its organization and initial registration. These costs have been
deferred and are being amortized over 60 months on a straight-line basis.
REPURCHASE AGREEMENTS: The Fund may engage in repurchase and tri-party
repurchase agreements with several financial institutions whereby the Fund,
through its custodian or third-party custodian, receives delivery of the
underlying securities. The market value of these securities (including
accrued interest) on acquisition date is required to be an amount equal to
at least 102% of the repurchase price. The Fund's Adviser will monitor
repurchase agreements daily to determine that the market value (including
accrued interest) of the underlying securities remains equal to at least
102% of the repurchase price at Fedwire closing time. The Adviser or
third-party custodian will notify the seller to immediately increase the
collateral on the repurchase agreement to 102% of the repurchase price if
collateral falls below 102%.
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the year ended August 31, 1997, purchases and
sales of investment securities, excluding short-term investments,
aggregated to $449,060,974 and $403,688,272, respectively.
4. RELATED PARTIES
ADVISER: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company (the "Adviser") under which the Adviser
directs the investments of the Fund in accordance with its investment
objectives, policies, and limitations. For these services, the Fund pays a
fee to the Adviser, calculated daily and paid monthly, at the annual rate
of .75% of its average daily net assets. For the year ended August 31,
1997, the Adviser voluntarily agreed to waive one-half of its advisory fee
to the Fund. The Investment Company also has contracts with the Adviser to
provide custody, shareholder servicing and transfer agent services to the
Fund. These amounts are presented in the accompanying Statement of
Operations.
ADMINISTRATOR: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator") under
which the Administrator supervises all non-portfolio investment aspects of
the Investment Company's operations and provides adequate office space and
all necessary office equipment and services, including telephone service,
utilities, stationery supplies, and similar items. The Investment Company
pays the Administrator the following fees for services supplied by the
Administrator pursuant to the Administration Agreement: (i) an annual fee,
payable monthly on a pro rata basis, based on the following percentages of
the average daily net assets of all domestic funds: $0 up to and
18 Annual Report
<PAGE>
SSgA
MATRIX EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
including $500 million - .06%; over $500 million to and including $1
billion - .05%; over $1 billion - .03%; (ii) less an amount equal to the
sum of certain distribution-related expenses incurred by the Investment
Company's Distributor on behalf of the Fund (up to a maximum of 10% of the
asset-based fee determined in (i)); (iii) out-of-pocket expenses; and (iv)
start-up costs for new funds.
DISTRIBUTOR AND SHAREHOLDER SERVICING: The Investment Company has entered
into a Distribution Agreement with Russell Fund Distributors (the
"Distributor") which is a wholly-owned subsidiary of the Administrator to
promote and offer shares of the Investment Company. The Distributor may
have entered into sub-distribution agreements with other non-related
parties. The amounts paid to the Distributor are included in the
accompanying Statement of Operations.
The Investment Company has also adopted a Distribution Plan pursuant to
Rule 12b-1 (the "Plan") under the 1940 Act. Under this Plan, the Investment
Company is authorized to make payments to the Distributor, or any
Shareholder Servicing Agent, as defined in the Plan, for providing
distribution and marketing services, for furnishing assistance to investors
on an ongoing basis, and for the reimbursement of direct out-of-pocket
expenses incurred by the Distributor in connection with the distribution
and marketing of shares of the Investment Company and the servicing of
investor accounts.
The Fund has entered into service agreements with the Adviser, State Street
Brokerage Services, Inc. ("SSBSI"), a wholly-owned subsidiary of the
Adviser, the Adviser's Retirement Investment Services Division ("RIS") and
the Adviser's Metropolitan Division of Commercial Banking ("Commercial
Banking")(collectively the "Agents"), as well as several unaffiliated
service providers. For these services, the Fund pays .025%, .175%, .175%,
and .175% to the Adviser, SSBSI, RIS, and Commercial Banking, respectively,
based upon the average daily value of all Fund shares held by or for
customers of these Agents. For the year ended August 31, 1997, the Fund
incurred expenses of $84,379, $2,010 and $109,200, or a total of $195,589,
from the Adviser, SSBSI and RIS, respectively. The Fund did not incur any
expenses from Commercial Banking during this period.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The Trustees or a majority of the
Fund's shareholders have the right, however, to terminate the Distribution
Plan and all payments thereunder at any time. The Fund will not be
obligated to reimburse the Distributor for
Annual Report 19
<PAGE>
SSgA
MATRIX EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
carryover expenses subsequent to the Distribution Plan's termination or
noncontinuance. There were no carryover expenses as of August 31, 1997.
AFFILIATED BROKERAGE: The Fund placed a portion of its portfolio
transactions with SSBSI, an affiliated broker dealer of the Fund's Adviser.
The commissions paid to SSBSI were $130,978 for the year ended August 31,
1997.
BOARD OF TRUSTEES: The Investment Company pays each Trustee not affiliated
with the Investment Company a retainer of $44,000 annually, $1,000 for each
board meeting attended, an additional $1,000 for attending the annual audit
committee meeting, and reimbursement for out-of-pocket expenses. These
expenses are allocated among all of the Funds based upon their relative net
assets.
ACCRUED FEES PAYABLE TO AFFILIATES AND TRUSTEES AS OF AUGUST 31, 1997 WERE
AS FOLLOWS:
Advisory fees $ 283,436
Administration fees 11,869
Custodian fees 15,374
Distribution fees 2,871
Shareholder servicing fees 17,148
Transfer agent fees 49,290
Trustees' fees 65
---------
$ 380,053
---------
---------
BENEFICIAL INTEREST: As of August 31, 1997, three shareholders (two of
which were also affiliates of the Investment Company) were record owners of
approximately 21%, 13% and 11%, respectively, of the total outstanding
shares of the Fund.
5. DIVIDENDS
On September 2, 1997, the Board of Trustees declared a dividend of $.0490
from net investment income, payable on September 10, 1997 to shareholders
of record on September 3, 1997.
20 Annual Report
<PAGE>
SSgA
MATRIX EQUITY FUND
TAX INFORMATION
August 31, 1997 (Unaudited)
The Fund paid distributions of $.5996 per share from net long-term
capital gains during its taxable year ended August 31, 1997. Pursuant
to Section 852 of the Internal Revenue Code, the Fund designates $11,714,418
as capital gain dividends for its taxable year ended August 31, 1997.
Please consult a tax advisor for questions about federal or state
income tax laws.
Annual Report 21
<PAGE>
SSgA MATRIX EQUITY FUND
Two International Place, 35th Floor
Boston, Massachusetts 02110
(800) 997-7327
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
George W. Weber, Senior Vice President and Treasurer
J. David Griswold, Vice President and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND OFFICE OF SHAREHOLDER INQUIRIES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 647-7327
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(800) 997-7327
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
22 Annual Report
<PAGE>
SSgA-SM- FUNDS
SMALL CAP FUND
Annual Report
August 31, 1997
Table of Contents
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion. . . . . . . . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . 17
Tax Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Fund Management and Service Providers. . . . . . . . . . . . . . . . . . 23
"SSgA-SM-" IS A SERVICE MARK OF STATE STREET CORPORATION AND IS LICENSED FOR
USE BY THE SSgA FUNDS.
THIS REPORT IS PREPARED FROM THE BOOKS AND RECORDS OF THE FUND AND IT IS
SUBMITTED FOR THE GENERAL INFORMATION OF SHAREHOLDERS. THIS INFORMATION IS FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR ACCOMPANIED BY A
SSgA FUNDS PROSPECTUS CONTAINING MORE COMPLETE INFORMATION CONCERNING THE
INVESTMENT OBJECTIVE AND OPERATIONS OF THE FUND, CHARGES AND EXPENSES. THE
PROSPECTUS SHOULD BE READ CAREFULLY BEFORE AN INVESTMENT IS MADE.
PERFORMANCE IS HISTORICAL AND ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL
GAINS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN WHEN PURCHASED.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. RUSSELL FUND DISTRIBUTORS,
INC., IS THE DISTRIBUTOR OF THE SSgA FUNDS.
<PAGE>
SSgA SMALL CAP FUND
LETTER FROM THE CHAIRMAN OF STATE STREET GLOBAL ADVISORS
DEAR SHAREHOLDERS,
I am pleased to provide you with the SSgA Funds annual report for the fiscal
year ended August 31, 1997. Over the past year, the Funds have grown to include
seventeen portfolios covering a broad range of investment strategies from the
far corners of the emerging markets countries to the domestic stock and bond
markets. This report contains summaries on the market environment, performance
and financial statements for the Small Cap Fund. I hope you find this
information a useful tool as you review your overall investment strategy.
The SSgA Funds opened three additional funds in fiscal 1997. These three asset
allocation funds, called Life Solutions Funds, were opened on July 1, 1997. Each
Life Solutions Fund seeks to achieve its investment objective by diversifying
its assets in shares of certain Funds of the Investment Company, referred to as
Underlying Funds.
The Life Solutions Income and Growth Fund seeks income and, secondarily,
long-term growth of capital.
The Life Solutions Balanced Fund seeks a balance of growth of capital and
income.
The Life Solutions Growth Fund seeks long-term growth of capital.
During the past fiscal year, the SSgA Funds were proud to announce that the SSgA
Matrix Fund and the SSgA Small Cap Fund achieved five year track records. We are
proud of our long-term record and look forward to having additional funds
complete their five year anniversary.
SSGA is strategically growing by continuing to build an organization that
delivers comprehensive services striving to meet your investment requirements.
In an effort to compete in this ever-changing complex world, we focus on our
expertise, our knowledge and our commitment to better serve your investment
needs.
As Chairman and Chief Executive Officer of State Street Global Advisors, which
serves as the investment adviser to the SSgA Funds, I would like to thank you
for choosing the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
SSgA SMALL CAP FUND
MANAGEMENT OF THE FUNDS
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A TEAM APPROACH TO INVESTMENT MANAGEMENT
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio managers work together to develop and enhance the
techniques that drive our investment processes. The result is that the
portfolios we manage benefit from the knowledge of the entire team.
Mr. Jeffrey Adams, Vice President, has been the portfolio manager primarily
responsible for investment decisions regarding the SSgA Small Cap Fund since
December 1994. Mr. Adams has been with State Street since 1990, as a portfolio
manager for the past five years, and as an Investment Support Analyst for two
years prior to that. He is a graduate of Northeastern University with a BS in
Economics. There are seven other portfolio managers working with Mr. Adams.
Annual Report 5
<PAGE>
SSgA SMALL CAP FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
OBJECTIVE: Maximize total return.
INVESTS IN: Equity securities; 65% of which is in securities of smaller
capitalized issuers.
STRATEGY: Fund Managers make the majority of purchase selections in the $50
million to $3.0 billion range, based on a proprietary stock selection model.
[GRAPH]
DATES SMALL CAP FUND S&P 400 MIDCAP INDEX RUSSELL 2000 INDEX
Inception* $10,000 $10,000 $10,000
1992 $10,090 $10,245 $10,055
1993 $12,478 $12,751 $13,321
1994 $12,964 $13,341 $14,111
1995 $16,859 $16,077 $17,045
1996 $20,760 $17,988 $18,890
1997 $28,202 $24,693 $24,359
- --------------------------------------------------------------------------------
Total $111,353 $105,095 $107,781
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SSgA SMALL CAP FUND
Period Ended Growth of Total
08/31/97 $10,000 Return
- ------------ ------------ ------------
1 Year $ 13,585 35.85%
5 Years $ 27,948 22.82%+
Inception $ 28,202 22.22%+
STANDARD & POOR'S-Registered Trademark- MIDCAP 400 INDEX
Period Ended Growth of Total
08/31/97 $10,000 Return
- ------------ ------------ ------------
1 Year $ 13,728 37.28%
5 Years $ 24,105 19.24%+
Inception $ 24,693 19.12%+
RUSSELL 2000-Registered Trademark- INDEX
Period Ended Growth of Total
08/31/97 $10,000 Return
- ------------ ------------ ------------
1 Year $ 12,895 28.95%
5 Years $ 24,227 19.36%+
Inception $ 24,359 18.81%+
SEE RELATED NOTES ON THE FOLLOWING PAGE.
PERFORMANCE REVIEW
The SSgA Small Cap Fund ended its second fiscal year with positive performance
relative to its benchmark, the Russell 2000 Index. The Fund had a one year
return of 35.9% for the fiscal year ended August 31, 1997. The Fund outperformed
the Russell 2000 Index by 6.9%. The primary focus in our portfolio construction
process is on stock selection, while maintaining similar characteristics to the
Index. This focus helped the Fund reach its objective.
PORTFOLIO HIGHLIGHTS
The overall characteristics of the Fund are intended to be similar to the
Russell 2000 Index. The universe of investable stocks is comprised of, but not
limited to, issues found in the Russell 2000 Index. The underlying investment
philosophy is to purchase stocks with improving earnings estimates, which we
believe are available at a "reasonable" price. The strategy utilizes a
systematic, disciplined and
6 Annual Report
<PAGE>
SSgA SMALL CAP FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
quantitative process that allows us to analyze large amounts of data quickly and
efficiently.
Based on the calendar year-to-date, the performance of small cap stocks
versus large cap stocks started out weak in 1997. This is indicated by
returns of -5.2% for the Russell 2000-Registered Trademark- Index versus the
S&P 500 Index return of 2.7% for the first quarter of the 1997 calendar year,
a spread of 7.9%. This domination continued into April of 1997 as the S&P 500
outperformed the Russell 2000 by 5.7%. In May of 1997, we saw a correction
for small cap stocks as the Russell 2000 returned 11.1%, versus the S&P 500
return of 6.1%. In July and August 1997, the spread differential continued.
Although large capitalization stocks have led the market in 1997, the gap
between the S&P 500 and the Russell 2000-Registered Trademark has narrowed to
approximately 5.0% through August 1997. August especially helped close the
spread, as the Russell 2000 outperformed the S&P 500 by 7.9%.
The ten largest equity holdings comprised 12.7% of the portfolio with Symantec
Corp. representing the largest single holding at 1.6%. The financial sector was
the largest concentration for the same period.
TOP TEN EQUITY HOLDINGS
(AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31, 1997
Symantec Corp. 1.6%
Perrigo Co. 1.6
Novellus Systems, Inc. 1.3
Jabil Circuit, Inc. 1.3
National Steel Corp. Class B 1.3
Carmike Cinemas, Inc. 1.2
Tech Data Corp. 1.1
Ethan Allen Interiors, Inc. 1.1
Stratus Computer, Inc. 1.1
CellStar Corp. 1.1
-----------------------
NOTES: THE FOLLOWING NOTES RELATE TO THE GROWTH OF $10,000 GRAPH AND TABLE ON
THE PRECEDING PAGE.
* The Fund commenced operations on July 1, 1992. Index comparison also began
July 1, 1992.
** The Standard & Poor's-Registered Trademark- MidCap 400 Index is comprised
of 400 domestic stocks chosen for market size, liquidity and industry
group representation. It is a market-weighted index (stock price times
shares outstanding), with each stock affecting the Index in proportion
to its market value.
+ The Russell 2000-Registered Trademark- Index is comprised of the 2,000
smallest securities in the Russell 3000-Registered Trademark- Index,
representing approximately 10% of the Russell 3000 total market
capitalization. The Index is reconstituted annually.
+ Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Annual Report 7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of the SSgA Funds:
We have audited the accompanying statement of assets and liabilities and
statement of net assets of SSgA Small Cap Fund (formerly The Seven Seas Series
Small Cap Fund)(the "Fund"), as of August 31, 1997, and the related statement of
operations for the fiscal year then ended, the statements of changes in net
assets for each of the two fiscal years in the period then ended, and the
financial highlights for each of the five fiscal years in the period then ended
and for the period July 1, 1992 (commencement of operations) to August 31, 1992.
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
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 free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1997 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We 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 of the
Fund as of August 31, 1997, the results of its operations for the fiscal year
then ended, the changes in its net assets for each of the two fiscal years in
the period then ended, and the financial highlights for each of the five fiscal
years in the period then ended and for the period July 1, 1992 (commencement of
operations) to August 31, 1992 in conformity with generally accepted accounting
principles.
Boston, Massachusetts /s/ COOPERS & LYBRAND L.L.P.
October 7, 1997
8 Annual Report
<PAGE>
SSgA
SMALL CAP FUND
STATEMENT OF NET ASSETS
August 31, 1997
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
COMMON STOCKS - 99.2%
BASIC INDUSTRIES - 4.2%
ARMCO, Inc. (a) 164,700 $ 978
Buckeye Cellulose Corp. (a) 10,000 394
Devon Energy Corp. 25,400 1,084
National Steel Corp. Class B (a) 101,100 1,902
Precision Castparts Corp. 19,400 1,254
Spartech Corp. 12,000 190
Texas Industries, Inc. 15,500 516
----------
6,318
----------
CAPITAL GOODS - 6.8%
Aeroquip-Vickers, Inc. 14,900 832
Barnes Group, Inc. 7,200 198
Commercial Intertech Corp. 7,300 124
Essex International, Inc. 41,800 1,607
Fluke Corp. 14,400 713
General Cable Corp. New (a) 47,300 1,638
Manitowoc Co., Inc. 36,975 1,336
Novellus Systems, Inc. (a) 17,800 2,038
Robbins & Myers, Inc. 9,900 317
Zytec Corp. (a) 45,600 1,345
----------
10,148
----------
CONSUMER BASICS - 14.0%
Acuson (a) 24,000 646
Agouron Pharmaceuticals, Inc. (a) 34,400 1,509
Alpharma, Inc. Class A 17,000 373
Alpharma, Inc. Rights (a) 2,833 15
AmeriSource Health Corp. Class A (a) 11,500 576
Bindley Western Industries, Inc. 10,200 257
Dean Foods Co. 32,500 1,442
Dura Pharmaceuticals, Inc. (a) 39,000 1,394
Integrated Health Services, Inc. 47,500 1,567
Michael Foods, Inc. 18,600 402
Nationwide Health Properties, Inc. 57,400 1,299
NovaCare, Inc. (a) 82,000 1,235
Pediatrix Medical Group (a) 23,700 987
Perrigo Co. (a) 165,600 2,370
Rexall Sundown, Inc. (a) 36,600 1,263
Safeskin Corp. (a) 41,800 1,390
Smith's Food & Drug Centers, Inc. Class B (a) 29,400 1,610
Sofamor/Danek Group, Inc. (a) 23,900 1,146
Universal Health Services, Inc. Class B (a) 34,800 1,525
----------
21,006
----------
CONSUMER DURABLES - 2.6%
Ethan Allen Interiors, Inc. 23,200 1,705
Furniture Brands International, Inc. (a) 45,500 802
Kinetic Concepts, Inc. 18,500 340
Polaris Industries, Inc. 36,200 1,041
----------
3,888
----------
CONSUMER NON-DURABLES - 10.7%
Canandaigua Wine, Inc. Class A (a) 30,100 1,227
Cato Corp. New Class A 55,400 471
Claire's Stores, Inc. 56,600 1,189
Coors (Adolph) Co. Class B 42,700 1,575
Dress Barn, Inc. (a) 20,100 410
Family Dollar Stores, Inc. 60,150 1,278
Fingerhut Cos., Inc. 69,400 1,405
Footstar, Inc. (a) 57,200 1,419
Genesco, Inc. (a) 10,400 129
Land's End, Inc. (a) 7,400 195
Nautica Enterprises, Inc. (a) 55,600 1,320
Pacific Sunwear of California (a) 2,900 111
Pier 1 Imports, Inc. 84,900 1,443
Proffitt's, Inc. (a) 28,300 1,519
Ross Stores, Inc. 38,600 1,129
Stein Mart, Inc. (a) 25,300 705
Tuesday Morning, Inc. (a) 22,900 501
----------
16,026
----------
Annual Report 9
<PAGE>
SSgA
SMALL CAP FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
CONSUMER SERVICES - 4.6%
Anchor Gaming (a) 10,900 $ 867
Carmike Cinemas, Inc. (a) 57,400 1,808
Equity Inns, Inc. 52,100 755
Landry's Seafood Restaurants, Inc. (a) 26,700 637
Regal Cinemas, Inc. (a) 34,700 985
Ruby Tuesday, Inc. (a) 21,600 583
Sonic Corp. (a) 59,000 1,302
----------
6,937
----------
ENERGY - 6.7%
Cliffs Drilling Co. (a) 32,200 1,536
Comstock Resources, Inc. New (a) 103,300 1,265
Falcon Drilling Co., Inc. (a) 51,400 1,619
Laclede Gas Co. 2,900 71
Marine Drilling Co, Inc. (a) 56,800 1,363
Newpark Resources, Inc. New (a) 45,400 1,538
Smith International, Inc. (a) 16,200 1,179
Vintage Petroleum, Inc. 33,100 1,421
----------
9,992
----------
FINANCE - 14.8%
Acceptance Insurance Companies, Inc. (a) 2,700 60
Allied Group, Inc. 250 11
American Bankers Insurance Group, Inc. 4,500 297
CDI Corp. (a) 4,400 155
CitiFed Bancorp, Inc. 6,900 298
Commercial Federal Corp. 37,700 1,586
Community First Bankshares, Inc. 20,200 823
First American Financial Corp. 19,900 890
FirstFed Financial Corp. (a) 14,400 486
FIRSTPLUS Financial Group, Inc. (a) 32,500 1,483
Frontier Insurance Group, Inc. New 38,600 1,351
Life Re Corp. 13,400 688
Money Store, Inc. 27,000 769
NAC Reinsurance Corp. 26,000 1,225
North Fork Bancorporation, Inc. 51,600 1,287
ONBANCorp, Inc. 25,100 1,296
Orion Capital Corp. 34,000 1,445
Peoples Heritage Financial Group 15,400 568
Presidential Life Corp. 26,700 507
Provident Financial Group, Inc. 2,475 116
Reinsurance Group Of America 6,600 396
Resource Bancshares Mortgage Group 30,500 515
Sirrom Capital Corp. 31,700 1,125
Sotheby's Holdings Co., Inc. Class A 85,900 1,627
Sovereign Bancorp, Inc. 46,500 718
St. Paul Bancorp, Inc. 30,600 700
T R Financial Corp. 21,300 588
Thornburg Mortgage Asset Corp. 10,500 243
USBANCORP, Inc. 4,000 246
Vesta Insurance Group, Inc. 14,700 725
----------
22,224
----------
GENERAL BUSINESS - 3.8%
Alternative Resources Corp. (a) 61,800 1,383
Computer Task Group, Inc. 26,300 1,175
Media General, Inc. Class A 34,300 1,261
MicroAge, Inc. (a) 15,200 412
Mosaix, Inc. (a) 27,500 258
Pulitzer Publishing Co. 16,800 883
SPS Transaction Services, Inc. (a) 16,700 356
----------
5,728
----------
MISCELLANEOUS - 6.4%
Apartment Investment & Management Co. Class A 15,400 500
BRE Properties, Inc. 22,200 598
Cali Realty Corp. 20,900 778
Crescent Real Estate Equities, Inc. 31,200 987
Duke Realty Investments, Inc. 23,800 498
First Industrial Realty Trust, Inc. 22,500 695
GenCorp, Inc. 56,200 1,503
10 Annual Report
<PAGE>
SSgA
SMALL CAP FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Health Care, Inc. 26,200 $ 684
Home Properties of New York, Inc. REIT 15,600 354
Irvine Apartment Communities, Inc. 35,900 1,028
Liberty Property Trust 31,600 812
Merry Land and Investment, Inc. 26,800 583
TriNet Corporate Realty Trust, Inc. 14,600 519
----------
9,539
----------
SHELTER - 1.5%
Essex Property Trust (a) 24,000 768
Southdown, Inc. 27,600 1,296
U.S. Home Corp. (a) 3,800 134
----------
2,198
----------
TECHNOLOGY - 15.1%
BMC Industries, Inc. 4,500 140
CHS Electronics, Inc. New (a) 11,800 454
Citrix Systems, Inc. (a) 25,400 1,284
Data General Corp. (a) 43,600 1,567
Electro Scientific Industries, Inc. (a) 31,600 1,513
Esterline Corp. (a) 2,300 85
Furon Co. 16,300 579
GT Interactive Software Corp. (a) 8,600 86
Hadco Corp. (a) 20,100 1,410
InaCom Corp. (a) 35,300 1,200
Integrated Circuit Systems, Inc. (a) 13,600 462
INTERSOLV, Inc. (a) 55,000 883
Jabil Circuit, Inc. (a) 33,800 2,003
Kulicke & Soffa Industries, Inc. (a) 13,100 601
Marshall Industries (a) 5,800 230
Paxar Corp. (a) 26,200 570
Rohr, Inc. (a) 46,700 1,264
Stratus Computer, Inc. (a) 29,800 1,654
Structural Dynamics Research Corp. (a) 19,400 514
Symantec Corp. (a) 104,400 2,506
Tech Data Corp. (a) 44,200 1,713
Thiokol Corp. 17,200 1,370
Zygo Corp. (a) 18,500 569
----------
22,657
----------
TRANSPORTATION - 4.2%
Airborne Freight Corp. 26,200 1,290
Consolidated Freightways Corp. (a) 24,200 378
Navistar International Corp. (a) 42,700 1,060
Seacor Holdings, Inc. (a) 5,500 298
Trico Marine Services, Inc. (a) 14,900 460
USFreightways Corp. 44,600 1,332
Yellow Corp. (a) 49,400 1,544
----------
6,362
----------
UTILITIES - 3.8%
Aliant Communications, Inc. 24,200 545
Atlantic Energy, Inc. 15,200 263
CellStar Corp. (a) 49,600 1,652
MDU Resources Group, Inc. 14,800 354
New Jersey Resources Corp. 16,500 529
Piedmont Natural Gas Co., Inc. 15,100 399
Public Service Co. of New Mexico 26,500 484
Washington Gas & Light Co. 55,600 1,414
----------
5,640
----------
TOTAL COMMON STOCKS
(cost $120,854) 148,663
----------
Annual Report 11
<PAGE>
SSgA
SMALL CAP FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
SHORT-TERM INVESTMENTS - 2.7%
Dreyfus Cash Management Plus, Inc.
Money Market Fund (b) $ 4,098 $ 4,098
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $4,098) 4,098
----------
TOTAL INVESTMENTS
(identified cost $124,952)(c) - 101.9% 152,761
OTHER ASSETS AND LIABILITIES,
NET - (1.9%) (2,953)
----------
NET ASSETS - 100.0% $ 149,808
----------
----------
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) See Note 2 for federal income tax information.
The accompanying notes are an integral part of the financial statements.
12 Annual Report
<PAGE>
SSgA
SMALL CAP FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1997
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $124,952)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . $ 152,761
Receivables:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,145
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 859
--------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154,845
LIABILITIES
Payables:
Investments purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,032
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 761
Accrued fees to affiliates and trustees (Note 4) . . . . . . . . . . . . . . . . . 215
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
--------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,037
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 149,808
--------------
--------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 137
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,449
Unrealized appreciation (depreciation) on investments. . . . . . . . . . . . . . . . . . . . . . . . . . 27,809
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113,406
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 149,808
--------------
--------------
NET ASSET VALUE, offering and redemption price per share:
($149,807,720 divided by 6,776,887 shares of $.001
par value shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . $ 22.11
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 13
<PAGE>
SSgA
SMALL CAP FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Fiscal Year Ended August 31, 1997
Amounts
in thousands
<S> <C> <C>
INVESTMENT INCOME:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,061
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
--------------
Total Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,086
EXPENSES (Notes 2 and 4):
Advisory fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 690
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Amortization of deferred organization expenses . . . . . . . . . . . . . . . . . . 3
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
--------------
Expenses before reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,006
Expense reductions (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . (86)
--------------
Total Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 920
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166
--------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (NOTES 2 AND 3)
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,545
Net change in unrealized appreciation or depreciation of investments . . . . . . . . . . . . . . . . . . 22,222
--------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,767
--------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . . . $ 30,933
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 Annual Report
<PAGE>
SSgA
SMALL CAP FUND
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Fiscal Years Ended August 31,
Amounts in thousands
1997 1996
----------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 166 $ 96
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,545 4,782
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . . . . . . . . 22,222 2,395
----------------- -----------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . . . . . 30,933 7,273
----------------- -----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (44) (144)
Net realized gain on investment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,408) (357)
----------------- -----------------
Total Distributions to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . (4,452) (501)
----------------- -----------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions . . . . . . . . . . . . 68,119 25,135
----------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . 94,600 31,907
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,208 23,301
----------------- -----------------
End of year (including undistributed net investment income of. . . . . . . . . . . . . . .
$137 and $15, respectively). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 149,808 $ 55,208
----------------- -----------------
----------------- -----------------
</TABLE>
<TABLE>
<CAPTION>
FUND SHARE TRANSACTIONS 1997 1996
------------------------------------- -------------------------------------
SHARES DOLLARS SHARES DOLLARS
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Proceeds from shares sold. . . . . . . . . . . . . 5,423 $ 103,546 2,113 $ 33,924
Proceeds from reinvestment
of distributions . . . . . . . . . . . . . . . . 237 4,094 31 463
Payments for shares redeemed . . . . . . . . . . . (2,048) (39,521) (595) (9,252)
----------------- ----------------- ----------------- -----------------
Total net increase (decrease). . . . . . . . . . . 3,612 $ 68,119 1,549 $ 25,135
----------------- ----------------- ----------------- -----------------
----------------- ----------------- ----------------- -----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 15
<PAGE>
SSgA
SMALL CAP FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each fiscal
year or period and other performance information derived from the financial statements.
1997 1996 1995* 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . $ 17.44 $ 14.42 $ 11.88 $ 12.24 $ 10.09
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . .03 .04 .13 .21 .22
Net realized and unrealized gain on investments. . 5.87 3.25 3.19 .24 2.14
---------- ---------- ---------- ---------- ----------
Total Income From Investment Operations . . . . 5.90 3.29 3.32 .45 2.36
---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
Net realized investment income . . . . . . . . . . (.01) (.07) (.15) (.21) (.21)
In excess of net realized gain on investments. . . -- -- (.05) -- --
Net realized gain on investments . . . . . . . . . (1.22) (.20) (.58) (.60) --
---------- ---------- ---------- ---------- ----------
Total Distributions . . . . . . . . . . . . . . (1.23) (.27) (.78) (.81) (.21)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . $ 22.11 $ 17.44 $ 14.42 $ 11.88 $ 12.24
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
TOTAL RETURN (%) . . . . . . . . . . . . . . . . . . 35.85 23.14 30.04 3.90 23.66
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of year ($000 omitted) . . . . . . 149,808 55,208 23,301 25,716 34,815
Ratios to average net assets (%):
Operating expenses, net (a) . . . . . . . . . . 1.00 1.00 .97 .30 .25
Operating expenses, gross (a) . . . . . . . . . 1.09 1.18 1.58 .81 1.18
Net investment income . . . . . . . . . . . . . .18 .26 .81 1.73 1.85
Portfolio turnover rate (%). . . . . . . . . . . . 143.79 76.85 192.88 44.86 81.14
Per share amount of expense reductions
($ omitted)(a). . . . . . . . . . . . . . . . . .0141 .0277 .0991 .0628 .1123
Average commission rate paid per share
of security ($ omitted) . . . . . . . . . . . . .0365 .0368 N/A N/A N/A
</TABLE>
* Prior to November 22, 1994, the Fund was passively managed as the S&P
Midcap Index Fund. Effective November 23, 1994, the Fund increased the
Advisory fee from .20% to .75% of its average daily net assets.
(a) See Note 4 for current period amounts.
16 Annual Report
<PAGE>
SSgA
SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1997
1. ORGANIZATION
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 17 investment portfolios which are in operation as
of August 31, 1997. In December 1996, the Investment Company changed its
name from "The Seven Seas Series Fund" to the "SSgA Funds." These financial
statements report on one portfolio, the SSgA Small Cap Fund (the "Fund").
Prior to November 22, 1994, the Fund was passively managed under the name
of The Seven Seas Series S&P Midcap Index Fund. Effective November 23,
1994, the name and investment objective of the Fund was changed pursuant to
a shareholder vote. The Investment Company is a registered and diversified
open-end investment company, as defined in the Investment Company Act of
1940, as amended (the "1940 Act"), that was organized as a Massachusetts
business trust on October 3, 1987 and operates under a First Amended and
Restated Master Trust Agreement, dated October 13, 1993, as amended (the
"Agreement"). The Investment Company's Agreement permits the Board of
Trustees to issue an unlimited number of full and fractional shares of
beneficial interest at a $.001 par value.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
SECURITY VALUATION: United States equity securities listed and traded
principally on any national securities exchange are valued on the basis of
the last sale price or, lacking any sale, at the closing bid price, on the
primary exchange on which the security is traded. United States
over-the-counter equities are valued on the basis of the closing bid price.
International securities traded on a national securities exchange are
valued on the basis of the last sale price. International securities traded
over the counter are valued on the basis of the mean of bid prices. In the
absence of a last sale or mean bid price, respectively, such securities may
be valued on the basis of prices provided by a pricing service if those
prices are believed to reflect the market value of such securities.
Money market instruments maturing within 60 days of the valuation date are
valued at amortized cost, a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed, unless the Board of
Trustees determines that amortized cost does not represent fair value.
The Fund may value securities for which market quotations are not readily
available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
SECURITIES TRANSACTIONS: Securities transactions are recorded on a trade
date basis. Realized gains and losses from securities transactions are
recorded on the basis of identified cost.
Annual Report 17
<PAGE>
SSgA
SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
INVESTMENT INCOME: Dividend income is recorded on the ex-dividend date and
interest income is recorded daily on the accrual basis.
AMORTIZATION AND ACCRETION: All zero-coupon bond discounts and original
issue discounts are accreted for both tax and financial reporting purposes.
All short- and long-term market premiums/discounts are amortized/accreted
for both tax and financial reporting purposes.
FEDERAL INCOME TAXES: Since the Investment Company is a Massachusetts
business trust, each sub-trust is a separate corporate taxpayer and
determines its net investment income and capital gains (or losses) and the
amounts to be distributed to each fund's shareholders without regard to the
income and capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company, as
defined by the Internal Revenue Code of 1986, as amended. This requires the
Fund to distribute all of its taxable income. Therefore, the Fund paid no
federal income taxes and no federal income tax provision was required.
The Fund's aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of August 31, 1997 are as follows:
NET
UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
-------------- -------------- -------------- --------------
$ 124,951,841 $ 28,846,717 $ (1,038,015) $ 27,808,702
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date. Dividends
are generally declared and paid quarterly. Capital gain distributions are
generally declared and paid annually. An additional distribution may be
paid by the Fund to avoid imposition of federal income tax on any remaining
undistributed net investment income and capital gains.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP"). As
a result, net investment income and net realized gain (or loss) on
investment and foreign currency-related transactions for a reporting period
may differ significantly from distributions during such period. The
differences between tax regulations and GAAP relate primarily to
investments in foreign denominated investments and certain securities sold
at a loss. Accordingly, the Fund may periodically make reclassifications
among certain of its capital accounts without impacting its net asset
value.
18 Annual Report
<PAGE>
SSgA
SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
EXPENSES: Most expenses can be directly attributed to the Fund. Expenses
which cannot be directly attributed are allocated among all funds based
principally on their relative net assets.
DEFERRED ORGANIZATION EXPENSES: The Fund incurred expenses in connection
with its organization and initial registration. These costs have been
deferred and are being amortized over 60 months on a straight-line basis.
REPURCHASE AGREEMENTS: The Fund may engage in repurchase and tri-party
repurchase agreements with several financial institutions whereby the Fund,
through its custodian or third-party custodian, receives delivery of the
underlying securities. The market value of these securities (including
accrued interest) on acquisition date is required to be an amount equal to
at least 102% of the repurchase price. The Fund's Adviser will monitor
repurchase agreements daily to determine that the market value (including
accrued interest) of the underlying securities remains equal to at least
102% of the repurchase price at Fedwire closing time. The Adviser or
third-party custodian will notify the seller to immediately increase the
collateral on the repurchase agreement to 102% of the repurchase price if
collateral falls below 102%.
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the year ended August 31, 1997, purchases and
sales of investment securities, excluding short-term investments aggregated
to $193,014,316 and $128,861,592, respectively.
4. RELATED PARTIES
ADVISER: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company (the "Adviser") under which the Adviser
directs the investments of the Fund in accordance with its investment
objectives, policies, and limitations. Effective November 23, 1994,
pursuant to a shareholder vote, the Fund pays a fee to the Adviser
calculated daily and paid monthly, at an annual rate of .75% of its average
daily net assets. For the year ended August 31, 1997, the Adviser
voluntarily agreed to reimburse the Fund for all expenses in excess of
1.00% of average daily net assets on an annual basis. As of August 31,
1997, the receivable due from the Adviser for expenses in excess of the
expense cap has been netted against the Adviser fee payable. The Investment
Company also has contracts with the Adviser to provide custody, shareholder
servicing and transfer agent services to the Fund. These amounts are
presented in the accompanying Statement of Operations.
ADMINISTRATOR: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator") under
which the Administrator supervises all non-portfolio investment aspects of
the Investment Company's operations and provides adequate office space and
all necessary office equipment and services, including telephone service,
utilities, stationery supplies, and similar items. The Investment Company
pays the Administrator the following fees for services supplied by the
Administrator pursuant to the Administration Agreement: (i) an annual fee,
payable monthly on a pro rata basis, based on the following percentages of
the combined average daily net assets of all domestic funds: $0
Annual Report 19
<PAGE>
SSgA
SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
up to and including $500 million - .06%; over $500 million to and including
$1 billion - .05%; over $1 billion - .03%; (ii) less an amount equal to the
sum of certain distribution-related expenses incurred by the Investment
Company's Distributor on behalf of the Fund (up to a maximum of 10% of the
asset-based fee determined in (i)); (iii) out-of-pocket expenses; and (iv)
start-up costs for new funds.
DISTRIBUTOR AND SHAREHOLDER SERVICING: The Investment Company has entered
into a Distribution Agreement with Russell Fund Distributors (the
"Distributor") which is a wholly-owned subsidiary of the Administrator to
promote and offer shares of the Investment Company. The Distributor may
have entered into sub-distribution agreements with other non-related
parties. The amounts paid to the Distributor are included in the
accompanying Statement of Operations.
The Investment Company has also adopted a Distribution Plan pursuant to
Rule 12b-1 (the "Plan") under the 1940 Act. Under this Plan, the Investment
Company is authorized to make payments to the Distributor, or any
Shareholder Servicing Agent, as defined in the Plan, for providing
distribution and marketing services, for furnishing assistance to investors
on an ongoing basis, and for the reimbursement of direct out-of-pocket
expenses incurred by the Distributor in connection with the distribution
and marketing of shares of the Investment Company and the servicing of
investor accounts.
The Fund has entered into service agreements with the Adviser, State Street
Brokerage Services, Inc. ("SSBSI"), a wholly-owned subsidiary of the
Adviser, the Adviser's Retirement Investment Services Division ("RIS"), and
the Adviser's Metropolitan Division of Commercial Banking ("Commercial
Banking")(collectively the "Agents"), as well as several unaffiliated
service providers. For these services, the Fund pays .025%, .175%, .175%
and .175% to the Adviser, SSBSI, RIS, and Commercial Banking, respectively,
based upon the average daily value of all Fund shares held by or for
customers of these Agents. For the year ended August 31, 1997, the Fund
incurred expenses of $22,792 and $3,878, or a total of $26,670, from the
Adviser and SSBSI, respectively. The Fund did not incur any expenses from
RIS or Commercial Banking during this period. The remaining amount of $62
was paid to another third-party provider.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The Trustees or a majority of the
Fund's shareholders have the right, however, to terminate the Distribution
Plan and all payments thereunder at any time. The Fund will not be
obligated to reimburse the Distributor for
20 Annual Report
<PAGE>
SSgA
SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
carryover expenses subsequent to the Distribution Plan's termination or
noncontinuance. There were no carryover expenses as of August 31, 1997.
AFFILIATED BROKERAGE: The Fund placed a portion of its portfolio
transactions with SSBSI, an affiliated broker dealer of the Fund's Adviser.
The commissions paid to SSBSI were $37,368 for the year ended August 31,
1997.
BOARD OF TRUSTEES: The Investment Company pays each Trustee not affiliated
with the Investment Company a retainer of $44,000 annually, $1,000 for each
board meeting attended, an additional $1,000 for attending the annual audit
committee meeting, and reimbursement for out-of-pocket expenses. These
expenses are allocated among all of the Funds based upon their relative net
assets.
ACCRUED FEES PAYABLE TO AFFILIATES AND TRUSTEES AS OF AUGUST 31, 1997 WERE
AS FOLLOWS:
Advisory fees $ 160,949
Administration fees 3,757
Custodian fees 7,858
Distribution fees 6,843
Shareholder servicing fees 3,253
Transfer agent fees 32,184
----------
$ 214,844
----------
----------
BENEFICIAL INTEREST: As of August 31, 1997, two shareholders (who were also
affiliates of the Investment Company) were record owners of approximately
22% and 14%, respectively, of the total outstanding shares of the Fund.
Annual Report 21
<PAGE>
SSgA
SMALL CAP FUND
TAX INFORMATION
August 31, 1997 (Unaudited)
The Fund paid distributions of $.4133 per share from net long-term capital gains
during its taxable year ended August 31, 1997. Pursuant to Section 852 of the
Internal Revenue Code, the Fund designates $1,498,865 as capital gain dividends
for its taxable year ended August 31, 1997.
Please consult a tax advisor for questions about federal or state income tax
laws.
22 Annual Report
<PAGE>
SSgA SMALL CAP FUND
Two International Place, 35th Floor
Boston, Massachusetts 02110
(800) 997-7327
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
George W. Weber, Senior Vice President and Fund Treasurer
J. David Griswold, Vice President and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND OFFICE OF SHAREHOLDER INQUIRIES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 647-7327
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(800) 997-7327
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
Annual Report 23
<PAGE>
SSgA-SM- FUNDS
ACTIVE INTERNATIONAL FUND
Annual Report
August 31, 1997
Table of Contents
Page
Chairman's Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion . . . . . . . . . . . . . . . . . . . . 6
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . 8
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . 23
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . 24
Tax Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Fund Management and Service Providers . . . . . . . . . . . . . . . . . 30
"SSgA-SM-" IS A SERVICE MARK OF STATE STREET CORPORATION AND IS LICENSED FOR
USE BY THE SSgA FUNDS.
THIS REPORT IS PREPARED FROM THE BOOKS AND RECORDS OF THE FUND AND IT IS
SUBMITTED FOR THE GENERAL INFORMATION OF SHAREHOLDERS. THIS INFORMATION IS FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR ACCOMPANIED BY A
SSgA FUNDS PROSPECTUS CONTAINING MORE COMPLETE INFORMATION CONCERNING THE
INVESTMENT OBJECTIVE AND OPERATIONS OF THE FUND, CHARGES AND EXPENSES. THE
PROSPECTUS SHOULD BE READ CAREFULLY BEFORE AN INVESTMENT IS MADE.
PERFORMANCE IS HISTORICAL AND ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL
GAINS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN WHEN PURCHASED.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. INTERNATIONAL MARKETS
ENTAIL DIFFERENT RISKS THAN THOSE TYPICALLY ASSOCIATED WITH DOMESTIC MARKETS,
INCLUDING CURRENCY FLUCTUATIONS, POLITICAL AND ECONOMIC INSTABILITY, ACCOUNTING
CHANGES AND FOREIGN TAXATION. SECURITIES MAY BE LESS LIQUID AND MORE VOLATILE.
PLEASE SEE THE PROSPECTUS FOR FURTHER DETAILS. RUSSELL FUND DISTRIBUTORS, INC.,
IS THE DISTRIBUTOR OF THE SSgA FUNDS.
<PAGE>
SSgA ACTIVE INTERNATIONAL FUND
LETTER FROM THE CHAIRMAN OF STATE STREET GLOBAL ADVISORS
DEAR SHAREHOLDERS,
I am pleased to provide you with the SSgA Funds annual report for the fiscal
year ended August 31, 1997. Over the past year, the Funds have grown to include
seventeen portfolios covering a broad range of investment strategies from the
far corners of the emerging markets countries to the domestic stock and bond
markets. This report contains summaries on the market environment, performance
and financial statements for the Active International Fund. I hope you find this
information a useful tool as you review your overall investment strategy.
The SSgA Funds opened three additional funds in fiscal 1997. These three asset
allocation funds, called Life Solutions Funds, were opened on July 1, 1997. Each
Life Solutions Fund seeks to achieve its investment objective by diversifying
its assets in shares of certain Funds of the Investment Company, referred to as
Underlying Funds.
The Life Solutions Income and Growth Fund seeks income and, secondarily,
long-term growth of capital.
The Life Solutions Balanced Fund seeks a balance of growth of capital and
income.
The Life Solutions Growth Fund seeks long-term growth of capital.
During the past fiscal year, the SSgA Funds were proud to announce that the SSgA
Matrix Fund and the SSgA Small Cap Fund achieved five year track records. We are
proud of our long-term record and look forward to having additional funds
complete their five year anniversary.
SSGA is strategically growing by continuing to build an organization that
delivers comprehensive services striving to meet your investment requirements.
In an effort to compete in this ever-changing complex world, we focus on our
expertise, our knowledge and our commitment to better serve your investment
needs.
As Chairman and Chief Executive Officer of State Street Global Advisors which
serves as the investment adviser to the SSgA Funds, I would like to thank you
for choosing the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
SSgA ACTIVE INTERNATIONAL FUND
MANAGEMENT OF THE FUNDS
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A TEAM APPROACH TO INVESTMENT MANAGEMENT
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio managers work together to develop and enhance the
techniques that drive our investment processes. The result is that the
portfolios we manage benefit from the knowledge of the entire team.
Mr. Robert Rubano, Vice President, has been the portfolio manager primarily
responsible for investment decisions regarding the SSgA Active International
Fund since its inception in March 1995. Mr. Rubano has been with State Street
since 1990 as a portfolio manager of active international funds. He is a
graduate of Boston University's MBA program with concentration in Finance and
also holds an BA in Government and Mathematics from Bowdoin College. There are
seven other portfolio managers working with Mr. Rubano.
Annual Report 5
<PAGE>
SSgA ACTIVE INTERNATIONAL FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
OBJECTIVE: Provide long-term capital growth.
INVESTS IN: Equity securities of foreign issuers.
STRATEGY: Fund Managers will concentrate investments in holdings that are
composed of, but not limited to, countries included in the Morgan Stanley
Capital International Europe, Australia, Far East ("MSCI EAFE") Index. Through
the use of our proprietary model, a quantitative selection process is used to
select the best securities within each underlying country in the Index.
[GRAPH]
DATES ACTIVE INTERNATIONAL FUND MSCI EAFE INDEX **
Inception* $10,000 $10,000
1995 $10,890 $10,933
1996 $11,567 $11,794
1997 $11,703 $12,862
- --------------------------------------------------------------------------------
Total $44,160 $45,589
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SSgA
ACTIVE INTERNATIONAL FUND
Period Ended Growth of Total
08/31/97 $10,000 Return
- ------------ ------------ ------------
1 Year $ 10,117 1.17%
Inception $ 11,703 6.54%+
MORGAN STANLEY CAPITAL INTERNATIONAL
EUROPE, AUSTRALIA, FAR EAST INDEX (NET DIVIDEND)
Period Ended Growth of Total
08/31/97 $10,000 Return
- ------------ ------------ ------------
1 Year $ 10,906 9.06%
Inception $ 12,862 10.59%+
SEE RELATED NOTES ON THE FOLLOWING PAGE.
PERFORMANCE REVIEW
The SSgA Active International Fund posted a 1.17% return for the fiscal year
ended August 31, 1997. The Fund lagged the MSCI EAFE index, which returned 9.06%
over the same period. The difference in return was primarily attributable to
Japan.
PORTFOLIO HIGHLIGHTS
As noted above, exposure to Japanese securities was the primary source of the
Fund's trailing returns. The Fund held an overweighting of 5% to Japan versus
the Index. Over the period, the Japanese market lost over 11%, with most of
this loss coming from the depreciation of the yen. At the end of August of
1996, the yen stood at 109 per dollar. At the end of August of 1997, the yen was
at 120 per dollar. This 9% devaluation happened in the fourth quarter
6 Annual Report
<PAGE>
SSgA ACTIVE INTERNATIONAL FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
of 1996 and into the first quarter of 1997. The Fund was additionally hurt by
our lagging security selection within Japan. The Managers favor securities which
are trading at attractive price multiples (price-to-book, price-to-earnings,
etc.) with strong forecasted earnings growth rates. In Japan, these companies
tend to be the smaller sized companies that are more domestically focused.
Historically, these companies have fared much better than their larger
counterparts. The recent economic turmoil in Japan has hurt the performance of
the smaller sized companies as domestic demand fell off. As the Japanese economy
continues to improve, these companies, and their shareholders, should be well
rewarded.
Within Europe, the Fund favored investments in France and Germany, which were up
over 17% and 22%, respectively. The Fund's weightings in France and Germany
outperformed the respective local indexes in France and Germany through its
stock selections. More recently, the Fund has been reducing its position in
France as the Managers believe that the market is fairly priced given its price
multiples and growth prospects. The Fund continues to favor investments in
Germany, however profits have been taken and deployed elsewhere.
Throughout the fiscal year the Fund was well rewarded by its holdings in the
emerging markets. During the period, the Fund maintained about a 5%
overweighting to emerging markets versus the Index. Unfortunately, August was a
very difficult month as currency devaluations in Southeast Asia sent tremors
throughout all of the emerging markets. While the Fund's emerging markets
holdings did add to its overall return, in general, the emerging markets fared
worse than the developed markets.
The past twelve months have been very difficult for value investing which is the
core principle on which the Fund's strategy is based. Value investing has
significantly outperformed in the international markets over time and it will
return to its winning ways.
TOP TEN EQUITY HOLDINGS
(AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31, 1997
Telecom Italia SPA 1.8%
Ente Nazionale Idrocarburi SPA (Regd) 1.8
Norsk Hydro AS 1.5
Nippon Telegraph & Telephone Corp. 1.5
Novartis AG (Regd) 1.3
Toyota Motor Corp. 1.2
Elf Aquitaine SA 1.0
Deutsche Telekom AG 1.0
RWE AG 0.8
Singapore Telecommunications, Ltd. 0.7
--------------------
NOTES: THE FOLLOWING NOTES RELATE TO THE GROWTH OF $10,000 GRAPH AND TABLE ON
THE PRECEDING PAGE.
* The Fund commenced operations on March 7, 1994. Index comparison began
March 1, 1994.
** Morgan Stanley Capital International Europe, Australia Far East Index
is an index composed of an arithmetic, market value-weighted average
of the performance of over 1,100 securities listed on the stock
exchanges of the countries of Europe, Australia, and the Far East. The
Index is calculated on a total-return basis, which includes
reinvestment of net dividends after deduction of withholding taxes.
+ Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Investments in securities of non-US issuers and foreign currencies involve
investment risks different from those of US issuers. The Prospectus contains
further information and details regarding these risks.
Annual Report 7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of the SSgA Funds:
We have audited the accompanying statement of assets and liabilities and
statement of net assets of SSgA Funds Active International Fund (formerly The
Seven Seas Series Active International Fund)(the "Fund"), as of August 31, 1997,
and the related statement of operations for the fiscal year then ended, the
statements of changes in net assets for each of the two fiscal years in the
period then ended, and the financial highlights for each of the two fiscal years
in the period then ended, and for the period March 7, 1995 (commencement of
operations) to August 31, 1995. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
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 free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management as well as evaluating the overall financial statement
presentation. We 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 of the
Fund as of August 31, 1997, the results of its operations for the fiscal year
then ended, the changes in its net assets for each of the two fiscal years in
the period then ended, and the financial highlights for each of the two fiscal
years in the period then ended and for the period March 7, 1995 (commencement of
operations) to August 31, 1995 in conformity with generally accepted accounting
principles.
Boston, Massachusetts /s/ COOPERS & LYBRAND L.L.P
October 7, 1997
8 Annual Report
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
STATEMENT OF NET ASSETS
August 31, 1997
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
COMMON STOCKS - 92.2%
AUSTRALIA - 0.8%
AAPC, Ltd. 39,400 $ 23
Aberfoyle, Ltd. 10,100 25
Acacia Resources, Ltd. (a) 14,400 16
Australia & New Zealand Bank Group, Ltd. 2,800 20
Boral, Ltd. 13,300 39
Broken Hill Proprietary Co. 6,400 80
Burswood Property Trust (Units) 19,600 22
Caltex Australia 7,400 22
Coca-Cola Amatil, Ltd. 1,600 16
Foster's Brewing Group, Ltd. 14,200 27
M.I.M. Holdings, Ltd. 31,200 37
National Australia Bank, Ltd. 4,100 57
National Foods, Ltd. 17,900 25
National Mutual Holdings, Ltd. 16,200 24
Normandy Poseidon 29,700 36
North Broken Hill Peko 2,400 8
Qantas Airways, Ltd. 11,000 24
Santos, Ltd. 6,800 32
Schroders Property Fund 16,100 26
Village Roadshow, Ltd. 7,000 19
Westfield Trust 17,900 33
Westpac Banking Corp. 10,700 62
----------
673
----------
AUSTRIA - 3.1%
Austrian Airlines AG (a) 13,200 311
Bau Holding AG 1,300 80
Brau-Union Goess AG 3,100 174
BWT AG 1,400 237
Creditanstalt-Bankverein 1,360 83
EA-Generali AG 800 188
Oester Elektrizita Class A 4,300 292
OMV AG 3,860 509
Perlmooser Zementwerke AG 970 57
Steyr-Daimler-Puch 7,800 231
Strabag Oesterreich AG 2,900 169
VA Technologie AG (BR) 400 73
Wienerberger Baustoff 1,000 194
----------
2,598
----------
BELGIUM - 1.1%
Arbed S.A. NPV 400 53
CMB NPV 800 52
Cobepa (Cie Belge) 1,200 50
Cofinimmo 505 51
Credit Communal Holding Dexia NPV 505 48
Electrabel NPV 500 98
Electrafina NPV 575 53
Fortis AG 900 176
Generale de Banque NPV 300 112
PetroFina SA NPV 200 71
Societe Generale de Belgique NPV 600 53
Sofina NPV 20 12
Tractebel Investments International NPV 325 130
----------
959
----------
CANADA - 1.6%
Air Canada, Inc. (a) 9,800 77
Bank of Montreal 600 23
Bank of Nova Scotia Halifax 2,700 117
Cameco Corp. 800 28
Edperbrascan Corp. Class A (a) 3,700 63
George Weston, Ltd. 1,200 81
Inmet Mining Corp. (a) 11,600 65
IPL Energy, Inc. 2,200 79
IPSCO, Inc. 1,500 63
Mitel Corp. NPV (a) 12,100 84
National Bank of Canada 5,700 73
Annual Report 9
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Northern Telecom, Ltd. 600 $ 60
PanCanadian Petroleum, Ltd. 1,300 24
Placer Dome, Inc. 3,300 55
Power Corporation of Canada 600 16
Rio Algom, Ltd. 500 12
Shell Canada, Ltd. Class A 4,100 66
Slocan Forest Products, Ltd. 3,100 26
Southam, Inc. 3,900 72
Stelco, Inc. Series A 8,800 75
TELUS Corp. 4,400 87
The Seagram Co., Ltd. 1,500 52
Transalta Corp. 900 11
TransCanada Pipelines, Ltd. 2,200 42
----------
1,351
----------
COLOMBIA - 0.8%
Banco Ganadero SA Class B - ADR 10,900 395
Banco Industrial Colombiano SA - ADR 5,600 98
Cementos Diamante SA - GDR 14,300 178
----------
671
----------
CZECH REPUBLIC - 0.8%
CEZ (a) 6,600 205
Cokoladovny AS 300 44
Inzenyrske a Prumyslove Stavby AS 1,100 8
SPT Telecom AS (a) 2,800 351
Unipetrol AS (a) 16,500 70
----------
678
----------
FRANCE - 8.4%
Assurances Generales de France 5,900 211
Banque Nationale Paris 8,348 356
Casino Guich-Perr 7,900 393
CGIP 1,369 383
Chargeurs International SA 4,050 240
Compagnie Bancaire SA 2,273 250
Credit Lyonnais Cert d'Invest. (a) 3,700 200
Elf Aquitaine SA 7,669 852
Eurafrance 581 220
Eurotunnel/Euro SA Units (a) 182,400 212
Finextel (Soc. Fin.) 2,142 37
Galeries Lafayette 450 164
Gascogne 1,141 100
Groupe Andre SA (a) 1,634 150
GTM - Entrepose 6,413 356
L'Oreal (Societe) 1,200 428
Labinal 800 191
Lyonnais Eaux Dumez 4,175 420
Peugeot SA 4,625 519
Renault (a) 4,100 104
S.A.T. Telecommunications 450 115
Sanofi SA 3,982 382
Schneider SA 4,450 237
Scor SA 1,450 60
Sommer Allibert 4,850 172
Usinor Sacilor 15,812 273
----------
7,025
----------
GERMANY - 8.7%
AGIV AG fuer Industrie und Verkehrswesen (a) 9,200 214
Allianz AG (Regd) 2,700 597
AMB - Aachener & Muenchener Beteiligung (Regd) 350 285
Bankgesellschaft Berlin AG 12,200 299
BASF AG 15,350 526
Bayer AG 400 15
Bayer Motoren Werk 450 319
Bayerische Vereinsbank AG 9,750 506
Continental AG 10,300 250
Daimler-Benz AG 2,350 176
10 Annual Report
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
DBV Holding AG (Regd) 750 $ 274
Deutsche Lufthansa AG 15,750 316
Deutsche Telekom AG 39,850 795
Dyckerhoff AG 500 175
Hamburgische Electricitaets Werke AG 900 219
Holsten Brauere AG 1,000 222
IKB Deutsche Industriebank AG (a) 15,600 321
Kolbenschmidt AG (a) 13,150 200
Papierwerke Waldore 1,150 212
Rheinmetall Berlin 1,150 204
SAP AG 650 143
Schmalbach Lubeca AG 850 176
Siemens AG 5,000 307
Suddeutsche Zucker AG 350 160
Victoria Holding AG (Regd) 150 128
Volkswagen International AG 1998 Warrants (a) 650 257
----------
7,296
----------
HONG KONG - 5.6%
Asia Satellite Telecommunications Holdings, Ltd. 77,000 215
Cathay Pacific Airways 149,000 243
Cheung Kong Holdings, Ltd. 56,000 593
China Light & Power 22,500 104
Dickson Concepts International, Ltd. 69,000 262
Great Eagle Holdings 70,751 208
Guoco Group, Ltd. 44,000 171
Hang Lung Development Co. 168,000 304
Hang Seng Bank 12,700 153
Hong Kong Electric Holding, Ltd. 64,000 224
Hong Kong Land Holdings, Ltd. (a) 14,173 41
Hong Kong Telecommunications, Ltd. 119,287 251
Hutchison Whampoa, Ltd. 38,000 316
Jardine International Motor 44,000 50
Kumagai Gumi Hong Kong 269,000 505
Lai Sun Garment International 114,000 138
Sun Hung Kai Properties, Ltd. 17,000 193
Tai Cheung Holdings 301,000 223
Wing Lung Bank 37,640 231
Yue Yuen Industrial Holdings 110,200 247
----------
4,672
----------
INDIA - 0.5%
Arvind Mills, Ltd. 14,700 45
Ashok Leyland, Ltd. 19,800 40
Bharat Heavy Electricals, Ltd. (a) 3,900 41
Bharat Petroleum Corp., Ltd. 1,800 21
Colgate-Palmolive Co. 4,800 41
Finolex Cables, Ltd. 10,500 37
Industrial Development Bank 17,700 48
ITC, Ltd. 2,100 28
Madras Refineries, Ltd. 16,100 22
Mahanagar Telephone Nigam, Ltd. 4,300 28
Reliance Industries, Ltd. 5,100 46
Tata Engineering & Locomotive Co., Ltd. 1,100 10
Tata SSL, Ltd. 7,800 39
Videsh Sanchar Nigam, Ltd. 1,000 26
----------
472
----------
ITALY - 7.8%
Assicurazioni Generali SPA 8,800 185
Banca Commerciale Italiana 77,000 192
Banca Pop di Bergamo CV 4,000 54
Banca Pop di Milano 31,000 165
Banco Ambrosiano Veneto di Risp 108,300 237
Burgo (Cartiere) SPA 32,000 182
Comau Finanziaria SPA 62,000 193
Compagnia Assicuratrice Unipol 1999 Warrants (a) 15,200 5
Annual Report 11
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Danieli & Co. di Risp 14,000 $ 50
Ente Nazionale Idrocarburi SPA (Regd) 263,400 1,469
Fiat SPA di Risp 309,980 517
I.F.I.L. Risp NC 131,000 221
Istituto Mobiliane Italiano SPA 34,000 316
Istituto Nazionale Delle Assicurazioni 62,000 90
Pirelli & Co. 78,000 114
R.A.S. di Risp 58,500 290
Recordati di Risp 36,000 139
Sirti SPA 44,000 235
SNIA BPD di Risp NC 109,000 75
Telecom Italia Mobile SPA - di Risp 92,000 154
Telecom Italia SPA (a) 419,825 1,481
Toro Assicurazioni 16,000 198
----------
6,562
----------
JAPAN - 27.1%
Acom Co., Ltd. 6,700 316
Aichi Machine Industries 23,000 122
Alinco, Inc. 25,000 215
Amada Co., Ltd. 36,000 243
Amada Metrecs Co. 29,000 238
Amada Sonoike Co. 37,000 125
Aoyama Trading Co. 12,900 346
Asahi Bank, Ltd. 39,000 282
Asahi Denka Kogyo 31,000 167
Atsugi Nylon Industry 76,000 179
Bank Of Tokyo - Mitsubishi, Ltd. 27,000 490
Brother Industries 51,000 177
Bunka Shutter Co. 54,000 270
Canon, Inc. 2,000 55
Chubu Electric Power Co., Inc. 4,000 67
Chugoku Electric Power 5,700 92
Chuo Trust & Banking 11,000 50
Citizen Watch Co., Ltd. 30,000 231
Dai Ichi Katei Denki (a) 35,000 53
Daishinku Corp. 17,000 125
Daiwa Bank 70,000 368
Eiden Sakakiya Co., Ltd. 16,000 111
Fuji Bank, Ltd. 14,000 170
Fujisawa Pharmaceutical 25,000 242
Fujita Corp. 168,000 143
Glory, Ltd. 11,000 207
Gun-Ei Chemical Industry Co. 83,000 169
Gunze, Ltd. 29,000 111
Hisamitsu Pharmaceutical Co. 20,000 141
Hitachi Transportation Systems 19,000 167
Hitachi, Ltd. 19,000 175
Hokkai Can Co. 29,000 115
Hokkaido Takushoku Bank, Ltd. 130,000 131
Hokuriku Bank 97,000 299
Hokuriku Electric Power 8,600 140
Honda Motor Co., Ltd. 15,000 462
Inabata & Co. 30,000 188
Intec, Inc. 14,000 159
Itochu Fuel Corp. 52,000 211
Japan Energy Corp. 139,000 245
Joshin Denki Co. 12,000 85
Kawasho Corp. 48,000 116
Kayaba Industry Co., Ltd. 68,000 242
Keiyo Bank, Ltd. 6,000 21
Kinseki 14,000 144
Kiyo Bank 87,000 216
Kurabo Industries 107,000 226
Life Co., Ltd. 53,000 104
Makita Corp. 21,000 287
Matsushita Electric Industrial Co., Ltd. 21,000 386
Minolta Camera Co. 41,000 234
Mitsubishi Gas & Chemical 50,000 189
Mitsuboshi Belting 56,000 179
Mitsui Petrochemical Industry 65,000 223
12 Annual Report
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Miyuki Keori Co., Ltd. 21,000 $ 115
Mizuno Corp. 28,000 140
Morita Corp. 25,000 82
New Japan Securities Co. (a) 58,000 110
Nichia Steel Works 30,800 135
Nichicon Corp. 27,000 333
Nichiei Construction 19,000 76
Nichimo Co. 12,000 31
Nippon Carbon Co. (a) 96,000 219
Nippon Chemi-Con Co., Ltd. 45,000 209
Nippon Conlux Co. 49,000 252
Nippon Credit Bank 100,000 171
Nippon Hume Pipe 33,000 111
Nippon Oil Co. 74,000 330
Nippon Shinpan Co. 46,000 111
Nippon Suisan (a) 114,000 255
Nippon Telegraph & Telephone Corp. 128 1,198
Nippon Valqua Industries 34,000 94
Nissan Motor Co., Ltd. 68,000 438
Nisshinbo Industries, Inc. 39,000 252
Nissho Corp. 15,000 139
Nittoc Construction Co. 19,000 61
Noritz Corp. 3,000 29
Okabe Co. 21,000 116
Ono Pharmaceutical 1,000 31
Optec Dai-Ichi Denko 45,000 108
Orient Corp. 45,000 143
Ryoden Trading Co. 23,000 133
Ryosan Co. 11,000 221
Sakura Bank, Ltd. 29,000 170
Sanshin Electronics 13,000 213
Sanwa Bank 12,000 149
Sanyo Shinpan Finance Co. 4,000 222
Sanyo Special Steel Co. 78,000 149
Seino Transportation 24,000 238
Sekisui House, Ltd. 33,000 311
Senshukai Co. 32,000 252
Settsu Corp. (a) 109,000 92
Shin Meiwa Industries 12,000 64
Shinko Shoji Co. 10,000 96
Showa Denko (a) 128,000 248
Sintokogio 22,000 126
Sony Corp. 1,600 139
Sumisho Computer Systems Corp. 15,000 265
Sumitomo Bank 13,000 192
Suntelephone Co. 2,000 11
Takiron Co., Ltd. 32,000 103
Tanabe Seiyaku Co. 34,000 255
Tenma Corp. 13,000 186
Toda Kogyo Corp. 28,000 151
Toenec Corp. 46,000 194
Tokyo Electric Power 4,000 76
Tokyo Style Co. 21,000 247
Tokyo Tatemono Co., Ltd. 67,000 294
Toyo Information Systems 11,000 148
Toyo Trust & Banking 6,000 49
Toyota Motor Corp. 37,000 965
Uchida Yoko Co. 34,000 113
Uniden Corp. 28,000 392
Victor Co. of Japan 27,000 326
Yamaha Motor Co. 23,000 207
----------
22,735
----------
NETHERLANDS - 0.3%
ABN Amro Holdings NV 4,564 90
Stad Rotterdam CVA 1,550 74
Van Ommeren (Kon) CVA 1,412 58
----------
222
----------
NORWAY - 4.2%
Aker AS Series B 11,280 174
Bergesen DY AS Series B 11,000 291
Annual Report 13
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Christiania Bank OG Kreditkasse 119,700 $ 409
Den Norske Creditbank AS 67,700 277
Det Norske Luftfartselskap AS Series B 11,956 171
Helikopter Services Group ASA 8,100 101
Kvaerner Industries AS Series A 1,600 85
Kvaerner Industries AS Series B 3,300 161
Norsk Hydro AS 22,400 1,215
Norske Skogindustrier AS Class A 9,100 338
Nycomed ASA Series B 11,089 202
Saga Petroleum AS Series A 5,000 105
----------
3,529
----------
PAKISTAN - 0.9%
Cherat Cement Co., Ltd. 21,500 10
Dewan Salmon Fibre 80,500 59
Engro Chemical 12,500 48
Fauji Fertilizer 39,500 88
Hub Power Co., Ltd. - GDR (a) 143,000 170
Ici Pakistan 117,500 67
Karachi Electric (a) 75,500 41
Muslim Commercial (a) 22,500 21
Pakistan State Oil 13,000 114
Pakistan Telecom Corp. Series A 93,000 84
Sui Northern Gas Pipelines (a) 29,900 25
Sui Southern Gas Co., Ltd. (a) 57,500 39
----------
766
----------
PHILIPPINES - 1.4%
Ayala Corp. Class B 141,500 66
EEI Corp. (a) 210,000 16
Empire East Land Holdings, Inc. (a) 704,000 54
First Philippine Holdings Class B 72,100 73
Guoco Holdings 322,000 21
JG Summit Holdings, Inc. Series B 608,000 76
Manila Electric Co. Class B 29,400 99
Megaworld Properties & Holdings, Inc. (a) 972,000 63
Metropolitan Bank & Trust Co. 3,500 38
Petron Corp. 368,000 52
Philex Mining Corp. Class B (a) 388,000 26
Philippine Long Distance Telephone Co. 9,400 237
Philippine National Bank (a) 15,200 66
Pilipino Telephone Corp. (a) 82,800 26
Robinson's Land Corp. Class B (a) 274,600 22
San Miguel Corp. Class B 43,800 72
Security Bank Corp. (a) 54,400 46
SM Prime Holdings 158,000 32
Universal Robina 171,000 50
----------
1,135
----------
POLAND - 1.1%
Agros Holdings Series C (a) 1,660 47
Bank Gdanski (a) 2,835 31
Bank Handlowy W. Warszawie (a) 13,495 170
Bank Inicjatyw Gospodarczych 38,335 45
Bank Rozwoju Eksportu SA 1,650 33
Bank Slaski SA 860 64
Banka Przemyslowo 1,125 62
Debica S.A. 3,015 84
Elektrim 5,870 54
Exbud SA (a) 3,120 37
Fabryka Kotlow Rafako SA (a) 8,005 25
Gorazdze SA 610 25
Huta Szkla Gospodarczego Irena 4,935 26
Mostostal Export SA 11,290 37
Okocimskie Zaklady Piwowarskie SA (a) 10,605 52
Polifarb (a) 6,220 35
ROLIMPEX SA Series A (a) 6,911 27
STALEXPORT SA Series A 5,720 52
----------
906
----------
14 Annual Report
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
PORTUGAL - 0.0%
Electricidade de Portugal SA 2,200 $ 34
----------
34
----------
SINGAPORE - 5.2%
Development Bank of Singapore, Ltd. (Alien Market) 32,000 338
Far East Levingston 16,000 41
Fraser & Neave 59,000 312
Hai Sun Hup Group 153,000 98
Haw Par Brothers International, Ltd. 24,000 46
Jardine Strategic Holdings, Ltd. (a) 69,000 255
Keppel Bank 102,000 213
Keppel Bank 2000 Warrants (a) 7,250 5
Mandarin Oriental International, Ltd. (a) 267,464 300
Metro Holdings, Ltd. 56,400 160
Neptune Orient Lines, Ltd. 199,000 150
Overseas Chinese Banking (Alien Market) 53,672 418
Overseas Union Bank (Alien Market) 31,000 140
Singapore Airlines, Ltd. (Alien Market) 60,000 436
Singapore Land 57,000 252
Singapore Telecommunications, Ltd. 411,000 600
United Engineers 35,000 40
United Industrial Corp., Ltd. 452,000 309
United Overseas Land 229,000 266
----------
4,379
----------
SOUTH KOREA - 1.5%
Cheil Industrial, Inc. 4,150 46
Daelim Industrial Co. 5,418 47
Daewoo Corp. 7,950 63
Haitai Confectionery Co., Ltd. 5,670 41
Haitai Electronics Co. 4,041 23
Korea Electric Power Corp. 4,030 105
Korea First Bank 9,640 38
Korea International Trust - IDR (a) 18* 558
Korean Air (a) 2,690 41
Kwang Ju Bank 8,010 36
LG Information &
Communication, Ltd. 810 85
LG Information & Communication, Ltd. Rights (a) 810 2
Orion Electric Co. 4,069 45
Tongyang Investment & Finance Corp. 4,430 38
Tongyang Nylon Co. 2,356 66
----------
1,234
----------
SWITZERLAND - 4.1%
Baloise Holdings (Regd)(a) 30 78
Boe Cart Vaudoise (BR) 220 55
Bobst AG (BR) 50 77
CS Holdings (Regd) 470 56
Fischer (Georg) AG (Regd) 180 48
Forbo Holding AG (Regd) 425 176
Gotthard Bank Class B (BR) 325 166
Helvetia Patria Holding Co. (Regd.) 285 172
Hero (BR) 395 204
Jelmoli Holding AG (Regd) 710 110
Nestle SA (Regd) 146 170
Novartis AG (Regd.) 745 1,055
Pargesa Holdings SA (BR) 135 159
Roche Holdings Genusscheine AG NPV 60 506
Schweiz Bankgesellsch (BR) 305 302
Winterthur (Regd) 80 70
----------
3,404
----------
Annual Report 15
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
THAILAND - 1.2%
Advanced Information Services (Alien Market) 13,000 $ 61
Asia Credit Public Co., Ltd. PLC (Alien Market) 8,000 20
Bangchak Petroleum 52,200 15
Bangkok Bank (Alien Market) 6,500 32
Bangkok Expressway PLC (Alien Market)(a) 95,500 81
Bank of Ayudhya (Alien Market) 17,200 27
Electricity Generating PLC (Alien Market) 43,100 76
Finance One Public Co., Ltd. (Alien Market)(a) 31,600 3
First Bangkok City Bank PLC (Alien Market) 27,800 20
Industrial Finance Corp. of Thailand (Alien Market) 10,700 8
MDX PLC (Alien Market)(a) 25,000 3
National Finance & Securities (Alien Market) 54,200 31
PTT Exploration & Production PLC (Alien Market) 9,600 102
Shinawatra Satellite PLC (Alien Market) 20,200 14
Siam Cement Co. (Alien Market) 2,100 32
Siam City Bank PLC (Alien Market) 95,200 23
Siam Commercial Bank PLC (Alien Market) 7,800 20
Tanayong (Alien Market)(a) 24,100 13
TelecomAsia (Alien Market)(a) 190,500 167
Thai Farmers Bank (Alien Market) 34,100 98
Thai Petrochemical Industry PLC (Alien Market) 171,800 54
Thai Telephone & Communication Co. (Alien Market)(a) 49,000 15
Thai-German Ceramic Industry PLC (Alien Market)(a) 17,200 7
TPI Polene PLC (Alien Market) 25,800 5
United Communications Industries (Alien Market) 21,000 66
----------
993
----------
UNITED KINGDOM - 6.0%
Abbey National PLC 13,200 177
Amec PLC 61,500 142
Amersham International PLC 1,400 44
ASDA-MFI Group PLC 30,800 72
Associated British Foods PLC 7,600 64
Bank of Scotland Governor & Co. PLC 27,400 184
Barclays Bank PLC 13,622 309
British Airways PLC 17,000 177
British Land Co. PLC 10,800 100
British Petroleum Co. PLC 3,953 55
British Telecom PLC 35,800 231
Burton Group PLC 76,400 150
Commercial Union Assurance Co. PLC 16,500 198
Courtaulds Textile Co. PLC 29,800 159
General Accident PLC 10,000 147
Glaxo Wellcome PLC 2,600 51
Greenalls Group PLC 5,400 41
Guardian Royal Exchange PLC 27,800 122
Hambros PLC 39,100 146
Hammerson Property PLC 12,200 92
Hanson PLC (a) 13,587 65
HSBC Holdings PLC 3,400 105
Kwik Save Group PLC 29,200 151
Land Securities PLC 7,500 109
Lloyds TSB Group PLC 2,800 32
Marley, Ltd. PLC 81,000 146
MEPC PLC 11,100 84
Mirror Group News PLC 13,000 43
Royal & Sun Alliance Insurance Group PLC 20,167 165
16 Annual Report
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Royal Bank of Scotland Group PLC 145 $ 1
Schroders, Ltd. PLC 6,000 182
Severn Trent PLC (a) 11,314 160
Simon Engineering PLC (a) 253,000 156
Slough Estates PLC 30,900 159
Smith & Nephew PLC 27,876 79
SmithKline Beecham PLC (a) 22,600 196
South West Water PLC 4,900 64
T & N PLC 62,700 164
Yorkshire Water PLC 16,169 116
Zeneca Group PLC 6,800 217
----------
5,055
----------
TOTAL COMMON STOCKS
(cost $82,255) 77,349
----------
PREFERRED STOCKS - 3.7%
Australia - 0.1%
News Corp., Ltd. 19,700 75
Sydney Harbour Casino Holdings, Ltd. (a) 18,700 25
----------
100
----------
AUSTRIA - 1.4%
Allgemeine Baugesellschaft 2,400 75
Bank Austria AG (a) 945 36
Bau Holdings AG 1,800 87
Creditanstalt-Bankverein 8,120 397
EA Generali AG 500 52
Z Landerbank Bank Austria AG 14,100 539
----------
1,186
----------
BELGIUM - 0.1%
Cockerill Sambre (a) 12,000 50
----------
50
----------
BRAZIL - 0.0%
Banco Nacional SA MPV (a)(d) 871,000 0
----------
0
----------
GERMANY - 1.8%
Axa Colonia Konzern AG NV 2,600 216
Draegerwerk AG 9,100 192
Dyckerhoff AG 233 80
ProSieben Media AG NV (a) 1,950 88
RWE AG 16,300 628
Volkswagen AG 650 349
----------
1,553
----------
ITALY - 0.0%
Fiat SPA 11,880 18
----------
18
----------
JAPAN - 0.3%
Sakura Bank 16,000 256
----------
256
----------
TOTAL PREFERRED STOCKS
(cost $2,828) 3,163
----------
PRINCIPAL
AMOUNT
(000)
----------
LONG-TERM INVESTMENTS - 0.2%
ITALY - 0.2%
Italy, Republic of (conv.)(a)
5.000% due 06/28/01 $ 150 151
----------
TOTAL LONG-TERM INVESTMENTS
(cost $150) 151
----------
Annual Report 17
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
SHORT-TERM INVESTMENTS - 2.1%
GERMANY - 0.1%
German Time Deposit DEM 175 $ 97
----------
97
----------
UNITED STATES - 2.0%
Dreyfus Cash Management Plus, Inc.
Money Market Fund (b) $ 69 69
Valiant Money Market Fund
Class A (b) 1,625 1,625
----------
1,694
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $1,795) 1,791
----------
TOTAL INVESTMENTS
(identified cost $87,028)(c) - 98.2% $ 82,454
OTHER ASSETS AND LIABILITIES, NET - 1.8% 1,476
----------
NET ASSETS - 100.0% $ 83,930
----------
----------
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) See Note 2 for federal income tax information.
(d) The Board of Trustees has estimated the value of the
Fund's holdings at zero. It is possible that the estimated
value may differ significantly from the amount that
might ultimately be realized.
ABBREVIATIONS:
ADR - American Depositary Receipt
BR - Bearer
GDR - Global Depositary Receipt
IDR - International Depositary Receipt
NPV - No Par Value
PLC - Public Limited Company
* Reflected in units. 1 IDR unit = 1,000 shares
FOREIGN CURRENCY ABBREVIATIONS:
DEM - German mark
The accompanying notes are an integral part of the financial statements.
18 Annual Report
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
% OF MARKET
NET VALUE
INDUSTRY DIVERSIFICATION ASSETS (000)
- -------------------------------------- ---------- ----------
Basic Industries 5.9% $ 4,953
Capital Goods 8.1 6,767
Consumer Basics 8.0 6,764
Consumer Durable Goods 8.4 7,026
Consumer Non-Durables 6.2 5,214
Consumer Services 2.4 2,021
Energy 7.7 6,483
Finance 22.9 19,231
General Business 2.2 1,865
Miscellaneous 6.3 5,258
Shelter 3.8 3,155
Technology 2.5 2,086
Transportation 1.7 1,466
Utilities 9.8 8,223
Long-Term Investments 0.2 151
Short-Term Investments 2.1 1,791
---------- ----------
Total Investments 98.2 82,454
Other Assets and Liabilities, Net 1.8 1,476
---------- ----------
NET ASSETS 100.0% $ 83,930
---------- ----------
---------- ----------
% OF MARKET
NET VALUE
GEOGRAPHIC DIVERSIFICATION ASSETS (000)
- -------------------------------------- ---------- ----------
Europe 52.2% $ 43,814
Japan 27.4 22,991
Pacific Basin 15.7 13,187
Short-Term Investments 2.1 1,791
Latin America 0.8 671
---------- ----------
Total Investments 98.2 82,454
Other Assets and Liabilities, Net 1.8 1,476
---------- ----------
NET ASSETS 100.0% $ 83,930
---------- ----------
---------- ----------
The accompanying notes are an integral part of the financial statements.
Annual Report 19
<PAGE>
SsgA
ACTIVE INTERNATIONAL FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1997
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $87,028)(Note 2). . . . . . . . . . . . . . . . . . . . . . . . . $ 82,454
Foreign currency holdings (identified cost $8,556) . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,553
Receivables:
Dividends and interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,631
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234
Foreign taxes recoverable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
--------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,114
LIABILITIES
Payables:
Investments purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,646
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 392
Accrued fees to affiliates (Note 4). . . . . . . . . . . . . . . . . . . . . . . . 115
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
--------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,184
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 83,930
--------------
--------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 382
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,630
Unrealized appreciation (depreciation) on:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,574)
Foreign currency-related transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84,411
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 83,930
--------------
--------------
NET ASSET VALUE, offering and redemption price per share:
($83,929,646 divided by 7,733,663 shares of $.001 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10.85
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20 Annual Report
<PAGE>
SsgA
ACTIVE INTERNATIONAL FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Fiscal Year Ended August 31, 1997
Amounts in
thousands
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $167). . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,359
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
--------------
Total Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,459
EXPENSES (Notes 2 and 4):
Advisory fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 517
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Amortization of deferred organization expenses . . . . . . . . . . . . . . . . . . 9
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
--------------
Expenses before reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 964
Expense reductions (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . (275)
--------------
Total Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 689
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 770
--------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,975
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10)
Foreign currency-related transactions. . . . . . . . . . . . . . . . . . . . . . . (171) 3,794
--------------
Net change in unrealized appreciation or depreciation of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,996)
Foreign currency-related transactions. . . . . . . . . . . . . . . . . . . . . . . 66 (4,930)
-------------- --------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,136)
--------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . . . $ (366)
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 21
<PAGE>
SsgA
ACTIVE INTERNATIONAL FUND
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Fiscal Years Ended August 31,
Amounts in thousands
1997 1996
----------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 770 $ 455
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,794 1,802
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . . . . (4,930) (651)
----------------- -----------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . (366) 1,606
----------------- -----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,078) (1,442)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . (342) --
----------------- -----------------
Total Distributions to Shareholders . . . . . . . . . . . . . . . . . . . . . . (1,420) (1,442)
----------------- -----------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions . . . . . . . . 31,121 29,245
----------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . 29,335 29,409
NET ASSETS
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,595 25,186
----------------- -----------------
End of year (including undistributed net investment income of
$382 and $524, respectively). . . . . . . . . . . . . . . . . . . . . . . . . . $ 83,930 $ 54,595
----------------- -----------------
----------------- -----------------
<CAPTION>
FUND SHARE TRANSACTIONS 1997 1996
------------------------------------- -------------------------------------
SHARES DOLLARS SHARES DOLLARS
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Proceeds from shares sold. . . . . . . . 7,392 $ 81,716 3,713 $ 40,966
Proceeds from reinvestment
of distributions . . . . . . . . . . . 95 1,032 129 1,337
Payments for shares redeemed . . . . . . (4,736) (51,627) (1,173) (13,058)
----------------- ----------------- ----------------- -----------------
Total net increase (decrease). . . . . . 2,751 $ 31,121 2,669 $ 29,245
----------------- ----------------- ----------------- -----------------
----------------- ----------------- ----------------- -----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
22 Annual Report
<PAGE>
SsgA
ACTIVE INTERNATIONAL FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each fiscal
year or period and other performance information derived from the financial statements.
1997 1996 1995*
---------- ---------- ----------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . . . . . . . . . . . . . . $ 10.96 $ 10.89 $ 10.00
---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 .36 .03
Net realized and unrealized gain (loss) on investments . . . . . . . . . . . .03 .28 .86
. ---------- ---------- ----------
Total Income From Investment Operations. . . . . . . . . . . . . . . . . . .13 .64 .89
---------- ---------- ----------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . (.18) (.57) --
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . (.06) -- --
---------- ---------- ----------
Total Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . (.24) (.57) --
---------- ---------- ----------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . . . . . . . . . . . . . . $ 10.85 $ 10.96 $ 10.89
---------- ---------- ----------
---------- ---------- ----------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.17 6.22 8.90
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of year ($000 omitted) . . . . . . . . . . . . . . . . . . . 83,930 54,595 25,186
Ratios to average net assets (%)(b):
Operating expenses, net (c). . . . . . . . . . . . . . . . . . . . . . . . 1.00 1.00 1.79
Operating expenses, gross (c). . . . . . . . . . . . . . . . . . . . . . . 1.40 1.47 2.56
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . 1.12 1.16 1.11
Portfolio turnover (%)(b). . . . . . . . . . . . . . . . . . . . . . . . . . 48.29 22.02 7.17
Per share amount of expense reductions ($ omitted)(c). . . . . . . . . . . . .0366 .1459 .0207
Average commission rate paid per share of
security ($ omitted)(d). . . . . . . . . . . . . . . . . . . . . . . . . . .0030 .0021 N/A
</TABLE>
* For the period March 7, 1995 (commencement of operations) to
August 31, 1995.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended August 31, 1995 are annualized.
(c) See Note 4 for current period amounts.
(d) In certain foreign markets the relationship between the translated U.S.
dollar price per share of security and commission paid per share of
security may vary from that of domestic markets.
Annual Report 23
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1997
1. ORGANIZATION
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 17 investment portfolios which are in operation as
of August 31, 1997. In December 1996, the Investment Company changed its
name from "The Seven Seas Series Fund" to the "SSgA Funds." These financial
statements report on one portfolio, the SSgA Active International Fund (the
"Fund"). The Investment Company is a registered and diversified open-end
investment company, as defined in the Investment Company Act of 1940, as
amended (the "1940 Act"), that was organized as a Massachusetts business
trust on October 3, 1987 and operates under a First Amended and Restated
Master Trust Agreement, dated October 13, 1993, as amended (the
"Agreement"). The Investment Company's Agreement permits the Board of
Trustees to issue an unlimited number of full and fractional shares of
beneficial interest at a $.001 par value.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
SECURITY VALUATION: International equity and fixed-income securities traded
on a national securities exchange are valued on the basis of the last sale
price. International securities traded over the counter are valued on the
basis of the mean of bid prices. In the absence of a last sale or mean bid
price, respectively, such securities may be valued on the basis of prices
provided by a pricing service if those prices are believed to reflect the
market value of such securities.
The Fund may value certain securities for which market quotations are not
readily available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
SECURITIES TRANSACTIONS: Securities transactions are recorded on the trade
date basis. Realized gains and losses from the securities transactions are
recorded on the basis of identified cost.
INVESTMENT INCOME: Dividend income is recorded on the ex-dividend date and
interest income is recorded daily on the accrual basis.
Amortization and accretion: All zero-coupon bond discounts and original
issue discounts are accreted for both tax and financial reporting purposes.
All short- and long-term market premiums/discounts are amortized/accreted
for both tax and financial reporting purposes.
FEDERAL INCOME TAXES: Since the Investment Company is a Massachusetts
business trust, each sub-trust is a separate corporate taxpayer and
determines its net investment income and capital gains (or losses) and the
amounts to be distributed to each fund's shareholders without regard to the
income and capital gains (or losses) of the other funds.
24 Annual Report
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
It is the Fund's intention to qualify as a regulated investment company as
defined by the Internal Revenue Code of 1986, as amended. This requires the
Fund to distribute all of its taxable income. Therefore the Fund paid no
federal income taxes and no federal income tax provision was required. As
permitted by tax regulations, the Fund intends to defer a net realized
capital loss of $100,182 incurred from November 1, 1996 to August 31, 1997,
and treat it as arising in fiscal year 1998.
The Fund's aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of August 31, 1997 are as follows:
NET
UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
------------- -------------- --------------- --------------
$ 87,388,761 $ 6,031,874 $ (10,966,515) $ (4,934,641)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date. The Fund
declares and pays dividends annually. Capital gain distributions, if any,
are generally declared and paid annually. An additional distribution may be
paid by the Fund to avoid imposition of federal income tax on any remaining
undistributed net investment income and capital gains.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP"). As
a result, net investment income and net realized gain (or loss) on
investment and foreign currency-related transactions for a reporting period
may differ significantly from distributions during such period. The
differences between tax regulations and GAAP relate primarily to
investments in options, futures, forward contracts, passive foreign
investment companies, foreign-denominated investments, and certain
securities sold at a loss. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting
its net asset value.
The following reclassifications have been made to reflect activity for the
fiscal year ended August 31, 1997:
UNDISTRIBUTED ACCUMULATED ADDITIONAL
NET INVESTMENT NET REALIZED PAID-IN
INCOME GAIN (LOSS) CAPITAL
-------------- ------------ ----------
$ 166,000 $ (160,000) $ (6,000)
EXPENSES: Most expenses can be directly attributed to the individual Fund.
Expenses which cannot be directly attributed are allocated among all funds
based principally on their relative net assets.
DEFERRED ORGANIZATION EXPENSES: The Fund has incurred expenses in
connection with its organization and initial registration. These costs have
been deferred and are being amortized over 60 months on a straight-line
basis.
Annual Report 25
<PAGE>
SsgA
ACTIVE INTERNATIONAL FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
FOREIGN CURRENCY TRANSLATIONS: The books and records of the Fund are
maintained in US dollars. Foreign currency amounts and transactions of the
Fund are translated into US dollars on the following basis:
(a) Market value of investment securities, other assets and
liabilities at the closing rate of exchange on the valuation date.
(b) Purchases and sales of investment securities and income at the
closing rate of exchange prevailing on the respective trade dates of
such transactions.
Reported net realized gains or losses from foreign currency-related
transactions arise from sales and maturities of short-term securities;
sales of foreign currencies; currency gains or losses realized between the
trade and settlement dates on securities transactions; and the difference
between the amounts of dividends, interest, and foreign withholding taxes
recorded on the Fund's books and the US dollar equivalent of the amounts
actually received or paid. Net unrealized gains or losses from foreign
currency-related transactions arise from changes in the value of assets and
liabilities other than investments in securities, at fiscal year-end,
resulting from changes in the exchange rates.
It is not practical to isolate that portion of the results of operations of
the Fund that arises as a result of changes in exchange rates from that
portion that arises from changes in market prices of investments during the
year. Such fluctuations are included with the net realized and unrealized
gain or loss from investments. However, for federal income tax purposes the
Fund does isolate the effects of changes in foreign exchange rates from the
fluctuations arising from changes in market prices for realized gain (or
loss) on debt obligations.
DERIVATIVES: To the extent permitted by the investment objectives,
restrictions and policies set forth in the Fund's Prospectus and Statement
of Additional Information, the Fund may participate in various
derivative-based transactions. Derivative securities are instruments or
agreements whose value is derived from an underlying security or index.
They include options, futures, swaps, forwards structured notes and
stripped securities. These instruments offer unique characteristics and
risks that assist the Fund in meeting its investment strategies.
The Fund typically uses derivatives in three ways: cash equitization
hedging, and return enhancement. Cash equitization is a technique that may
be used by the Fund through the use of options and futures to earn
"market-like" returns with the Fund's excess and liquidity reserve cash
balances. Hedging is used by the Fund to limit or control risks, such as
adverse movements in exchange rates and interest rates. Return enhancement
can be accomplished through the use of derivatives in the Fund. By
purchasing certain instruments, the Fund may more effectively achieve the
desired portfolio characteristics that assist in meeting the Fund's
investment objectives. Depending on how the derivatives are structured and
utilized, the risks associated with them may vary widely. These risks are
generally categorized as market risk, liquidity risk and counterparty or
credit risk.
26 Annual Report
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
FOREIGN CURRENCY EXCHANGE CONTRACTS: In connection with portfolio purchases
and sales of securities denominated in a foreign currency the Fund may
enter into foreign currency exchange spot contracts and forward foreign
currency exchange contracts ("contracts"). Contracts are recorded at market
value. Certain risks may arise upon entering into these contracts from the
potential inability of counterparties to meet the terms of their contracts
and are generally limited to the amount of unrealized gain on the
contracts, if any, that are recognized in the Statement of Assets and
Liabilities. Realized gains or losses arising from such transactions are
included in net realized gain (or loss) from foreign currency-related
transactions. There were no open contracts as of August 31, 1997.
REPURCHASE AGREEMENTS: The Fund may engage in repurchase and tri-party
repurchase agreements with several financial institutions whereby the Fund,
through its custodian or third-party custodian receives delivery of the
underlying securities. The market value of these securities (including
accrued interest) on acquisition date is required to be an amount equal to
at least 102% of the repurchase price. The Fund's Adviser will monitor
repurchase agreements daily to determine that the market value (including
accrued interest) of the underlying securities remains equal to at least
102% of the repurchase price at Fedwire closing time. The Adviser or
third-party custodian will notify the seller to immediately increase the
collateral on the repurchase agreement to 102% of the repurchase price if
collateral falls below 102%.
INVESTMENT IN INTERNATIONAL MARKETS: Investing in international markets may
involve special risks and considerations not typically associated with
investing in the United States markets. These risks include revaluation of
currencies, high rates of inflation, repatriation restrictions on income
and capital, and future adverse political and economic developments.
Moreover, securities issued in these markets may be less liquid, subject to
government ownership controls, delayed settlements, and their prices more
volatile than those of comparable securities in the United States.
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the year ended August 31, 1997 purchases and
sales of investment securities, excluding short-term investments,
aggregated to $60,654,158 and $31,130,847, respectively.
4. RELATED PARTIES
ADVISER: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company (the "Adviser") under which the Adviser
directs the investments of the Fund in accordance with its investment
objectives, policies, and limitations. For these services, the Fund pays a
fee to the Adviser, calculated daily and paid monthly, at the annual rate
of .75% of its average daily net assets. For the year ended August 31,
1997, the Adviser voluntarily agreed to waive up to the full amount of its
advisory fee to the extent that total expenses exceeded 1.00% on an annual
basis. The Investment Company also has contracts with the adviser to
provide custody, shareholder servicing and transfer agent services to the
Fund. These amounts are presented in the accompanying Statement of
Operations.
Annual Report 27
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
ADMINISTRATOR: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator") under
which the Administrator supervises all non-portfolio investment aspects of
the Investment Company's operations and provides adequate office space and
all necessary office equipment and services, including telephone service,
utilities, stationery supplies, and similar items. The Investment Company
pays the Administrator the following fees for services supplied by the
Administrator pursuant to the Administration Agreement: (i) an annual fee,
payable monthly on a pro rata basis based on the following percentages of
the average daily net assets of all international funds: $0 up to and
including $500 million - .07%, over $500 million to and including $1
billion - .06%, over $1 billion to and including $1.5 billion - .04%, over
$1.5 billion - .03%; (ii) less an amount equal to the sum of certain
distribution-related expenses incurred by the Investment Company's
Distributor on behalf of the Fund (up to a maximum of 10% of the
asset-based fee determined in (i)); (iii) out-of-pocket expenses; and (iv)
start-up costs for new funds.
DISTRIBUTOR AND SHAREHOLDER SERVICING: The Investment Company has entered
into a Distribution Agreement with Russell Fund Distributors (the
"Distributor") which is a wholly-owned subsidiary of the Administrator to
promote and offer shares of the Investment Company. The Distributor may
have entered into sub-distribution agreements with other non-related
parties. The amounts paid to the Distributor are included in the
accompanying Statement of Operations.
The Investment Company has also adopted a Distribution Plan pursuant to
Rule 12b-1 (the "Plan") under the 1940 Act. Under this Plan, the Investment
Company is authorized to make payments to the Distributor, or any
Shareholder Servicing Agent, as defined in the Plan, for providing
distribution and marketing services, for furnishing assistance to investors
on an ongoing basis, and for the reimbursement of direct out-of-pocket
expenses incurred by the Distributor in connection with the distribution
and marketing of shares of the Investment Company and the servicing of
investor accounts.
The Fund has entered into service agreements with the Adviser State Street
Brokerage Services, Inc. ("SSBSI"), a wholly-owned subsidiary of the
Adviser, the Adviser's Retirement Investment Services Division ("RIS"), and
the Adviser's Metropolitan Division of Commercial Banking ("Commercial
Banking")(collectively the "Agents"), as well as several unaffiliated
service providers. For these services, the Fund pays .025%, .175%, .175%
and .175%, to the Adviser, SSBSI, RIS, and Commercial Banking,
respectively, based upon the average daily value of all Fund shares held by
or for customers of these Agents. For the year ended August 31, 1997, the
Fund incurred expenses of $16,712, $4,092 and $236, or a total of $21,040
from the Adviser, SSBSI, and RIS, respectively. The Fund did not incur any
expenses from Commercial Banking during this period.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure
28 Annual Report
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
was incurred so long as the plan is in effect. The Fund's responsibility
for any such expenses carried forward shall terminate at the end of two
years following the year in which the expenditure was incurred. The
Trustees or a majority of the Fund's shareholders have the right, however,
to terminate the Distribution Plan and all payments thereunder at any time.
The Fund will not be obligated to reimburse the Distributor for carryover
expenses subsequent to the Distribution Plan's termination or
noncontinuance. There were no carryover expenses as of August 31, 1997.
BOARD OF TRUSTEES: The Investment Company pays each Trustee not affiliated
with the Investment Company a retainer of $44,000 annually $1,000 for each
board meeting attended, an additional $1,000 for attending the annual audit
committee meeting, and reimbursement for out-of-pocket expenses. These
expenses are allocated among all of the Funds based upon their relative net
assets.
ACCRUED FEES PAYABLE TO AFFILIATES AND TRUSTEES AS OF AUGUST 31 1997 WERE
AS FOLLOWS:
Advisory fees $ 49,895
Administration fees 4,759
Custodian fees 38,857
Distribution fees 1,809
Shareholder servicing fees 1,633
Transfer agent fees 18,466
----------
$ 115,419
----------
----------
Annual Report 29
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
TAX INFORMATION
August 31, 1997 (Unaudited)
The Fund paid distributions of $.0127 per share from net long-term capital gains
during its taxable year ended August 31, 1997. Pursuant to Section 852 of the
Internal Revenue Code, the Fund designates $75,374 as capital gain dividends for
its taxable year ended August 31, 1997.
The Fund paid foreign taxes of $167,359 and recognized $1,345,062 of foreign
source income during the taxable year ended August 31 1997. Pursuant to Section
853 of the Internal Revenue Code, the Fund designates $.0216 per share of
foreign taxes paid and $.1739 of gross income earned from foreign sources in the
taxable year ended August 31, 1997.
Please consult a tax advisor for questions about federal or state income tax
laws.
30 Annual Report
<PAGE>
SSgA ACTIVE INTERNATIONAL FUND
Two International Place, 35th Floor
Boston, Massachusetts 02110
(800) 997-7327
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
George W. Weber, Senior Vice President and Treasurer
J. David Griswold, Vice President and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND OFFICE OF SHAREHOLDER INQUIRIES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 647-7327
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(800) 997-7327
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
Annual Report 31
<PAGE>
SSgA-SM- FUNDS
EMERGING MARKETS FUND
Annual Report
August 31, 1997
Table of Contents
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion. . . . . . . . . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . 26
Tax Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Fund Management and Service Providers. . . . . . . . . . . . . . . . . . . 33
"SSgA-SM-" IS A SERVICE MARK OF STATE STREET CORPORATION AND IS LICENSED FOR
USE BY THE SSgA FUNDS.
THIS REPORT IS PREPARED FROM THE BOOKS AND RECORDS OF THE FUND AND IT IS
SUBMITTED FOR THE GENERAL INFORMATION OF SHAREHOLDERS. THIS INFORMATION IS FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR ACCOMPANIED BY A
SSgA FUNDS PROSPECTUS CONTAINING MORE COMPLETE INFORMATION CONCERNING THE
INVESTMENT OBJECTIVE AND OPERATIONS OF THE FUND, CHARGES AND EXPENSES. THE
PROSPECTUS SHOULD BE READ CAREFULLY BEFORE AN INVESTMENT IS MADE.
PERFORMANCE IS HISTORICAL AND ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL
GAINS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN WHEN PURCHASED.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. INTERNATIONAL MARKETS
ENTAIL DIFFERENT RISKS THAN THOSE TYPICALLY ASSOCIATED WITH DOMESTIC MARKETS,
INCLUDING CURRENCY FLUCTUATIONS, POLITICAL AND ECONOMIC INSTABILITY, ACCOUNTING
CHANGES AND FOREIGN TAXATION. SECURITIES MAY BE LESS LIQUID AND MORE VOLATILE.
INVESTMENTS IN EMERGING OR DEVELOPING MARKETS INVOLVE EXPOSURE TO ECONOMIC
STRUCTURES THAT ARE GENERALLY LESS DIVERSE AND MATURE, AND TO POLITICAL SYSTEMS
WHICH CAN BE EXPECTED TO HAVE LESS STABILITY THAN THOSE OF MORE DEVELOPED
COUNTRIES. PLEASE SEE THE PROSPECTUS FOR FURTHER DETAILS. RUSSELL FUND
DISTRIBUTORS, INC., IS THE DISTRIBUTOR OF THE SSgA FUNDS .
<PAGE>
SSgA EMERGING MARKETS FUND
LETTER FROM THE CHAIRMAN OF STATE STREET GLOBAL ADVISORS
DEAR SHAREHOLDERS,
I am pleased to provide you with the SSgA Funds annual report for the fiscal
year ended August 31, 1997. Over the past year, the Funds have grown to include
seventeen portfolios covering a broad range of investment strategies from the
far corners of the emerging markets countries to the domestic stock and bond
markets. This report contains summaries on the market environment, performance
and financial statements for the Emerging Markets Fund. I hope you find this
information a useful tool as you review your overall investment strategy.
The SSgA Funds opened three additional funds in fiscal 1997. These three asset
allocation funds, called Life Solutions Funds, were opened on July 1, 1997. Each
Life Solutions Fund seeks to achieve its investment objective by diversifying
its assets in shares of certain Funds of the Investment Company, referred to as
Underlying Funds.
The Life Solutions Income and Growth Fund seeks income and, secondarily,
long-term growth of capital.
The Life Solutions Balanced Fund seeks a balance of growth of capital and
income.
The Life Solutions Growth Fund seeks long-term growth of capital.
During the past fiscal year, the SSgA Funds were proud to announce that the SSgA
Matrix Fund and the SSgA Small Cap Fund achieved five year track records. We are
proud of our long-term record and look forward to having additional funds
complete their five year anniversary.
SSGA is strategically growing by continuing to build an organization that
delivers comprehensive services striving to meet your investment requirements.
In an effort to compete in this ever-changing complex world, we focus on our
expertise, our knowledge and our commitment to better serve your investment
needs.
As Chairman and Chief Executive Officer of State Street Global Advisors, which
serves as the investment adviser to the SSgA Funds, I would like to thank you
for choosing the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
SSgA EMERGING MARKETS FUND
MANAGEMENT OF THE FUNDS
Nicholas A. Lopardo
Chairman and Chief Exective Officer
A TEAM APPROACH TO INVESTMENT MANAGEMENT
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio managers work together to develop and enhance the
techniques that drive our investment processes. The result is that the
portfolios we manage benefit from the knowledge of the entire team.
Mr. Rob Furdak, CFA, Principal, has been the portfolio manager primarily
responsible for investment decisions regarding the SSgA Emerging Markets Fund
since its inception in March 1994. Mr. Furdak has been with State Street since
1989, working on the non-US active equity team. He holds a BA in finance from
the University of Michigan and an MBA in finance from the University of Chicago
Graduate School of Business. There are seven other portfolio managers working
with Mr. Furdak.
Annual Report 5
<PAGE>
SSgA EMERGING MARKETS FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
OBJECTIVE: Maximize total return primarily through capital appreciation.
INVESTS IN: Equity securities of foreign issuers domiciled, or doing a
substantial portion of their business, in countries having a developing economy
or securities market.
STRATEGY: Fund Managers invest in foreign emerging market countries with
prospects for continued growth. Through the use of proprietary evaluation,
the Fund invests primarily in the International Finance Corporation
Investable ("IFCI") Index countries. As the IFCI Index introduces new
emerging market countries, the Fund will expand to gain exposure to new
emerging countries.
[GRAPH]
DATES EMERGING MARKETS FUND I F C INVESTABLE COMPOSITE INDEX**
Inception* $10,000 $10,000
1994 $11,450 $10,529
1995 $10,387 $8,357
1996 $11,201 $8,881
1997 $12,895 $9,197
- --------------------------------------------------------------------------------
Total $55,933 $46,964
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SSgA
EMERGING MARKETS FUND
Period Ended Growth of Total
08/31/97 $10,000 Return
- ------------ ------------ ------------
1 Year $ 11,512 15.12%
Inception $ 12,895 7.53%+
INTERNATIONAL FINANCE CORPORATION
INVESTABLE COMPOSITE INDEX
Period Ended Growth of Total
08/31/97 $10,000 Return
- ------------ ------------ ------------
1 Year $ 10,356 3.56%
Inception $ 9,197 (2.36%)+
SEE RELATED NOTES ON THE FOLLOWING PAGE.
PERFORMANCE REVIEW
The SSgA Emerging Markets Fund finished the fiscal year ended August 31, 1997,
with a one year total return of 15.1%. This compared very favorably to the
Fund's benchmark, the International Finance Corporation Investable (IFCI) Index
which returned 3.6% for the one year ended August 31, 1997. The Fund also bested
the average diversified emerging markets mutual fund, as calculated by
Morningstar, which rose 13.3% over the same period.
PORTFOLIO HIGHLIGHTS
The emerging markets had a tumultuous year, with China leading the winners
rising 87.6% (all country level returns quoted are for the IFCI country level
indices). Thailand led the decliners falling 67.0%. The excellent performance of
the Fund can be attributed to several key country allocations. The Fund's
largest country exposure
6 Annual Report
<PAGE>
SSgA EMERGING MARKETS FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
was to Brazil, which returned 47.8% during the year. The market in Brazil
continued to benefit from the new economic plan that has stabilized the economy
and tamed inflation. Brazilian returns were also boosted by large-scale
privatizations of state-owned companies that have resulted in increased
efficiency and stronger earnings. We also benefited from our overweighting in
some of the smaller countries which all had positive returns such as Argentina
(59%), Colombia (52%), Sri Lanka (47%) and Portugal (36%).
The Asian markets finished the fiscal year on a sour note, as a wave of currency
devaluations rocked markets across the region. Growing trade deficits coupled
with overly aggressive property developers financed by a weak banking system
generally caused the depreciations. The declining currencies exacerbated the
already weak equity markets. Particularly hard hit were Thailand (-67%), the
Philippines (-48%), Malaysia (-42%) and Indonesia (-31%). The Fund was well
positioned in this time of crisis. The Fund had a large underweight to Malaysia
and no position in Indonesia. Additionally, the Fund has small overweights to
Thailand and the Philippines which were established later in the year avoiding
much of those markets' decline. Asian equities now present some very compelling
valuation levels given the steep declines over the past year. This is especially
true for the export-oriented companies whose goods should be more competitively
priced thanks to the devalued currency.
The Fund was advantageously positioned in developing Europe. For the better part
of the year, the Fund was overweighted in exposure to Portugal, Hungary and
Greece, which had positive returns of 36%, 55% and 32%, respectively. In
particular, the Greek market rocketed on the news that Athens was awarded the
2004 Olympics. Towards the end of the year, the Fund took profits in all three
markets and reinvested the proceeds in Poland and the Czech Republic which are
trading at lower price multiples and have strong earnings growth.
We feel that the main themes driving the emerging markets remain sound: strong
growth potential, attractive valuations, compelling diversification benefits and
continuing social and economic liberalization. These forces should continue to
be a positive influence going forward.
TOP TEN EQUITY HOLDINGS
(AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31, 1997
Telecomunicacoes Brasileiras NPV 4.4%
SPT Telecom AS 1.4
Eletrobras (centrais) NPV 1.4
Korea Electric Power Corp. 1.3
Petroleo Brasileiro SA NPV 1.3
Telefonos de Mexico SA Series L - ADR 1.2
GTE Corp. 1.2
Sider Nacional Cia NPV 1.1
Bavaria 1.1
YPF SA Class D 1.0
---------------
NOTES: THE FOLLOWING NOTES RELATE TO THE GROWTH OF $10,000 GRAPH AND TABLE ON
THE PRECEDING PAGE.
* The Fund commenced operations on March 1, 1994. Index comparison also began
on March 1, 1994.
** The IFC Investable Composite Index is a market capitalization-weighted
index of the performance of equity securities listed on the stock exchanges
of emerging market countries.
+ Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Investments in securities of non-US issuers and foreign currencies involve
investment risks different from those of US issuers, the Prospectus contains
further information and details regarding these risks.
Annual Report 7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of the SSgA Funds:
We have audited the accompanying statement of assets and liabilities and
statement of net assets of SSgA Emerging Markets Fund (formerly The Seven Seas
Series Emerging Markets Fund)(the "Fund"), as of August 31, 1997, and the
related statement of operations for the fiscal year then ended, the statements
of changes in net assets for each of the two fiscal years in the period then
ended, and the financial highlights for each of the three fiscal years in the
period then ended and for the period March 1, 1994 (commencement of operations)
to August 31, 1994. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
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 free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We 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 of the
Fund as of August 31, 1997, the results of its operations for the fiscal year
then ended, the changes in its net assets for each of the two fiscal years in
the period then ended, and the financial highlights for each of the three fiscal
years in the period then ended and for the period March 1, 1994 (commencement of
operations) to August 31, 1994 in conformity with generally accepted accounting
principles.
Boston, Massachusetts /s/ COOPERS & LYBRAND L.L.P.
October 7, 1997
8 Annual Report
<PAGE>
SSgA
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS
August 31, 1997
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
COMMON STOCKS - 80.4%
ARGENTINA - 3.9%
Acindar Industria Argentina
de Aceros SA Class B (a) 220,257 $ 688
Alpargatas (a) 728,007 605
Astra cia Argentina de Petro 387,620 787
Banco de Galicia 149,240 1,128
Celulosa Argentina (a) 232,719 116
Dalmine Siderca SA 313,796 985
Ledesma 359,967 432
Naviera Perez Companc Class B 182,890 1,461
Siderar SA Series A 11,700 60
Telecom Argentina Class B 114,329 629
Telefonica de Argentina Class B 200,250 701
YPF SA Class D 72,702 2,372
----------
9,964
----------
BRAZIL - 7.2%
Companhia Siderurgica
de Tubarao NPV 13,300,000 183
Eletrobras (centrais) NPV 8,458,900 3,604
Itausa Investimentos Itau SA 95,000 81
Sider Nacional cia NPV 82,954,000 2,813
Telecomunicacoes
Brasileiras NPV 102,480,496 10,987
Telecomunicacoes de
Sao Paulo SA (a) 90,157 25
Telecomunicacoes
San Paulo NPV (a) 1,581,871 417
----------
18,110
----------
CHILE - 0.7%
Chile Fund, Inc. 18,700 455
Chilquinta SA - ADR 4,550 75
Compania de Telecomunicaciones
de Chile SA - ADR 22,000 661
Embotelladora Andina SA - ADR
Series A 5,300 130
Enersis SA - ADR 6,200 220
Laboratorio Chile SA - ADR 4,450 122
Madeco SA - ADR 6,300 151
----------
1,814
----------
CHINA - 1.7%
Beiren Printing Class H 60,000 23
Dong Fang Electric Machinery, Ltd.
Class H 64,000 30
Guangshen Railway Co., Ltd. - ADR 6,000 128
Guangzhou Shipyard Class H 122,000 50
Harbin Power Equipment Class H 316,000 105
Huaneng Power International, Inc.
Series N - ADR (a) 23,900 565
Jilin Chemical Industrial
Company, Ltd. Class H 166,000 53
Luoyang Glasswork Class H (a) 268,000 82
Maanshan Iron & Steel Class H 590,000 187
Quingling Motors Class H 591,000 334
Shandong Huaneng Power Co., Ltd.
Series N - ADR 16,500 197
Shanghai Hai Xing Shipping Co.
Class H (a) 1,484,000 1,340
Shanghai Petrochemical Corp. 7,500 307
Tsingtao Brewery Class H (a) 151,000 93
Yizheng Chemical Fibre Class H 946,000 690
Zhenhai Refining &
Chemical Co., Ltd. Series H 110,000 63
----------
4,247
----------
COLOMBIA - 3.8%
Banco de Bogota NPV 90,000 529
Banco Ganadero SA Class B - ADR 39,900 1,446
Annual Report 9
<PAGE>
SSgA
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Banco Industrial Colombiano 34,900 $ 132
Banco Industrial
Colombiano SA - ADR 21,000 366
Bavaria 295,400 2,641
Cadenalco SA NPV 344,876 271
Cementos Argos 176,315 1,338
Cementos Diamante SA - GDR 49,300 613
Cia Nacional de Chocolates 77,000 662
Coltabaco SA 105,200 363
Suramericana de Seguros SA 40,700 1,143
----------
9,504
----------
CZECH REPUBLIC - 3.0%
Ceska Sporitelna AS 18,835 162
CEZ (a) 64,358 2,001
Cokoladovny AS 700 104
Komercni Banka AS 7,377 408
Skoda Koncern Plzen AG (a) 18,041 472
SPT Telecom AS (a) 28,773 3,608
Unipetrol AS (a) 212,608 891
----------
7,646
----------
EGYPT - 0.2%
MISR INTERNATIONAL
BANK SAE - GDR 19,600 309
Suez Cement Co. - GDR (a) 6,900 144
----------
453
----------
GREECE - 2.9%
Alpha Leasing SA (Regd) 3,800 91
Aluminum Co. of Greece
Industrial and Commercial (Regd) 3,420 217
Commercial Bank of Greece (Regd) 18,260 726
Credit Bank (Regd) 14,580 952
Ergo Bank (Regd) 6,280 366
ETBA Leasing SA (Regd) 8,190 74
Hellenic Bottling 11,500 416
Hellenic Telecommunication
Organization SA 43,143 960
Heracles General Cement Co. 38,520 719
Ionian Bank SA (Regd)(a) 3,060 60
Loulis Flour Mills SA (Regd) 62,667 242
Naoussa Spinning Mills 39,800 139
National Bank of Greece (Regd)(a) 12,595 1,470
National Mortgage Bank 8,172 479
Nikas SA 3,800 44
Petzetakis SA (a) 22,281 102
Shelman SA 18,120 102
Strintzis Shipping 49,640 155
----------
7,314
----------
HUNGARY - 1.3%
Danubius Hotel (Regd)(a) 555 15
Egis Gyogyszergyar 10,609 516
Fotex Rt. (Regd)(a) 384,108 468
Magyar Olaj Es Gas 16,599 340
Mol Magyar Olay-Es
Gazipari - GDS (a) 31,000 618
Pick Szeged Rights (a) 3,448 251
Richter Gedeon, Ltd. - GDR 10,500 1,003
----------
3,211
----------
INDIA - 5.5%
Andhra Valley Power Supply Co., Ltd. 74,200 191
Arvind Mills, Ltd. 34,300 105
Bajaj Auto, Ltd. 18,200 400
Bharat Heavy Electricals, Ltd. (a) 63,600 673
Bharat Petroleum Corp., Ltd. 18,400 216
Bombay Fund NPV (a) 147,223 1,472
10 Annual Report
<PAGE>
SSgA
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
CESC, Ltd. (a) 184,900 $ 212
Colgate-Palmolive Co. 42,800 362
Crompton Greaves, Ltd. 51,500 97
Finolex Cables, Ltd. 28,700 101
Gujarat State Fertilisers &
Chemicals, Ltd. 72,200 205
Hindustan Lever, Ltd. 25,600 950
Industrial Development Bank 303,500 823
ITC, Ltd. 27,400 370
Madras Refineries, Ltd. 165,800 231
Mahanagar Telephone Nigam, Ltd. 123,400 812
Mahindra & Mahindra, Ltd. 12,500 138
Morgan Stanley India
Investment Fund, Inc. (a) 165,300 1,777
Ranbaxy Laboratories, Ltd. 5,900 111
Reliance Industries Ltd. - GDS (a) 25,000 491
Reliance Industries, Ltd. 48,100 435
State Bank Of India 28,100 220
Tata Engineering &
Locomotive Co., Ltd. 72,850 670
Tata SSL, Ltd. 107,600 534
The India Fund, Inc. 233,900 1,944
Videsh Sanchar Nigam, Ltd. 16,900 419
----------
13,959
----------
ISRAEL - 2.1%
Agis Industries Ltd. 27,250 283
Bank Hapoalim, Ltd. 269,037 583
Bank Leumi Le-Israel 117,500 185
Bezeq Israeli
Telecommunication Corp., Ltd. 174,235 485
Clal Industries, Ltd. 19,500 108
Clal Israel, Ltd. (a) 400,000 124
Dead Sea Works, Ltd. 33,614 103
Delek Israel Fuel Corp., Ltd. 8,416 268
Discount Investment Corp. (Regd) 3,240 93
ECI Telecom, Ltd. 24,300 724
Elco Holdings Ltd. 23,300 163
Electric Wire & Cable 14,000 48
Electrochemical
Industries 1952, Ltd. (a) 39,713 45
IDB Development Corp., Ltd. (a) 5,780 134
Israel Chemicals, Ltd. 271,375 336
Koor Industries, Ltd. 3,170 340
Makteshim Chemical Works (a) 21,500 135
Supersol, Ltd. 104,723 321
Tadiran, Ltd. - ADR 7,300 252
Teva Pharmaceutical
Industries, Ltd. - ADR 10,100 529
----------
5,259
----------
MALAYSIA - 4.8%
Affin Holdings Berhad 126,000 145
Amalgamated Steel Mills 546,000 243
Arab Malaysian Corp. Berhad 95,000 129
Arab-Malaysian Development
Berhad 333,000 129
Bandar Raya Developments 373,000 265
Cement Industries 146,000 208
Cold Storage 24,000 22
DCB Holdings Berhad 186,000 318
Diversified Resources Berhad 112,000 151
Faber Group Berhad (a) 445,600 238
Golden Hope Plantation 417,000 548
Highlands & Lowlands 250,000 247
IGB Corp. Berhad 450,000 308
IND Oxygen, Inc. 485,000 435
Kuala Lumpur Kepong 284,000 578
Kumpulan Guthrie 297,000 313
Kwong Yik Bank 86,000 251
LARUT Consolidated Berhad 251,000 171
Lion Land Berhad 571,000 324
Malayan Banking Berhad 91,000 604
Annual Report 11
<PAGE>
SSgA
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Malaysia Mining Corp. 544,000 $ 465
Malaysian Airline System 175,000 332
Malaysian Helicopter Services 170,000 84
Malaysian International
Shipping Corp. (Alien Market) 185,000 380
MBF Capital Berhad 328,000 307
Metroplex Berhad 162,000 116
Oriental Holdings Berhad 78,400 282
Perlis Plantations 164,250 404
Petronas Gas Berhad 225,000 619
Public Bank Berhad 88,000 83
Public Bank Berhad (Alien Market) 77,333 72
Rashid Hussain Berhad 93,000 224
Renong Berhad 806,000 827
Sime Darby Berhad 197,800 467
Tan Chong Motor Holdings 359,000 378
Telekom Malaysia 136,500 416
Tenaga Nasional Berhad 232,000 690
UMW Holdings Berhad 128,000 345
UMW Holdings Berhad
2000 Warrants (a) 4,000 3
----------
12,121
----------
MEXICO - 7.0%
Alfa SA de CV Class A NPV 176,662 1,353
Altos Hornos de
Mexico SA - NPV (a) 164,000 440
Carso Global Telecom
Series A1 NPV 51,000 191
Celanese Mexicana Series B NPV 124,000 335
Cemex SA de CV Class B NPV 135,737 748
Cifra Sa de CV 20,425 39
Cifra SA de CV Class B NPV 295,000 563
Controladora Comercial
Mexicana S.A. de CV 462,000 474
Cydsa SA Series A NPV 96,000 290
Desc SA de CV NPV 88,931 737
Desc Sociedad de Fomento
Industrial SA de CV
Series B NPV 30,000 251
Empresa Nacional de
Electric - ADR 23,450 522
Fomento Economico
Mexicano SA de CV
Series B NPV 167,000 1,159
Grupo Carso Series A NPV 51,000 355
Grupo Cementos Chihuahua
Series B NPV 200,000 231
Grupo Continental SA 47,500 119
Grupo Financiero Bancomer
Series B NPV (a) 2,434,000 1,485
Grupo Gigante SA
Series B NPV (a) 810,000 302
Grupo Mexico SA
Series B NPV 163,108 637
Grupo Posadas SA
Series A NPV (a) 100,000 72
Grupo Sidek Series B NPV (a) 400,000 20
Grupo Simec SA de CV
Series B NPV (a) 620,000 110
Grupo Tribasa SA de
CV - ADR (a) 65,000 362
Ingenieros Civiles NPV 204,000 537
Kimberly-Clark, Mexico
Class A NPV 180,000 806
Telefonos de Mexico SA
Series L - ADR 67,800 3,110
Telefonos de Mexico SA
Series L NPV 192,900 446
Tubos de Acero de
Mexico NPV (a) 47,000 853
TV Azteca SA de CV - ADR (a) 7,500 135
Vitro SA NPV 231,000 1,017
----------
17,699
----------
12 Annual Report
<PAGE>
SSgA
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
PAKISTAN - 2.7%
Bank of Punjab (a) 228,838 $ 118
Cherat Cement Co., Ltd. 93,000 44
Crescent Textile Mills (a) 47,355 20
Dandot Cement Co. (a) 35,000 3
Dewan Salmon Fibre 159,140 117
DG Kahn Cement (a) 160,000 47
Dhan Fibres, Ltd. (a) 1,027,000 118
Engro Chemical 92,425 352
Fauji Fertilizer 290,800 647
Hub Power Co., Ltd. - GDR (a) 1,360,800 1,620
Ici Pakistan 1,244,000 715
Karachi Electric (a) 516,520 284
Lucky Cement Corp. (a) 190,000 34
Muslim Commercial (a) 372,860 350
Pakistan International Air (a) 228,000 51
Pakistan State Oil 78,586 689
Pakistan Telecom Corp. Series A 697,500 633
Pakistan Telecommunications 768,900 698
Pioneer Cement (a) 61,300 10
Sui Northern Gas Pipelines (a) 141,703 112
Sui Southern Gas Co., Ltd. (a) 369,293 247
----------
6,909
----------
PERU - 1.0%
Banco Wiese 80,610 135
Banco Wiese - ADR 9,100 59
Cementos Lima SA 3,800 77
Cementos Norte Pacasmayo SA
Class T 30,013 45
Cerveceria Backus & Johnston SA 200,000 170
Compania de Minas Buenaventura
Series B - ADR 6,400 118
Credicorp, Ltd. 42,000 885
Minas Buenaventura 16,600 145
Minsur S.A. 43,120 147
Telefonica Del Peru SA
Class B - ADR 30,500 714
----------
2,495
----------
PHILIPPINES - 2.5%
Aboitiz Equity Ventures (a) 4,918,500 280
Alsons Cement Corp. 656,250 60
Ayala Corp. Class B (a) 139,925 65
Belle Corporation (a) 283,200 44
EEI Corp. (a) 420,400 33
Far East Bank & Trust Co. 90,200 197
Filinvest Development Corp. 302,100 56
Filinvest Land (a) 821,000 91
First Philippine Holdings Class B 273,050 277
JG Summit Holdings, Inc.
Series B 2,197,300 273
Kuok Philippine Properties, Inc. (a) 3,353,055 112
Manila Electric Co. Class B 124,580 419
Megaworld Properties
& Holdings, Inc. (a) 1,565,550 101
Metropolitan Bank & Trust Co. 15,310 168
Petron Corp. 2,024,640 288
Philex Mining Corp. Class B (a) 499,500 33
Philippine Long Distance
Telephone Co. - ADR 74,600 1,884
Philippine National Bank (a) 77,650 335
Robinson's Land Corp. Class B (a) 2,264,400 178
San Miguel Corp. Class B 282,120 461
SM Prime Holdings 2,201,600 453
Southeast Asia Cement
Holdings, Inc. (a) 5,354,200 164
Union Bank of the Phillippines (a) 367,000 258
Universal Robina 657,100 198
----------
6,428
----------
POLAND - 3.5%
Agros Holdings Series C (a) 14,175 404
Bank Handlowy W. Warszawie (a) 117,945 1,487
Bank Inicjatyw Gospodarczych 794,530 926
Bank Inicjatyw Gospodarczych
SA Series I (a) 98,506 96
Bank Rozwoju Eksportu SA 18,310 369
Annual Report 13
<PAGE>
SSgA
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Bank Slaski SA 8,425 $ 623
Banka Przemyslowo 8,925 496
Debica S.A. 36,560 1,015
Elektrim 65,920 607
Exbud SA (a) 17,362 207
Jelfa (a) 11,865 253
KGHM Polska Miedz SA - GDR 9,000 110
Mostostal Export SA 119,235 388
Okocimskie Zaklady Piwowarskie SA (a) 66,988 330
Polifarb (a) 39,555 221
ROLIMPEX SA Series A (a) 61,860 240
Sokolowskie Zaklady Miesne SA 84,840 103
STALEXPORT SA Series A 51,415 469
Universal SA (a) 48,640 126
WBK 21,500 118
Wolczanka SA 27,970 141
Zywiec 1,875 145
----------
8,874
----------
PORTUGAL - 4.3%
Banco Comercial Portuguese (Regd) 118,867 2,206
Banco Portugues de Investimento (Regd) 49,583 975
Banco Totta e Acores (Regd) 13,236 238
Banif Banco International do Funchal 37,757 309
Cimpor Cimentos de Portugal 21,100 507
Companhia de Celulose do Caima SA 13,900 276
Corticeira Amorim SGPS 34,700 379
Electricidade de Portugal SA (a) 14,000 218
Empresa Fabril de Maquinas Electricas - Efacec 45,866 365
Inparsa Industria e Participacoes SA (a) 7,800 156
Jeronimo Martins SGPS 15,000 925
Lusotur Societe Finance de Turismo (a) 11,800 160
Mague Gestao e Partipacoes 15,200 431
Modelo Continente SGPS SA 14,700 582
Portucel Industrial SA 42,900 322
Portugal Telecom SA 29,200 1,085
Portugal Telecom SA - ADR 7,200 265
Salvador Caetano Industrias Metalurgicas
Veiculos de Transporte SA 2,464 58
Soja de Portugal 21,900 159
Sonae Investimentos SA 15,600 581
Soporcel SA (a) 15,600 468
Telecel-Comunicacaoes Pessoaissa (a) 2,000 145
----------
10,810
----------
RUSSIA - 1.2%
AO Mosenergo - ADR 11,000 499
Lukoil Oil Co. - ADR 14,200 1,277
Rostelecom (a) 31,000 133
Surgutneftegaz - ADR 6,600 330
Unified Energy Systems - GDR (a) 11,600 450
Vimpel-Communications - ADR (a) 8,500 290
----------
2,979
----------
SOUTH AFRICA - 6.8%
AECI, Ltd. 77,202 416
Amalgamated Banks of South Africa 184,867 1,200
Anglo America Corp. SA 38,873 1,995
Anglo American Industrial Corp. 11,744 494
Billiton PLC (a) 123,712 477
De Beers Centenary AG 55,444 1,767
Del Monte Royal Food, Ltd. 323,439 186
Free State Consolidated Gold Mines, Ltd. 85,668 434
14 Annual Report
<PAGE>
SSgA
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Impala Platinum Holdings, Ltd. 34,600 $ 384
Iscor 1,399,399 862
Liberty Life Association of Africa 41,613 1,282
Liberty Life Strategic 92,707 342
Malbak, Ltd. NPV 370,600 509
Nedcor, Ltd. 13,500 265
Rembrandt Group, Ltd. 152,894 1,480
Sappi, Ltd. 95,732 886
Sasol NPV 72,646 967
South African Breweries 31,252 937
Standard Bank Investment Corp., Ltd. 19,650 880
Tongaat-Hulett Group, Ltd. 21,525 325
Vaal Reefs Exploration & Mining, Ltd. 10,178 507
Western Deep Levels, Ltd. 19,691 471
----------
17,066
----------
SOUTH KOREA - 6.4%
Bank of Seoul (a) 126,570 436
Cheil Industrial, Inc. 38,700 428
Daelim Industrial Co. 51,584 452
Daewoo Corp. 102,260 804
Daewoo Electronics Co. 97,620 779
Daewoo Telecom Co. 34,918 418
Dong Shin Housing & Construction Co. (a) 59,710 112
Dongkuk Steel Mill 16,638 371
Haitai Confectionery Co., Ltd. 37,010 268
Hana Bank 10,496 109
Hana Bank Rights (a) 10,496 7
Hanil Bank (a) 97,200 475
Hanshin Construction Co. (a) 81,040 96
Hanshin Securities 501 6
Housing & Commercial Bank, Korea 2,460 46
Korea Electric Power Corp. 123,000 3,216
Korea First Bank Securities 25,080 167
Korea First Securities Co. (a) 2,472 12
Korea Kumho Petrochemical Co. 71,570 436
Korea Long-Term Credit Bank 31,117 344
Korea Mobile Telecommunications Corp. 298 158
Korean Air (a) 25,000 377
Kumho Construction & Engineering Co. 54,170 319
Kwang Ju Bank 55,952 248
Kyong Nam Bank 54,330 473
Kyungki Bank (a) 67,812 301
L.G. Information & Communication 6,491 683
LG Information & Communication Ltd. Rights (a) 6,491 13
LG Merchant Banking Corp. 8,025 84
Orion Electric Co. 32,130 356
Pohang Iron & Steel 5,080 326
Samsung Co. 78,300 963
Samsung Electronics, Ltd. 5,111 401
Seoul Access Trust - IDR (a) 12* 128
Seoul Horizon Trust (a) 5,000 60
Ssangyong Cement Co., Ltd. 29,220 271
Sunkyong Industries (a) 31,507 552
Tae Il Media Co. 43,280 408
Tongyang Cement 6,000 119
Tongyang Investment & Finance Corp. 36,300 310
Tongyang Nylon Co. 18,094 511
Yukong, Ltd. 11,058 253
----------
16,296
----------
SRI LANKA - 1.4%
Aitken Spence & Co. 47,900 145
Asian Hotel Corp. (a) 176,200 36
Blue Diamond Jewel NPV 241,987 37
Central Finance Co. 12,800 78
Annual Report 15
<PAGE>
SSgA
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Colombo Drydocks 114,700 $ 40
Development Finance Corp. 202,200 989
Hayleys, Ltd. (a) 108,005 428
John Keells Holdings, Ltd. 232,195 1,312
Lanka Ceramic (a) 46,300 23
Lanka Milk Food (a) 21,600 3
Lanka Orix Leasing Co., Ltd. (a) 14,880 44
Merchant Bank of Sri Lanka 162,800 44
National Development Bank 47,000 219
Richard Pieris & Co., Ltd. (a) 1,650 4
United Motor 32,160 28
Vanik Inc., Ltd. (a) 24,750 8
----------
3,438
----------
TAIWAN - 2.7%
Acer, Inc. (a) 131,835 386
Ambassador Hotel (a) 203,500 203
Ambassador Hotel Rights (a) 185,000 3
Cathay Life Insurance 132,779 656
Chang Hwa Bank 19,500 76
Cheng Loong (a) 15,105 10
Chia Hsin Flour - GDR (a) 26,665 13
China Development Corp. (a) 253,500 1,143
China Development Corp. Rights (a) 195,000 79
China Petrochemical Development Corp. (a) 335,240 507
China Rebar (a) 24,840 14
China Steel Corp. 510,450 531
Ensure Co., Ltd. (a) 96,800 116
Far Eastern Textile 345,411 528
Hua Nan Bank 194,280 819
Hualon Teijran (a) 28,143 27
Kao Hsing Chang Iron & Steel (a) 16,200 15
Kwong Fong Industries (a) 14,950 30
Lealea Enterprise (a) 23,257 21
Pacific Construction (a) 332,700 290
Pacific Electrical Wire & Cable (a) 370,700 497
Prince Housing Development (a) 14,968 14
Taipei Business Bank 59,405 102
Tuntex Distinct (a) 443,394 275
Walsin Lihwa Corp. Rights (a) 301,233 8
Walsin Lihwa Wire (a) 331,356 320
Wan Yu Paper (a) 20,160 8
Yieh Loong Co. 22,143 10
Yue Loong Motor 19,950 50
Yuen Foong Yu Manufacturing (a) 16,735 10
----------
6,761
----------
THAILAND - 2.5%
Advanced Information Services (Alien Market) 91,500 431
Bangchak Petroleum 156,200 46
Bangkok Bank (Alien Market) 102,500 507
Bangkok Expressway PLC (Alien Market)(a) 396,000 336
Bangkok Land Co. (Alien Market)(a) 118,700 28
Bangkok Metropolitan Bank PLC (a) 1,052,200 154
Bangkok Rubber PLC (Alien Market)(a) 24,400 3
Bank of Ayudhya (Alien Market) 149,150 231
Electricity Generating PLC (Alien Market) 224,600 394
Finance One Public Co., Ltd. (Alien Market)(a) 158,300 16
First Bangkok City Bank PLC (Alien Market) 305,900 219
Industrial Finance Corp. of Thailand
(Alien Market) 156,700 124
Karat Sanitaryware PLC (Alien Market)(a) 39,150 15
16 Annual Report
<PAGE>
SSgA
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Krisda Mahanakorn PLC (Alien Market)(a) 97,700 $ 8
Krung Thai Bank PLC (Alien Market) 164,600 105
MDX PLC (Alien Market)(a) 116,600 15
National Finance & Securities (Alien Market) 271,600 155
National Petrochemical PLC (Alien Market)(a) 103,900 62
Nava Finance & Securities PLC (Alien Market) 101,100 41
NEP Realty & Industry Co. PLC (Alien Market)(a) 14,700 1
NTS Steel Groups Co., Ltd. PLC (Alien Market)(a) 130,800 5
Padaeng Industry Co., Ltd. PLC (Alien Market)(a) 88,400 22
PTT Exploration & Production PLC (Alien Market) 58,400 622
Robinson Department Store PLC (Alien Market) 33,000 8
Saha Pathana Inter-Holding PLC (Alien Market) 44,200 81
Saha Union Corp. PLC (Alien Market) 235,200 138
Sahaviriya Steel Industries PLC
(Alien Market)(a) 411,500 40
Shinawatra Satellite PLC (Alien Market) 148,200 102
Siam Cement Co. (Alien Market) 23,000 353
Siam City Bank PLC (Alien Market) 467,200 113
Siam Commercial Bank PLC (Alien Market) 62,300 158
Tanayong (Alien Market)(a) 262,400 138
TelecomAsia (Alien Market)(a) 1,039,500 912
Thai Farmers Bank (Alien Market) 55,000 158
Thai Petrochemical Industry PLC (Alien Market) 686,900 216
Thai Telephone & Communication Co.
(Alien Market)(a) 139,000 43
Tipco Asphalt Public Co., Ltd. 38,000 120
TPI Polene PLC (Alien Market) 154,400 31
Unicord PLC (Alien Market)(a) 348,600 4
United Communications Industries (Alien Market) 81,200 253
Univest Land PLC (Alien Market)(a) 281,600 11
----------
6,419
----------
TURKEY - 1.3%
Akbank 5,258,436 337
Eczacibasi Ilac Sanayii ve Ticaret AS (a) 4,126,000 202
Erciyas Biracilik Ve Malt Sanayii 1,456,000 189
Eregli Demir Ve Celik Fabrikalari 2,951,000 484
Izmir Demir Celik Sanayii AS (a) 11,171,636 130
Kartonsan 2,043,750 128
Petrokimya Holdings 805,000 322
Raks Elektronik Sanayi ve Ticaret AS 510,000 119
T Sise Cam (a) 6,856,346 360
Tofas Turk Otomobil Fabrikasi 6,147,750 341
Turk Hava Yollari A.O. (a) 1,430,000 380
Yapi Kredi Bankasi 13,916,985 286
----------
3,278
----------
TOTAL COMMON STOCKS
(cost $190,045) 203,054
----------
Annual Report 17
<PAGE>
SSgA
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
PREFERRED STOCKS - 8.2%
BRAZIL - 7.8%
Acos Villares SA NPV (a) 1,090,000 $ 245
Banco Bradesco SA NPV 121,077,064 1,198
Banco do Estado de Sao Paulo NPV (a) 44,086,600 2,100
Banco Itau SA (Regd) 1,764,000 1,012
Banco Nacional SA NPV (a)(f) 19,600,000 0
Caemi Mineracao e Metal (BR)(a) 6,992,000 391
CEMIG SA 22,360,856 1,004
Ceval Alimentos SA NPV 61,288,800 635
Companhia Energetica de Sao Paulo NPV (a) 12,983,800 886
Companhia Siderurgica Belgo-Mineira NPV 10,270,000 697
Copene Petroquimica do
Nordestse Series A (Regd) 1,580,341 618
Electrobras Series B NPV 3,048,000 1,388
Gerdau Metalurgica SA 22,248,904 999
Gerdau SA NPV 50,986,752 1,000
Hering SA (cia) NPV (a) 30,450,000 460
Hering Textile SA - NPV (a) 2,490,000 6
Papel Simao NPV 15,500,000 413
Petroleo Brasileiro SA NPV 12,808,900 3,122
Siderurgica Tubarao NPV 56,938,928 955
Telecomunicacoes de Sao Paulo NPV 487,020 145
UNIPAR SA Class B 580,226 207
Vale Rio Doce (cia) NPV 88,765 2,067
----------
19,548
----------
GREECE - 0.1%
Aluminum of Greece SA 600 36
Delta Dairy 32,304 304
----------
340
----------
HUNGARY - 0.1%
OTP Bank 9,949 309
----------
309
----------
SOUTH KOREA - 0.2%
Daewoo Heavy Industries 106,700 408
LG Chemical, Ltd. 20,640 142
----------
550
----------
TOTAL PREFERRED STOCKS
(cost $14,364) 20,747
----------
PRINCIPAL
AMOUNT
(000)
----------
LONG-TERM INVESTMENTS - 0.1%
Philippines - 0.1%
Ayala Corp. (conv.)
3.000% due 06/08/00 $ 232 256
----------
TOTAL LONG-TERM INVESTMENTS
(cost $320) 256
----------
SHORT-TERM INVESTMENTS - 10.0%
UNITED STATES - 10.0%
Dreyfus Cash Management Plus, Inc.
Money Market Fund (b) 7,067 7,067
Federal Home Loan Bank
Consolidated Discount Note
5.270% due 09/02/97 (b)(c) 6,000 5,999
General Motors Acceptance Corp.
7.580% due 03/09/98 (e) 2,000 2,017
GTE Corp.
8.850% due 03/01/98 (e) 3,000 3,042
18 Annual Report
<PAGE>
SSgA
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
Valiant Money Market Fund
Class A (b) $ 7,169 $ 7,169
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $25,292) 25,294
----------
TOTAL INVESTMENTS
(identified cost $230,021)(d) - 98.7% 249,351
OTHER ASSETS AND LIABILITIES,
NET - 1.3% 3,357
----------
NET ASSETS - 100.0% $ 252,708
----------
----------
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) Rate noted is yield-to-maturity. (Unaudited)
(d) See Note 2 for federal income tax information.
(e) Held as collateral by the custodian in connection with an equity swap
agreement held by the Fund.
(f) The Board of Trustees has estimated the value of the Fund's holdings at
zero. It is possible that the estimated value may differ significantly
from the amount that might ultimately be realized.
ABBREVIATIONS:
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
GDS - Global Depositary Share
IDR - International Depositary Receipt
PLC - Public Limited Company
* Reflected in units. 1 IDR = 1,000 shares
FOREIGN CURRENCY ABBREVIATIONS:
HUF - Hungarian Forint
KRW - South Korean Won
LKR - Sri Lanka Rupee
ZAR - South African Rand
The accompanying notes are an integral part of the financial statements.
Annual Report 19
<PAGE>
SSgA
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31,1997
% OF MARKET
NET VALUE
INDUSTRY DIVERSIFICATION ASSETS (000)
- ------------------------ ---------- ----------
Basic Industries 12.4% $ 31,290
Capital Goods 7.4 18,787
Consumer Basics 5.5 13,898
Consumer Durable Goods 2.5 6,212
Consumer Non-Durables 4.2 10,603
Consumer Services 0.6 1,411
Energy 7.0 17,730
Finance 19.7 49,813
General Business 7.5 18,970
Miscellaneous 5.5 13,818
Shelter 1.3 3,268
Technology 3.3 8,343
Transportation 0.7 1,848
Utilities 11.0 27,810
Long-Term Investments 0.1 256
Short-Term Investments 10.0 25,294
---------- ----------
Total Investments 98.7 249,351
Other Assets and Liabilities, Net 1.3 3,357
---------- ----------
NET ASSETS 100.0% $ 252,708
---------- ----------
---------- ----------
% OF MARKET
NET VALUE
GEOGRAPHIC DIVERSIFICATION ASSETS (000)
- -------------------------- ---------- ----------
Latin America 31.3% $ 79,135
Europe 28.1 71,015
Pacific Basin 22.3 56,388
Africa 7.0 17,519
Short-Term Investments - U.S. 10.0 25,294
---------- ----------
Total Investments 98.7 249,351
Other Assets and Liabilities, Net 1.3 3,357
---------- ----------
NET ASSETS 100.0% $ 252,708
---------- ----------
---------- ----------
The accompanying notes are an integral part of the financial statements.
20 Annual Report
<PAGE>
SSgA
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31,1997
EQUITY SWAP (NOTE 2)
<TABLE>
<CAPTION>
UNREALIZED
NOTIONAL APPRECIATION
AMOUNT FLOATING TERMINATION (DEPRECIATION)
UNDERLYING SECURITY (000) RATE DATE (000)
- ------------------------------------ ------------ ------------------------- --------------- ----------------
<S> <C> <C> <C> <C>
Korean 200 Stock Price Index (KS200) $ 5,000 USD LIBOR-BBA minus 1.00% 03/09/98 $ (28)
----------------
$ (28)
----------------
----------------
</TABLE>
FOREIGN CURRENCY EXCHANGE SPOT CONTRACTS
- ----------------------------------------------------------------------
UNREALIZED
CONTRACTS TO IN EXCHANGE APPRECIATION
DELIVER FOR SETTLEMENT (DEPRECIATION)
(000) (000) DATE (000)
- ---------------- ------------- ------------ ----------------
USD 340 HUF 66,142 09/02/97 $ (2)
USD 152 KRW 136,351 09/02/97 (1)
USD 2,291 ZAR 10,730 09/02/97 (3)
LKR 3,168 USD 54 09/15/97 --
----------------
$ (6)
----------------
----------------
The accompanying notes are an integral part of the financial statements.
Annual Report 21
<PAGE>
SSgA
EMERGING MARKETS FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1997
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $230,021)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . $ 249,351
Foreign currency holdings (identified cost $6,807) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,784
Foreign currency exchange spot contracts (cost $2,836)(Note 2) . . . . . . . . . . . . . . . . . . . . . 2,829
Receivables:
Dividends and interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 882
Investments sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,857
Fund shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,592
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
--------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265,305
LIABILITIES
Payables:
Investments purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,430
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 814
Accrued fees to affiliates and trustees (Note 4) . . . . . . . . . . . . . . . . . 445
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Foreign currency exchange spot contracts (cost $2,836)(Note 2) . . . . . . . . . . . 2,835
Liability for equity swap (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . 28
--------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,597
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 252,708
--------------
--------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,284
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,478
Unrealized appreciation (depreciation) on:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,330
Equity swap. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (28)
Foreign currency-related transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (38)
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226,662
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 252,708
--------------
--------------
NET ASSET VALUE, offering and redemption price per share:
($252,708,031 divided by 20,490,790 shares of $.001
par value shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . $ 12.33
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
22 Annual Report
<PAGE>
SSgA
EMERGING MARKETS FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For The Fiscal Year Ended August 31, 1997
Amounts
in thousands
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $302). . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,017
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209
--------------
Total Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,226
EXPENSES (Notes 2 and 4):
Advisory fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,363
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 761
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 331
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Amortization of deferred organization expenses . . . . . . . . . . . . . . . . . . 7
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
--------------
Expenses before reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,751
Expense reductions (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . (479)
--------------
Total Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,272
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,954
--------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,057
Foreign currency-related transactions. . . . . . . . . . . . . . . . . . . . . . . (152) 5,905
--------------
Net change in unrealized appreciation or depreciation of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,900
Equity swap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (28)
Foreign currency-related transactions. . . . . . . . . . . . . . . . . . . . . . . (26) 11,846
-------------- --------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,751
--------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . . . $ 19,705
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 23
<PAGE>
SSgA
EMERGING MARKETS FUND
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Fiscal Years Ended August 31,
Amounts in thousands
1997 1996
----------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,954 $ 1,038
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,905 137
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . . . . 11,846 6,167
----------------- -----------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . 19,705 7,342
----------------- -----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,264) (832)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . (702) (700)
----------------- -----------------
Total Distributions to Shareholders . . . . . . . . . . . . . . . . . . . . . . (1,966) (1,532)
----------------- -----------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions . . . . . . . . 114,753 46,021
----------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . 132,492 51,831
NET ASSETS
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,216 68,385
----------------- -----------------
End of year (including undistributed net investment income
of $1,284 and $594, respectively) . . . . . . . . . . . . . . . . . . . . . . . $ 252,708 $ 120,216
----------------- -----------------
----------------- -----------------
</TABLE>
<TABLE>
<CAPTION>
FUND SHARE TRANSACTIONS 1997 1996
----------------------------------- -----------------------------------
SHARES DOLLARS SHARES DOLLARS
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Proceeds from shares sold. . . . . . . . . 13,524 $ 165,252 5,782 $ 60,429
Proceeds from reinvestment
of distributions. . . . . . . . . . . . 171 1,875 145 1,456
Payments for shares redeemed . . . . . . . (4,262) (52,374) (1,506) (15,864)
---------------- ---------------- ---------------- ----------------
Total net increase (decrease). . . . . . . 9,433 $ 114,753 4,421 $ 46,021
---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
24 Annual Report
<PAGE>
SSgA
EMERGING MARKETS FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each fiscal
year or period and other performance information derived from the financial statements.
1997 1996 1995 1994*
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . . . . . . . $ 10.87 $ 10.30 $ 11.45 $ 10.00
---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . .12 .11 .14 .05
Net realized and unrealized
gain (loss) on investments. . . . . . . . . . . . . . . . . . 1.51 .68 (1.19) 1.40
---------- ---------- ---------- ----------
Total Income From Investment Operations. . . . . . . . . . . 1.63 .79 (1.05) 1.45
---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . (.11) (.12) (.10) --
Net realized gain on investments . . . . . . . . . . . . . . . (.06) (.10) -- --
---------- ---------- ---------- ----------
Total Distributions. . . . . . . . . . . . . . . . . . . . . (.17) (.22) (.10) --
---------- ---------- ---------- ----------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . . . . . . . $ 12.33 $ 10.87 $ 10.30 $ 11.45
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . 15.12 7.83 (9.28) 14.50
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of year ($000 omitted) . . . . . . . . . . . . 252,708 120,216 68,385 27,479
Ratios to average net assets (%)(b):
Operating expenses, net (c). . . . . . . . . . . . . . . . . 1.25 1.28 1.50 1.50
Operating expenses, gross (c). . . . . . . . . . . . . . . . 1.51 1.67 1.90 2.45
Net investment income. . . . . . . . . . . . . . . . . . . . 1.07 1.10 1.74 1.31
Portfolio turnover (%) . . . . . . . . . . . . . . . . . . . . 15.00 4.36 19.77 --
Per share amount of expense reductions ($ omitted)(c). . . . . .0286 .0376 .0320 .0334
Average commission rate paid per share
of security ($ omitted)(d). . . . . . . . . . . . . . . . . . .0017 .0006 N/A N/A
</TABLE>
* For the period March 1, 1994 (commencement of operations) to
August 31, 1994.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended August 31, 1994 are annualized.
(c) See Note 4 for current period amounts.
(d) In certain foreign markets the relationship between the translated U.S.
dollar price per share of security and commission paid per share of
security may vary from that of domestic markets.
Annual Report 25
<PAGE>
SSgA
EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1997
1. ORGANIZATION
The SSgA Funds (the "Investment Company") is a series mutual fund, currently
comprised of 17 investment portfolios which are in operation as of August
31, 1997. In December 1996, the Investment Company changed its name from
"The Seven Seas Series Fund" to the "SSgA Funds." These financial statements
report on one portfolio, the SSgA Emerging Markets Fund (the "Fund"). The
Investment Company is a registered and diversified open-end investment
company, as defined in the Investment Company Act of 1940, as amended (the
"1940 Act"), that was organized as a Massachusetts business trust on October
3, 1987 and operates under a First Amended and Restated Master Trust
Agreement, dated October 13, 1993, as amended (the "Agreement"). The
Investment Company's Agreement permits the Board of Trustees to issue an
unlimited number of full and fractional shares of beneficial interest at a
$.001 par value.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements.
SECURITY VALUATION: International equity and fixed-income securities traded
on a national securities exchange are valued on the basis of the last sale
price. International securities traded over the counter are valued on the
basis of the mean of bid prices. In the absence of a last sale or mean bid
price, respectively, such securities may be valued on the basis of prices
provided by a pricing service if those prices are believed to reflect the
market value of such securities.
Money market instruments maturing within 60 days of the valuation date are
valued at amortized cost, a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed, unless the Board of
Trustees determines that amortized cost does not represent fair value.
The Fund may value certain securities for which market quotations are not
readily available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
SECURITIES TRANSACTIONS: Securities transactions are recorded on the trade
date basis. Realized gains and losses from the securities transactions are
recorded on the basis of identified cost.
INVESTMENT INCOME: Dividend income is recorded on the ex-dividend date and
interest income is recorded daily on the accrual basis.
AMORTIZATION AND ACCRETION: All zero-coupon bond discounts and original
issue discounts are accreted for both tax and financial reporting purposes.
All short- and long-term market premiums/discounts are amortized/accreted
for both tax and financial reporting purposes.
26 Annual Report
<PAGE>
SSgA
EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
FEDERAL INCOME TAXES: Since the Investment Company is a Massachusetts
business trust, each sub-trust is a separate corporate taxpayer and
determines its net investment income and capital gains (or losses) and the
amounts to be distributed to each fund's shareholders without regard to the
income and capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company, as
defined by the Internal Revenue Code of 1986, as amended. This requires the
Fund to distribute all of its taxable income. Therefore, the Fund paid no
federal income taxes and no federal income tax provision was required. As
permitted by tax regulations, the Fund intends to defer a net realized
capital loss of $66,274 incurred from November 1, 1996 to August 31, 1997,
and treat it as arising in fiscal year 1998.
The Fund's aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of August 31, 1997 are as follows:
NET
UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
-------------- -------------- -------------- --------------
$ 231,936,381 $ 51,210,183 $ (33,796,132) $ 17,414,051
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date. The Fund
declares and pays dividends annually. Capital gain distributions, if any,
are generally declared and paid annually. An additional distribution may be
paid by the Fund to avoid imposition of federal income tax on any remaining
undistributed net investment income and capital gains.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP"). As
a result, net investment income and net realized gain (or loss) on
investment and foreign currency-related transactions for a reporting period
may differ significantly from distributions during such period. The
differences between tax regulations and GAAP relate primarily to investments
in options, futures, forward contracts, passive foreign investment
companies, foreign denominated investments, and certain securities sold at a
loss. Accordingly, the Fund may periodically make reclassifications among
certain of its capital accounts without impacting its net asset value.
EXPENSES: Most expenses can be directly attributed to the Fund. Expenses
which cannot be directly attributed are allocated among all funds based
principally on their relative net assets.
DEFERRED ORGANIZATION EXPENSES: The Fund has incurred expenses in connection
with its organization and initial registration. These costs have been
deferred and are being amortized over 60 months on a straight-line basis.
Annual Report 27
<PAGE>
SSgA
EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
FOREIGN CURRENCY TRANSLATIONS: The books and records of the Fund are
maintained in US dollars. Foreign currency amounts and transactions of the
Fund are translated into US dollars on the following basis:
(a) Market value of investment securities, other assets and liabilities at
the closing rate of exchange on the valuation date.
(b) Purchases and sales of investment securities and income at the closing
rate of exchange prevailing on the respective trade dates of such
transactions.
Reported net realized gains or losses from foreign currency-related
transactions arise from sales and maturities of short-term securities; sales
of foreign currencies; currency gains or losses realized between the trade
and settlement dates on securities transactions; and the difference between
the amounts of dividends, interest, and foreign withholding taxes recorded
on the fund's books and the us dollar equivalent of the amounts actually
received or paid. Net unrealized gains or losses from foreign
currency-related transactions arise from changes in the value of assets and
liabilities, other than investments in securities, at fiscal year-end,
resulting from changes in the exchange rates.
It is not practical to isolate that portion of the results of operations of
the fund that arises as a result of changes in exchange rates from that
portion that arises from changes in market prices of investments during the
year. Such fluctuations are included with the net realized and unrealized
gain or loss from investments. however, for federal income tax purposes the
fund does isolate the effects of changes in foreign exchange rates from the
fluctuations arising from changes in market prices for realized gain (or
loss) on debt obligations.
REPURCHASE AGREEMENTS: The Fund may engage in repurchase and tri-party
repurchase agreements with several financial institutions whereby the Fund,
through its custodian or third-party custodian, receives delivery of the
underlying securities. The market value of these securities (including
accrued interest) on acquisition date is required to be an amount equal to
at least 102% of the repurchase price. The Fund's Adviser will monitor
repurchase agreements daily to determine that the market value (including
accrued interest) of the underlying securities remains equal to at least
102% of the repurchase price at Fedwire closing time. The Adviser or
third-party custodian will notify the seller to immediately increase the
collateral on the repurchase agreement to 102% of the repurchase price if
collateral falls below 102%.
DERIVATIVES: To the extent permitted by the investment objectives,
restrictions and policies set forth in the Fund's Prospectus and Statement
of Additional Information, the Fund may participate in various
derivative-based transactions. Derivative securities are instruments or
agreements whose value is derived from an underlying security or index. They
include options, futures, swaps, forwards, structured notes and stripped
securities. These instruments offer unique characteristics and risks that
assist the Fund in meeting its investment strategies.
28 Annual Report
<PAGE>
SSgA
EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
The Fund typically uses derivatives in three ways: cash equitization,
hedging, and return enhancement. Cash equitization is a technique that may
be used by the Fund through the use of options and futures to earn
"market-like" returns with the Fund's excess and liquidity reserve cash
balances. Hedging is used by the fund to limit or control risks, such as
adverse movements in exchange rates and interest rates. Return enhancement
can be accomplished through the use of derivatives in the Fund. By
purchasing certain instruments, the Fund may more effectively achieve the
desired portfolio characteristics that assist in meeting the Fund's
investment objectives. Depending on how the derivatives are structured and
utilized, the risks associated with them may vary widely. These risks are
generally categorized as market risk, liquidity risk and counterparty or
credit risk.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS: In connection with portfolio
purchases and sales of securities denominated in a foreign currency, the
Fund may enter into forward foreign currency exchange spot contracts and
forward foreign currency exchange contracts ("contracts"). The Fund may
enter into foreign currency forward overlays on liquidity reserve balances.
Additionally, from time to time the Fund may enter into contracts to hedge
certain foreign currency-denominated assets. Contracts are recorded at
market value. Certain risks may arise upon entering into these contracts
from the potential inability of counterparties to meet the terms of their
contracts and are generally limited to the amount of unrealized gain on the
contracts, if any, that are recognized in the Statement of Assets and
Liabilities. Realized gains or losses arising from such transactions are
included in net realized gain (or loss) from foreign currency-related
transactions. Open contracts at August 31, 1997, are presented on the
Statement of Net Assets.
EQUITY SWAPS: The Fund has entered into a one year equity swap agreement
with Goldman Sachs International in order to efficiently participate in
certain foreign markets. Pursuant to this agreement, the Fund pays the swap
counterparty based on the notional amount and the 12-month USD LIBOR BBA
rate minus 1% at the termination date. During the terms of the agreement,
changes in the underlying value of the swap are recorded as unrealized gains
or losses and are based on changes in the value of the underlying index. The
underlying index is valued at the published daily closing price of the
Korean 200 Stock Price Index (KS200). Interest expense to be paid to the
swap counterparty at the termination date has been netted against unrealized
gains or losses of the underlying index. The Fund is exposed to credit risk
in the event of non-performance by the swap counterparty; however, the Fund
does not anticipate non-performance by the counterparty. The Fund has
segregated certain short-term investments (identified on the Statement of
Net Assets) as collateral for the notional amount and payment of liabilities
under the equity swap agreement.
INVESTMENT IN EMERGING MARKETS: Investing in emerging markets may involve
special risks and considerations not typically associated with investing in
the United States markets. These risks include revaluation of currencies,
high rates of inflation, repatriation, restrictions on income and capital,
and future adverse political and economic developments. Moreover, securities
issued in these markets may be less liquid, subject to government ownership
controls, delayed settlements, and their prices more volatile than those of
comparable securities in the United States.
Annual Report 29
<PAGE>
SSgA
EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the year ended August 31, 1997, purchases and
sales of investment securities, excluding short-term investments, aggregated
to $114,581,074 and $25,714,088, respectively.
4. RELATED PARTIES
ADVISER: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company (the "Adviser") under which the Adviser
directs the investments of the Fund in accordance with its investment
objectives, policies, and limitations. For these services, the Fund pays a
fee to the Adviser, calculated daily and paid monthly, at the annual rate of
.75% of its average daily net assets. For the period September 1, 1995 to
October 31, 1995, the Adviser voluntarily agreed to reimburse the Fund for
all expenses in excess of 1.50% of average daily net assets on an annual
basis. Effective November 1, 1995, the Adviser voluntarily agreed to
reimburse the Fund for all expenses in excess of 1.25% of average daily net
assets on an annual basis. As of August 31, 1997, the receivable due from
the Adviser for expenses in excess of the expense cap has been netted
against the Adviser fee payable. The Investment Company also has contracts
with the Adviser to provide custody, shareholder servicing and transfer
agent services to the Fund. These amounts are presented in the accompanying
Statement of Operations.
ADMINISTRATOR: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator") under
which the Administrator supervises all non-portfolio investment aspects of
the Investment Company's operations and provides adequate office space and
all necessary office equipment and services, including telephone service,
utilities, stationery supplies, and similar items. The Investment Company
pays the Administrator the following fees for services supplied by the
Administrator pursuant to the Administration Agreement: (i) an annual fee,
payable monthly on a pro rata basis, based on the following percentages of
the average daily net assets of all international funds; $0 up to and
including $500 million - .07%, over $500 million to and including $1 billion
- .06%, over $1 billion to and including $1.5 billion - .04%, over $1.5
billion - .03%; (ii) less an amount equal to the sum of certain
distribution-related expenses incurred by the Investment Company's
Distributor on behalf of the Fund (up to a maximum of 10% of the asset-based
fee determined in (i)); (iii) out-of-pocket expenses; and (iv) start-up
costs for new funds.
DISTRIBUTOR AND SHAREHOLDER SERVICING: The Investment Company has entered
into a Distribution Agreement with Russell Fund Distributors (the
"Distributor") which is a wholly-owned subsidiary of the Administrator to
promote and offer shares of the Investment Company. The Distributor may have
entered into sub-distribution agreements with other non-related parties. The
amounts paid to the Distributor are included in the accompanying Statement
of Operations.
The Investment Company has also adopted a Distribution Plan pursuant to Rule
12b-1 (the "Plan") under the 1940 Act. Under this Plan, the Investment
Company is authorized to make payments to the Distributor, or any
Shareholder Servicing Agent, as defined in the Plan, for providing
distribution and marketing services, for furnishing assistance to investors
on an ongoing basis, and for the reimbursement of direct out-of-pocket
30 Annual Report
<PAGE>
SSgA
EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
expenses incurred by the Distributor in connection with the distribution and
marketing of shares of the Investment Company and the servicing of investor
accounts.
The Fund has entered into service agreements with the Adviser, State Street
Brokerage Services, Inc. ("SSBSI"), a wholly-owned subsidiary of the
Adviser, the Adviser's Retirement Investment Services Division ("RIS"), and
the Adviser's Metropolitan Division of Commercial Banking ("Commercial
Banking")(collectively the "Agents"), as well as several unaffiliated
service providers. For these services, the Fund pays .025%, .175%, .175%,
and .175% to the Adviser, SSBSI, RIS, and Commercial Banking, respectively,
based upon the average daily value of all Fund shares held by or for
customers of these Agents. For the year ended August 31, 1997, the Fund
incurred expenses of $45,875, $5,456, and $3,368, or a total of $54,699,
from the Adviser, RIS, and SSBSI, respectively. The Fund did not incur any
expenses from Commercial Banking during this period.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis. The
shareholder servicing payments shall not exceed .20% of the average daily
value of net assets on an annual basis. Any payments that exceed the maximum
amount of allowable reimbursement may be carried forward for two years
following the year in which the expenditure was incurred so long as the plan
is in effect. The Fund's responsibility for any such expenses carried
forward shall terminate at the end of two years following the year in which
the expenditure was incurred. The Trustees or a majority of the Fund's
shareholders have the right, however, to terminate the Distribution Plan and
all payments thereunder at any time. The Fund will not be obligated to
reimburse the Distributor for carryover expenses subsequent to the
Distribution Plan's termination or noncontinuance. There were no carryover
expenses as of August 31, 1997.
BOARD OF TRUSTEES: The Investment Company pays each Trustee not affiliated
with the Investment Company a retainer of $44,000 annually, $1,000 for each
board meeting attended, an additional $1,000 for attending the annual audit
committee meeting, and reimbursement for out-of-pocket expenses. These
expenses are allocated among all of the Funds based upon their relative net
assets.
ACCRUED FEES PAYABLE TO AFFILIATES AND TRUSTEES AS OF AUGUST 31, 1997 WERE
AS FOLLOWS:
Advisory fees $ 246,646
Administration fees 13,893
Custodian fees 162,922
Distribution fees 11,724
Shareholder servicing fees 6,852
Transfer agent fees 3,158
----------
$ 445,195
----------
----------
BENEFICIAL INTEREST: As of August 31, 1997, one shareholder was a record
owner of approximately 49% of the total outstanding shares of the Fund.
Annual Report 31
<PAGE>
SSgA
EMERGING MARKETS FUND
TAX INFORMATION
August 31, 1997 (Unaudited)
The Fund paid distributions of $.0554 per share from net long-term capital gains
during its taxable year ended August 31, 1997. Pursuant to Section 852 of the
Internal Revenue Code, the Fund designates $701,540 as capital gain dividends
for its taxable year ended August 31, 1997.
The Fund paid foreign taxes of $301,789 and recognized $3,673,639 of foreign
source income during the taxable year ended August 31, 1997. Pursuant to Section
853 of the Internal Revenue Code, the Fund designates $.0147 per share of
foreign taxes paid and $.1793 of gross income earned from foreign sources in the
taxable year ended August 31, 1997.
Please consult a tax advisor for questions about federal or state income tax
laws.
32 Annual Report
<PAGE>
SSgA EMERGING MARKETS FUND
Two International Place, 35th Floor
Boston, Massachusetts 02110
(800) 997-7327
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
George W. Weber, Senior Vice President and Treasurer
J. David Griswold, Vice President and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND OFFICE OF SHAREHOLDER INQUIRIES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 647-7327
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(800) 997-7327
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
Annual Report 33
<PAGE>
SSgA-SM- FUNDS
GROWTH AND INCOME FUND
Annual Report
August 31, 1997
Table of Contents
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion. . . . . . . . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . 15
Tax Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Fund Management and Service Providers. . . . . . . . . . . . . . . . . . 21
"SSgA-SM-" IS A SERVICE MARK OF STATE STREET CORPORATION AND IS LICENSED FOR USE
BY THE SSgA FUNDS.
THIS REPORT IS PREPARED FROM THE BOOKS AND RECORDS OF THE FUND AND IT IS
SUBMITTED FOR THE GENERAL INFORMATION OF SHAREHOLDERS. THIS INFORMATION IS FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR ACCOMPANIED BY A
SSgA FUNDS PROSPECTUS CONTAINING MORE COMPLETE INFORMATION CONCERNING THE
INVESTMENT OBJECTIVE AND OPERATIONS OF THE FUND, CHARGES AND EXPENSES. THE
PROSPECTUS SHOULD BE READ CAREFULLY BEFORE AN INVESTMENT IS MADE.
PERFORMANCE IS HISTORICAL AND ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL
GAINS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN WHEN PURCHASED.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. RUSSELL FUND DISTRIBUTORS,
INC., IS THE DISTRIBUTOR OF THE SSgA FUNDS.
<PAGE>
SSgA GROWTH AND INCOME FUND
LETTER FROM THE CHAIRMAN OF STATE STREET GLOBAL ADVISORS
DEAR SHAREHOLDERS,
I am pleased to provide you with the SSgA Funds annual report for the fiscal
year ended August 31, 1997. Over the past year, the Funds have grown to include
seventeen portfolios covering a broad range of investment strategies from the
far corners of the emerging markets countries to the domestic stock and bond
markets. This report contains summaries on the market environment, performance
and financial statements for the Growth and Income Fund. I hope you find this
information a useful tool as you review your overall investment strategy.
The SSgA Funds opened three additional funds in fiscal 1997. These three asset
allocation funds, called Life Solutions Funds, were opened on July 1, 1997. Each
Life Solutions Fund seeks to achieve its investment objective by diversifying
its assets in shares of certain Funds of the Investment Company, referred to as
Underlying Funds.
The Life Solutions Income and Growth Fund seeks income and, secondarily,
long-term growth of capital.
The Life Solutions Balanced Fund seeks a balance of growth of capital and
income.
The Life Solutions Growth Fund seeks long-term growth of capital.
During the past fiscal year, the SSgA Funds were proud to announce that the SSgA
Matrix Fund and the SSgA Small Cap Fund achieved five year track records. We are
proud of our long-term record and look forward to having additional funds
complete their five year anniversary.
SSGA is strategically growing by continuing to build an organization that
delivers comprehensive services striving to meet your investment requirements.
In an effort to compete in this ever-changing complex world, we focus on our
expertise, our knowledge and our commitment to better serve your investment
needs.
As Chairman and Chief Executive Officer of State Street Global Advisors, which
serves as the investment adviser to the SSgA Funds, I would like to thank you
for choosing the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
SSgA GROWTH AND INCOME FUND
MANAGEMENT OF THE FUNDS
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A TEAM APPROACH TO INVESTMENT MANAGEMENT
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio managers work together to develop and enhance the
techniques that drive our investment processes. The result is that the
portfolios we manage benefit from the knowledge of the entire team.
Mr. Brenton H. Dickson, Principal, has been the portfolio manager primarily
responsible for investment decisions regarding the SSgA Growth and Income Fund
since its inception in September 1993. Mr. Dickson has over 30 years of
investment experience. He is a member of the Board of Directors of the Boston
Security Analyst Society and a portfolio manager of the Personal Trust Stock
Common Trust Funds. He holds the designation of Chartered Financial Analyst,
received his MBA with distinction from Boston University and is a graduate of
Middlebury College. There are five other portfolio managers working with Mr.
Dickson.
Annual Report 5
<PAGE>
SSgA GROWTH AND INCOME FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
OBJECTIVE: Achieve long-term capital growth, current income, and growth of
income.
INVESTS IN: Equity securities.
STRATEGY: Fund Managers concentrate in securities with market
capitalizations between $500 million to $50 billion. Stock selection focuses on
individual companies and the strength of their fundamental business
characteristics.
[GRAPH]
DATES GROWTH AND INCOME FUND S&P-Registered Trademark- 500 INDEX**
Inception* $10,000 $10,000
1994 $10,623 $10,547
1995 $12,287 $12,809
1996 $13,954 $15,208
1997 $19,668 $21,391
- --------------------------------------------------------------------------------
Total $66,532 $69,955
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PERFORMANCE REVIEW
For the fiscal year ended August 31, 1997, the SSgA Growth and Income Fund's
total return was 41.0%, compared to 40.7% for the S&P 500 Index. During the
first eight months of calendar 1997, the total return for the Fund was 24.6%,
versus 22.9% for the Index. Fund performance is net of operating expenses,
whereas Index results do not include expenses of any kind.
The Fund's results benefited from overweighted positions in technology, health
care, and financial service companies. The Fund's 8.5% exposure to foreign
securities continued to hurt performance, as the Morgan Stanley EAFE Index
increased only 9.1% over the past year.
SSgA
GROWTH AND INCOME FUND
Period Ended Growth of Total
08/31/97 $10,000 Return
- ------------ ------------ ------------
1 Year 14,095 40.95%
Inception 19,668 18.42%+
STANDARD & POOR'S -Registered Trademark- 500 COMPOSITE
STOCK PRICE INDEX
Period Ended Growth of Total
08/31/97 $10,000 Return
- ------------ ------------ ------------
1 Year 14,065 40.65%
Inception 21,391 20.94%+
SEE RELATED NOTES ON THE FOLLOWING PAGE.
6 Annual Report
<PAGE>
SSgA GROWTH AND INCOME FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
PORTFOLIO HIGHLIGHTS
Even though the US economy has been expanding for over seven years, there are
still no significant signs of a resurgence in inflation. For the fiscal year
ended August 31, 1997, the Consumer Price Index was 2.2%, down from the 3.3%
increase for all of calendar 1996. In fact, retailers and automobile dealers
have been engaging in intensely competitive promotional activity in order to
stimulate sales. In spite of the fact that there is little if any pricing power
in the system, corporate profits have been coming in above expectations. This is
partly because of the widespread restructuring and cost-cutting that has been
taking place over the past decade. Thus far in 1997, many of the earnings gains
have been turned in by a number of large multinational companies with recognized
brand name franchises.
Most of the companies held in the Fund are among the leaders within their
industries and conduct a significant part of their business abroad. In
addition, many are direct and indirect beneficiaries of major longer-term
secular trends that are likely to impact our economy for several years. These
include increased savings by the 'baby boom' generation as they enter their most
lucrative earnings years; higher health care spending by an aging population;
and accelerating spending for products employing new productivity enhancing
technologies.
The Fund is well diversified, with at least some exposure to the major sectors
of the US economy. The individual holdings are believed to have favorable
long-term growth prospects as well as being attractively valued at the present
time.
TOP TEN EQUITY HOLDINGS
(AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31, 1997
Northern Trust Corp. 3.7%
Caterpillar, Inc. 3.4
Intel Corp. 3.3
Time Warner, Inc. 3.2
Cisco Systems, Inc. 3.2
Microsoft Corp. 3.1
Franklin Resources, Inc. 3.1
Lucent Technologies, Inc. 3.0
Halliburton Co. 3.0
Reuters Holdings PLC Class B - ADR 3.0
----------------
NOTES: THE FOLLOWING NOTES RELATE TO THE GROWTH OF $10,000 GRAPH AND TABLE ON
THE PRECEDING PAGE.
* The Growth and Income Fund commenced operations on September 1, 1993. Index
comparison also began on September 1, 1993.
* The Standard & Poor's -Registered Trademark- 500 Composite Stock Index is
composed of 500 common stocks which are chosen by Standard & Poor's
Corporation to best capture the price performance of a large
cross-section of the US publicly traded stock market. The Index is
structured to approximate the general distribution of industries in the
US economy.
+ Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Annual Report 7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of the SSgA Funds:
We have audited the accompanying statement of assets and liabilities and
statement of net assets of SSgA Growth and Income Fund (formerly The Seven Seas
Series Growth and Income Fund)(the "Fund"), as of August 31, 1997, and the
related statement of operations for the fiscal year then ended, the statements
of changes in net assets for each of the two fiscal years in the period then
ended, and the financial highlights for each of the three fiscal years in the
period then ended, and for the period September 1, 1993 (commencement of
operations) to August 31, 1994. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
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 free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1997 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We 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 of the
Fund as of August 31, 1997, the results of its operations for the fiscal year
then ended, the changes in its net assets for each of the two fiscal years in
the period then ended, and the financial highlights for each of the three fiscal
years in the period then ended and for the period September 1, 1993
(commencement of operations) to August 31, 1994 in conformity with generally
accepted accounting principles.
Boston, Massachusetts /s/ COOPERS & LYBRAND L.L.P.
October 7, 1997
8 Annual Report
<PAGE>
SSgA
GROWTH AND INCOME FUND
STATEMENT OF NET ASSETS
August 31, 1997
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
COMMON STOCKS - 97.3%
BASIC INDUSTRIES - 8.6%
Brush Wellman, Inc. 70,000 $ 1,750
Ethyl Corp. 110,000 990
Kimberly-Clark Corp. 40,000 1,898
Schulman (A.), Inc. 70,000 1,522
----------
6,160
----------
CAPITAL GOODS - 3.4%
Caterpillar, Inc. 42,000 2,439
----------
2,439
----------
CONSUMER BASICS - 16.7%
American Home Products Corp. 28,000 2,016
Bristol-Myers Squibb Co. 27,000 2,052
Merck & Co., Inc. 22,000 2,020
Panamerican Beverages, Inc. Class A 65,000 1,954
Procter & Gamble Co. 15,000 1,996
Warner-Lambert Co. 15,000 1,906
----------
11,944
----------
CONSUMER NON-DURABLES - 2.8%
Home Depot, Inc. (The) 43,000 2,029
----------
2,029
----------
CONSUMER SERVICES - 2.7%
Disney (Walt) Co. 25,000 1,920
----------
1,920
----------
ENERGY - 7.1%
Halliburton Co. 45,000 2,149
Mobil Corp. 22,000 1,600
Unocal Corp. 35,000 1,367
----------
5,116
----------
FINANCE - 14.6%
American Express Co. 25,000 1,944
American International Group, Inc. 19,500 1,840
Franklin Resources, Inc. 29,000 2,244
Morgan (J.P.) & Co., Inc. 17,000 1,823
Northern Trust Corp. 50,000 2,638
----------
10,489
----------
GENERAL BUSINESS - 8.8%
Reuters Holdings PLC Class B - ADR 35,000 2,128
Staples, Inc. (a) 80,000 1,870
Time Warner, Inc. 45,000 2,318
----------
6,316
----------
MISCELLANEOUS - 2.8%
Beacon Properties 55,000 1,980
----------
1,980
----------
TECHNOLOGY - 22.7%
AlliedSignal, Inc. 25,000 2,064
Boeing Co. 32,000 1,742
Cisco Systems, Inc. (a) 30,000 2,259
Digital Equipment Corp. (a) 43,000 1,849
Hewlett-Packard Co. 25,000 1,533
Intel Corp. 26,000 2,390
Lucent Technologies, Inc. 28,000 2,181
Microsoft Corp. (a) 17,000 2,247
----------
16,265
----------
Annual Report 9
<PAGE>
SSgA
GROWTH AND INCOME FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
UTILITIES - 7.1%
Alltel Corp. 53,000 $ 1,676
AT&T Corp. 41,000 1,599
Vodafone Group PLC - ADR 36,000 1,834
----------
5,109
----------
TOTAL COMMON STOCKS
(cost $45,244) 69,767
----------
PRINCIPAL
AMOUNT
(000)
----------
SHORT-TERM INVESTMENTS - 2.6%
Dreyfus Cash Management Plus, Inc.
Money Market Fund (b) $ 1,482 1,482
Federal Home Loan Bank Discount Note (b)
5.437% due 09/05/97 400 400
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $1,882) 1,882
----------
TOTAL INVESTMENTS
(identified cost $47,126)(c) - 99.9% 71,649
OTHER ASSETS AND LIABILITIES, NET - 0.1% 87
----------
NET ASSETS - 100.0% $ 71,736
----------
----------
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) See Note 2 for federal income tax information.
Abbreviations:
ADR - American Depositary Receipt
PLC - Public Limited Company
The accompanying notes are an integral part of the financial statements.
10 Annual Report
<PAGE>
SSgA
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1997
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $47,126)(Note 2). . . . . . . . . . . . . . . . . . . . . . . . . $ 71,649
Receivables:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
--------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,865
LIABILITIES
Payables:
Accrued fees to affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 119
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
--------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 71,736
--------------
--------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 118
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,385
Unrealized appreciation (depreciation) on investments. . . . . . . . . . . . . . . . . . . . . . . . . . 24,523
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,706
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 71,736
--------------
--------------
NET ASSET VALUE, offering and redemption price per share:
($71,735,853 divided by 3,967,169 shares of $.001
par value shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . $ 18.08
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 11
<PAGE>
SSgA
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Fiscal Year Ended August 31, 1997
Amounts in
thousands
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $8). . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,192
EXPENSES (Notes 2 and 4):
Advisory fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 572
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Amortization of deferred organization expenses . . . . . . . . . . . . . . . . . . 9
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
--------------
Expenses before reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 814
Expense reductions (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . (175)
--------------
Total Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 639
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 553
--------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,387
Net change in unrealized appreciation or depreciation of investments . . . . . . . . . . . . . . . . . . 14,677
--------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,064
--------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . . . $ 22,617
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 Annual Report
<PAGE>
SSgA
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Fiscal Years Ended August 31,
Amounts in thousands
1997 1996
----------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 553 $ 590
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,387 2,142
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . . . . 14,677 3,616
----------------- -----------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . 22,617 6,348
----------------- -----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (606) (607)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . (2,131) (163)
----------------- -----------------
Total Distributions to Shareholders . . . . . . . . . . . . . . . . . . . . . . (2,737) (770)
----------------- -----------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions . . . . . . . . (3,967) 6,361
----------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . 15,913 11,939
NET ASSETS
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,823 43,884
----------------- -----------------
End of year (including undistributed net investment income of
$118 and $171, respectively). . . . . . . . . . . . . . . . . . . . . . . . . . $ 71,736 $ 55,823
----------------- -----------------
----------------- -----------------
</TABLE>
<TABLE>
<CAPTION>
FUND SHARE TRANSACTIONS 1997 1996
------------------------------------- -------------------------------------
SHARES DOLLARS SHARES DOLLARS
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Proceeds from shares sold. . . . . . . . . 2,426 $ 36,961 2,140 $ 27,679
Proceeds from reinvestment
of distributions . . . . . . . . . . . . 193 2,708 63 784
Payments for shares redeemed . . . . . . . (2,832) (43,636) (1,694) (22,102)
----------------- ----------------- ----------------- -----------------
Total net increase (decrease). . . . . . . (213) $ (3,967) 509 $ 6,361
----------------- ----------------- ----------------- -----------------
----------------- ----------------- ----------------- -----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 13
<PAGE>
SSgA
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each fiscal
year or period and other performance information derived from the financial statements.
1997 1996 1995 1994*
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . . . . $ 13.36 $ 11.95 $ 10.51 $ 10.00
---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . .12 .15 .18 .15
Net realized and unrealized gain (loss) on investments . 5.18 1.46 1.44 .47
---------- ---------- ---------- ----------
Total Income From Investment Operations. . . . . . . . 5.30 1.61 1.62 .62
---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . . . (.14) (.16) (.18) (.11)
Net realized gain on investments . . . . . . . . . . . . (.44) (.04) -- --
---------- ---------- ---------- ----------
Total Distributions. . . . . . . . . . . . . . . . . . (.58) (.20) (.18) (.11)
---------- ---------- ---------- ----------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . . . . $ 18.08 $ 13.36 $ 11.95 $ 10.51
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . 40.95 13.57 15.66 6.23
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of year ($000 omitted) . . . . . . . . . 71,736 55,823 43,884 26,747
Ratios to average net assts (%)(b):
Operating expenses, net (c). . . . . . . . . . . . . . .95 .95 .95 .95
Operating expenses, gross (c). . . . . . . . . . . . . 1.21 1.40 1.61 1.44
Net investment income . . . . . . . . . . . . . . . . .82 1.15 1.72 1.75
Portfolio turnover (%)(b). . . . . . . . . . . . . . . . 29.88 38.34 39.32 36.48
Per share amount of expense reductions ($ omitted)(c). . .0396 .0574 .0685 .0420
Average commission rate paid per share
of security ($ omitted). . . . . . . . . . . . . . . . .0421 .0436 N/A N/A
</TABLE>
* For the period September 1, 1993 (commencement of operations)
to August 31, 1994.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended August 31, 1994 are annualized.
(c) See Note 4 for current period amounts.
14 Annual Report
<PAGE>
SSgA
GROWTH AND INCOME FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1997
1. ORGANIZATION
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 17 investment portfolios which are in operation as
of August 31, 1997. In December 1996, the Investment Company changed its
name from "The Seven Seas Series Fund" to the "SSgA Funds." These financial
statements report on one portfolio, the SSgA Growth and Income Fund (the
"Fund"). The Investment Company is a registered and diversified open-end
investment company, as defined in the Investment Company Act of 1940, as
amended (the "1940 Act"), that was organized as a Massachusetts business
trust on October 3, 1987 and operates under a First Amended and Restated
Master Trust Agreement, dated October 13, 1993, as amended (the
"Agreement"). The Investment Company's Agreement permits the Board of
Trustees to issue an unlimited number of full and fractional shares of
beneficial interest at a $.001 par value.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
SECURITY VALUATION: United States equity securities listed and traded
principally on any national securities exchange are valued on the basis of
the last sale price or, lacking any sale, at the closing bid price, on the
primary exchange on which the security is traded. United States
over-the-counter equities are valued on the basis of the closing bid price.
International securities traded on a national securities exchange are
valued on the basis of the last sale price. International securities traded
over the counter are valued on the basis of the mean of bid prices. In the
absence of a last sale or mean bid price, respectively, such securities may
be valued on the basis of prices provided by a pricing service if those
prices are believed to reflect the market value of such securities.
Money market instruments maturing within 60 days of the valuation date are
valued at amortized cost, a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed, unless the Board of
Trustees determines that amortized cost does not represent fair value.
The Fund may value securities for which market quotations are not readily
available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
SECURITIES TRANSACTIONS: Securities transactions are recorded on a trade
date basis. Realized gains and losses from securities transactions are
recorded on the basis of identified cost.
Annual Report 15
<PAGE>
SSgA
GROWTH AND INCOME FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
INVESTMENT INCOME: Dividend income is recorded on the ex-dividend date and
interest income is recorded daily on the accrual basis.
AMORTIZATION AND ACCRETION: All zero-coupon bond discounts and original
issue discounts are accreted for both tax and financial reporting purposes.
All short- and long-term market premiums/discounts are amortized/accreted
for both tax and financial reporting purposes.
FEDERAL INCOME TAXES: Since the Investment Company is a Massachusetts
business trust, the sub-trust is a separate corporate taxpayer and
determines its net investment income and capital gains (or losses) and the
amounts to be distributed to each fund's shareholders without regard to the
income and capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company, as
defined by the Internal Revenue Code of 1986, as amended. This requires the
Fund to distribute all of its taxable income. Therefore, the Fund paid no
federal income taxes and no federal income tax provision was required.
The Fund's aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of August 31, 1997 are as follows:
NET
UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
-------------- -------------- -------------- --------------
$ 47,125,850 $ 25,319,645 $ (796,980) $ 24,522,665
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date. Dividends
are generally declared and paid quarterly. Capital gain distributions are
generally declared and paid annually. An additional distribution may be
paid by the Fund to avoid imposition of federal income tax on any remaining
undistributed net investment income and capital gains.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP"). As
a result, net investment income and net realized gain (or loss) from
investment transactions for a reporting period may differ significantly
from distributions during such period. The differences between tax
regulations and GAAP relate primarily to investments in certain securities
sold at a loss. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting
its net asset value.
16 Annual Report
<PAGE>
SSgA
GROWTH AND INCOME FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
EXPENSES: Most expenses can be directly attributed to the Fund. Expenses
which cannot be directly attributed are allocated among all funds based
principally on their relative net assets.
DEFERRED ORGANIZATION EXPENSES: The Fund incurred expenses in connection
with its organization and initial registration. These costs have been
deferred and are being amortized over 60 months on a straight-line basis.
REPURCHASE AGREEMENTS: The Fund may engage in repurchase and tri-party
repurchase agreements with several financial institutions whereby the Fund,
through its custodian or third-party custodian, receives delivery of the
underlying securities. The market value of these securities (including
accrued interest) on acquisition date is required to be an amount equal to
at least 102% of the repurchase price. The Fund's Adviser will monitor
repurchase agreements daily to determine that the market value (including
accrued interest) of the underlying securities remains equal to at least
102% of the repurchase price at Fedwire closing time. The Adviser or
third-party custodian will notify the seller to immediately increase the
collateral on the repurchase agreement to 102% of the repurchase price if
collateral falls below 102%.
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the year ended August 31, 1997, purchases and
sales of investment securities, excluding short-term investments aggregated
to $19,304,009 and $24,781,033, respectively.
4. RELATED PARTIES
ADVISER: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company (the "Adviser") under which the Adviser
directs the investments of the Fund in accordance with its investment
objectives, policies, and limitations. For these services, the Fund pays a
fee to the Adviser, calculated daily and paid monthly, at the annual rate
of .85% of its average daily net assets. For the year ended August 31,
1997, the Adviser voluntarily agreed to reimburse the Fund for all expenses
in excess of .95% of average daily net assets on an annual basis. As of
August 31, 1997, the receivable due from the Adviser for expenses in excess
of the expense cap has been netted against the Adviser fee payable. The
Investment Company also has contracts with the Adviser to provide custody,
shareholder servicing and transfer agent services to the Fund. These
amounts are presented in the accompanying Statement of Operations.
ADMINISTRATOR: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator") under
which the Administrator supervises all non-portfolio investment aspects of
the Investment Company's operations and provides adequate office space and
all necessary office equipment and services, including telephone service,
utilities, stationery supplies, and similar items. The Investment Company
pays the Administrator the following fees for services supplied by the
Annual Report 17
<PAGE>
SSgA
GROWTH AND INCOME FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
Administrator pursuant to the Administration Agreement: (i) an annual fee,
payable monthly on a pro rata basis, based on the following percentages of
the average daily net assets of all domestic funds: $0 up to and including
$500 million - .06%; over $500 million to and including $1 billion - .05%;
over $1 billion - .03%; (ii) less an amount equal to the sum of certain
distribution-related expenses incurred by the Investment Company's
Distributor on behalf of the Fund (up to a maximum of 10% of the
asset-based fee determined in (i)); (iii) out-of-pocket expenses; and (iv)
start-up costs for new funds.
DISTRIBUTOR AND SHAREHOLDER SERVICING: The Investment Company has entered
into a Distribution Agreement with Russell Fund Distributors (the
"Distributor") which is a wholly-owned subsidiary of the Administrator to
promote and offer shares of the Investment Company. The Distributor may
have entered into sub-distribution agreements with other non-related
parties. The amounts paid to the Distributor are included in the
accompanying Statement of Operations.
The Investment Company has also adopted a Distribution Plan pursuant to
Rule 12b-1 (the "Plan") under the 1940 Act. Under this Plan, the Investment
Company is authorized to make payments to the Distributor, or any
Shareholder Servicing Agent, as defined in the Plan, for providing
distribution and marketing services, for furnishing assistance to investors
on an ongoing basis, and for the reimbursement of direct out-of-pocket
expenses incurred by the Distributor in connection with the distribution
and marketing of shares of the Investment Company and the servicing of
investor accounts.
The Fund has entered into service agreements with the Adviser, State Street
Brokerage Services, Inc. ("SSBSI"), a wholly-owned subsidiary of the
Adviser, the Adviser's Retirement Investment Services Division ("RIS"), and
the Adviser's Metropolitan Division of Commercial Banking ("Commercial
Banking")(collectively the "Agents"), as well as several unaffiliated
service providers. For these services, the Fund pays .025%, .175%, .175%,
and .175% to the Adviser, SSBSI, RIS, and Commercial Banking, respectively,
based upon the average daily value of all Fund shares held by or for
customers of these Agents. For the year ended August 31, 1997, the Fund
incurred expenses of $16,839 and $8,133, or a total of $24,972, from the
Adviser and SSBSI, respectively. The Fund did not incur any expenses from
RIS or Commercial Banking during this period.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The
18 Annual Report
<PAGE>
SSgA
GROWTH AND INCOME FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
Trustees or a majority of the Fund's shareholders have the right, however,
to terminate the Distribution Plan and all payments thereunder at any time.
The Fund will not be obligated to reimburse the Distributor for carryover
expenses subsequent to the Distribution Plan's termination or
noncontinuance. There were no carryover expenses as of August 31, 1997.
AFFILIATED BROKERAGE: The Fund placed a portion of its portfolio
transactions with SSBSI, an affiliated broker dealer of the Fund's Adviser.
The commissions paid to SSBSI were $18,332 for the year ended August 31,
1997.
BOARD OF TRUSTEES: The Investment Company pays each Trustee not affiliated
with the Investment Company a retainer of $44,000 annually, $1,000 for each
board meeting attended, an additional $1,000 for attending the annual audit
committee meeting, and reimbursement for out-of-pocket expenses. These
expenses are allocated among all of the Funds based upon their relative net
assets.
ACCRUED FEES PAYABLE TO AFFILIATES AND TRUSTEES AS OF AUGUST 31, 1997 WERE
AS FOLLOWS:
Advisory fees $ 91,442
Administration fees 2,039
Custodian fees 3,517
Distribution fees 1,528
Shareholder servicing fees 1,804
Transfer agent fees 18,649
----------
$ 118,979
----------
----------
BENEFICIAL INTEREST: As of August 31, 1997, two shareholders (who were also
affiliates of the Investment Company) were each record owners of
approximately 29% of the total outstanding shares of the Fund.
5. DIVIDENDS
On September 2, 1997 the Board of Trustees declared a dividend of $.0298
from net investment income, payable on September 10, 1997 to shareholders
of record on September 3, 1997.
Annual Report 19
<PAGE>
SSgA
GROWTH AND INCOME FUND
TAX INFORMATION
August 31, 1997 (Unaudited)
The Fund paid distributions of $.3772 per share from net long-term capital gains
during its taxable year ended August 31, 1997. Pursuant to Section 852 of the
Internal Revenue Code, the Fund designates $1,820,443 as capital gain dividends
for its taxable year ended August 31, 1997.
Please consult a tax advisor for questions about federal or state income tax
laws.
20 Annual Report
<PAGE>
SSgA GROWTH AND INCOME FUND
Two International Place, 35th Floor
Boston, Massachusetts 02110
(800) 997-7327
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
George W. Weber, Senior Vice President and Treasurer
J. David Griswold, Vice President and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND OFFICE OF SHAREHOLDER INQUIRIES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 647-7327
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(800) 997-7327
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
Annual Report 21
<PAGE>
SSgA-SM- FUNDS
INTERMEDIATE FUND
Annual Report
August 31, 1997
Table of Contents
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion. . . . . . . . . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . 17
Fund Management and Service Providers. . . . . . . . . . . . . . . . . . . 22
"SSgA-SM-" IS A SERVICE MARK OF STATE STREET CORPORATION AND IS LICENSED FOR
USE BY THE SSgA FUNDS.
THIS REPORT IS PREPARED FROM THE BOOKS AND RECORDS OF THE FUND AND IT IS
SUBMITTED FOR THE GENERAL INFORMATION OF SHAREHOLDERS. THIS INFORMATION IS FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR ACCOMPANIED BY A
SSgA FUNDS PROSPECTUS CONTAINING MORE COMPLETE INFORMATION CONCERNING THE
INVESTMENT OBJECTIVE AND OPERATIONS OF THE FUND, CHARGES AND EXPENSES. THE
PROSPECTUS SHOULD BE READ CAREFULLY BEFORE AN INVESTMENT IS MADE.
PERFORMANCE IS HISTORICAL AND ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL
GAINS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN WHEN PURCHASED.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. RUSSELL FUND DISTRIBUTORS,
INC., IS THE DISTRIBUTOR OF THE SSgA FUNDS.
<PAGE>
SSgA INTERMEDIATE FUND
LETTER FROM THE CHAIRMAN OF STATE STREET GLOBAL ADVISORS
DEAR SHAREHOLDERS,
I am pleased to provide you with the SSgA Funds annual report for the fiscal
year ended August 31, 1997. Over the past year, the Funds have grown to include
seventeen portfolios covering a broad range of investment strategies from the
far corners of the emerging markets countries to the domestic stock and bond
markets. This report contains summaries on the market environment, performance
and financial statements for the Intermediate Fund. I hope you find this
information a useful tool as you review your overall investment strategy.
The SSgA Funds opened three additional funds in fiscal 1997. These three asset
allocation funds, called Life Solutions Funds, were opened on July 1, 1997. Each
Life Solutions Fund seeks to achieve its investment objective by diversifying
its assets in shares of certain Funds of the Investment Company, referred to as
Underlying Funds.
The Life Solutions Income and Growth Fund seeks income and, secondarily,
long-term growth of capital.
The Life Solutions Balanced Fund seeks a balance of growth of capital and
income.
The Life Solutions Growth Fund seeks long-term growth of capital.
During the past fiscal year, the SSgA Funds were proud to announce that the SSgA
Matrix Fund and the SSgA Small Cap Fund achieved five year track records. We are
proud of our long-term record and look forward to having additional funds
complete their five year anniversary.
SSGA is strategically growing by continuing to build an organization that
delivers comprehensive services striving to meet your investment requirements.
In an effort to compete in this ever-changing complex world, we focus on our
expertise, our knowledge and our commitment to better serve your investment
needs.
As Chairman and Chief Executive Officer of State Street Global Advisors, which
serves as the investment adviser to the SSgA Funds, I would like to thank you
for choosing the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
SSgA INTERMEDIATE FUND
MANAGEMENT OF THE FUNDS
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A TEAM APPROACH TO INVESTMENT MANAGEMENT
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio managers work together to develop and enhance the
techniques that drive our investment processes. The result is that the
portfolios we manage benefit from the knowledge of the entire team.
Mr. John Kirby, Assistant Vice President, has been the portfolio manager
primarily responsible for investment decisions regarding the SSgA Intermediate
Fund. Prior to joining State Street Bank in 1995, Mr. Kirby was an account
manager with Lowell, Blake & Associates. Prior to that he worked as a portfolio
manager with One Federal Asset Management and an asset/liability risk specialist
at Cambridge Port Savings. He has a BA from Boston College and is a CFA
candidate. There are six other portfolio managers working with Mr. Kirby.
Annual Report 5
<PAGE>
SSgA INTERMEDIATE FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
OBJECTIVE: High level of current income while preserving principal.
INVESTS IN: High quality, investment grade, debt instruments; including US
Government Treasuries, and Agencies, corporate bonds, asset-backed securities,
and mortgage-backed securities with a dollar-weighted average maturity of three
to ten years.
STRATEGY: Fund Managers seek to match or exceed the return of the Lehman
Brothers Intermediate Government/Corporate Bond Index. The Fund seeks to match
the Index's duration at all times while adding value through issue and sector
selection.
[GRAPH]
DATES INTERMEDIATE FUND LEHMAN INTERMEDIATE
Inception* $10,000 $10,000
1994 $9,658 $9,967
1995 $10,629 $10,911
1996 $11,066 $11,395
1997 $11,952 $12,357
- --------------------------------------------------------------------------------
Total $53,305 $54,630
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SSgA
INTERMEDIATE FUND
Period Ended Growth of Total
08/31/97 $10,000 Return
- ------------ ------------ ------------
1 Year $ 10,800 8.00%
Inception $ 11,952 4.56%+
LEHMAN BROTHERS INTERMEDIATE
GOVERNMENT/CORPORATE BOND INDEX
Period Ended Growth of Total
08/31/97 $10,000 Return
- ------------ ------------ ------------
1 Year $ 10,844 8.44%
Inception $ 12,357 5.43%+
SEE RELATED NOTES ON THE FOLLOWING PAGE.
PERFORMANCE REVIEW
For the fiscal year ended August 31, 1997, the SSgA Intermediate Bond Fund
returned 8.00%, versus 8.44% for its benchmark, the Lehman Brothers Intermediate
Government/Corporate Bond Index. Deviation from the benchmark was principally
due to the payment of operating expenses by the Fund, whereas Index results do
not include expenses of any kind.
The Fund does not pursue active interest rate exposure. Over the year, the
portfolio averaged 35 basis points of tracking error versus the Index. The
primary source of tracking error was sector allocations, a risk profile that
will be less volatile than one resulting from active duration management.
The fiscal year was favorable for fixed income markets. During the period,
moderate economic growth coupled with little if any real inflationary pressures
prevailed. The Federal Reserve (Fed) tempered the stock and bond "rally"
6 Annual Report
<PAGE>
SSgA INTERMEDIATE FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
by making it known it would be vigilant about containing inflationary pressure.
The long anticipated Fed move on March 26th to increase the Fed Funds rate
(+.25%), and the accompanying comments expressing concerns over inflation and
economic strength, set the tone for rising interest rates in the middle of the
year. The Fed's "pre-emptive strike" was well anticipated by investors and its
cautious tone prevailed until it was clearer that the Fed's work was done for
the near-term, allowing rates to move lower for the last part of fiscal 1997.
PORTFOLIO HIGHLIGHTS
The Fund was invested primarily in a diversified portfolio of debt securities
with a dollar-weighted average maturity between three and ten years. At August
31, 1997, the Fund's duration matched the Index at 3.33 years. The Fund had an
average quality rating of AA and was overweighted versus the Index in
non-government sectors in order to capture incremental yield.
The strategy in place for all of fiscal 1997 was to overweight domestic
corporate, AAA rated asset-backed, Yankee and mortgage-backed securities. US
Treasuries were underweighted. This strategy provided the portfolio with extra
yield and created the opportunity for enhanced returns versus the Index.
Additionally, the Fund has taken an active exposure to the global economy by
overweighting corporates through investments in US dollar denominated debt and
is concentrated in sovereign and corporate securities domiciled in Europe,
Canada and Australia/New Zealand. Asia presented too many uncertainties and was
kept at a neutral weighting to the Index.
TOP TEN ISSUERS
(AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31, 1997
United States Treasuries 14.7%
General Motors Acceptance Corp. 4.0
Lockheed Martin Corp. 3.8
International Lease Finance Corp. 3.7
CIT Group Holdings, Inc. 3.6
Citibank Credit Card Master Trust 2.7
Premier Auto Trust 2.7
Ford Motor Credit Co. 2.5
Quebec, Province of 2.5
Federal Home Loan Mortgage Corp. 2.3
----------------------
NOTES: THE FOLLOWING NOTES RELATE TO THE GROWTH OF $10,000 GRAPH AND TABLE ON
THE PRECEDING PAGE.
* The Intermediate Fund commenced operations on September 1, 1993. Index
comparisons also began on September 1, 1993.
** The Lehman Brothers Intermediate Government/ Corporate Bond Index is
composed of all bonds covered by the Lehman Brothers Government/Corporate
Bond Index with maturities between one and 9.99 years.
+ Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Annual Report 7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of the SSgA Funds:
We have audited the accompanying statement of assets and liabilities and
statement of net assets of SSgA Intermediate Fund (formerly The Seven Seas
Series Intermediate Fund)(the "Fund"), as of August 31, 1997, and the related
statement of operations for the fiscal year then ended, the statements of
changes in net assets for each of the two fiscal years in the period then ended,
and the financial highlights for each of the three fiscal years in the period
then ended and for the period September 1, 1993 (commencement of operations) to
August 31, 1994. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
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 free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1997 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We 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 of the
Fund as of August 31, 1997, the results of its operations for the fiscal year
then ended, the changes in its net assets for each of the two fiscal years in
the period then ended, and the financial highlights for each of the three fiscal
years in the period then ended and for the period September 1, 1993
(commencement of operations) to August 31, 1994 in conformity with generally
accepted accounting principles.
Boston, Massachusetts /s/ COOPERS & LYBRAND L.L.P.
October 7, 1997
8 Annual Report
<PAGE>
SSgA
INTERMEDIATE FUND
STATEMENT OF NET ASSETS
August 31, 1997
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
LONG-TERM INVESTMENTS - 98.8%
ASSET-BACKED SECURITIES - 11.9%
American Express Master Trust
Series 1993-1 Class A
5.375% due 09/15/00 $ 900 $ 875
CIT RV Trust
6.400% due 02/15/07 300 301
Citibank Credit Card Master Trust I
Series 1993-3 Class A
5.500% due 02/07/00 500 496
Series 1997-7 Class A
6.350% due 08/15/02 1,000 1,000
Ford Credit Auto Loan Master Trust
Series 1996-1 Class A
5.500% due 02/15/03 370 360
Ford Credit Auto Owner Trust
Series 1996 - B Class A4
6.300% due 01/15/01 500 501
MBNA Master Credit Card Trust
Series 1993-3 Class A
5.400% due 09/15/00 1,000 992
Premier Auto Trust
Series 1996-2 Class A4
6.575% due 10/06/00 1,000 1,007
Series 1997-1 Class A4
6.350% due 04/06/02 250 251
Series 1997-2 Class A4
6.250% due 06/06/01 200 200
Standard Credit Card Master Trust I
Series 1991-6 Class A
7.875% due 11/07/98 400 407
----------
6,390
----------
CORPORATE BONDS AND
NOTES - 47.2%
A.H. Belo Corp.
6.875% due 06/01/02 475 478
Associates Corp. of North America
6.250% due 03/15/99 400 400
Australia & New Zealand Banking
Group, Ltd.
7.550% due 09/15/06 500 518
Banc One, Milwaukee, N.A.
6.625% due 04/15/03 500 498
Branch Banking & Trust Co.
5.700% due 02/01/01 250 244
Burlington Northern Santa Fe Corp.
6.375% due 12/15/05 200 192
CIT Group Holdings, Inc. (MTN)
6.250% due 03/22/99 1,450 1,457
6.250% due 10/04/99 500 500
Citicorp
8.000% due 02/01/03 350 369
Crown Cork & Seal, Inc.
7.000% due 06/15/99 750 759
Enersis SA
6.900% due 12/01/06 160 158
Enron Corp.
9.650% due 05/15/01 150 164
6.500% due 08/01/02 750 746
First Data Corp. Series B (MTN)
6.820% due 09/18/01 500 504
First National Bank of Boston
8.375% due 12/15/02 500 535
Fleet Financial Group
7.250% due 09/01/99 500 509
Ford Motor Company
7.500% due 11/15/99 555 568
Ford Motor Credit Co.
7.250% due 05/15/99 300 304
8.375% due 01/15/00 350 365
Ford Motor Credit Co. (MTN)
6.110% due 12/28/01 700 687
Annual Report 9
<PAGE>
SSgA
INTERMEDIATE FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
General Electric Capital Corp.
Series A (MTN) Step Up Bond
8.090% due 04/01/04 (c) $ 450 $ 481
General Motors Acceptance Corp.
7.125% due 06/01/99 500 507
5.625% due 02/15/01 1,000 970
General Motors Acceptance Corp.
(MTN)
5.950% due 12/28/98 500 500
6.625% due 04/24/00 200 201
GTE Corp.
9.375% due 12/01/00 800 866
Harris Corp.
6.650% due 08/01/06 700 703
Integra Bank (MTN)
6.550% due 06/15/00 500 501
International Lease Finance Corp.
6.125% due 11/01/99 1,000 996
6.375% due 01/18/00 500 500
6.625% due 08/15/00 500 502
John Deere Capital Corp.
6.000% due 02/01/99 180 180
Kemper Corp.
6.875% due 09/15/03 500 502
KFW International Finance, Inc.
7.625% due 02/15/04 100 105
Lockheed Martin Corp.
6.550% due 05/15/99 1,250 1,255
6.850% due 05/15/01 800 807
McDonnell Douglas Corp.
6.875% due 11/01/06 365 368
Merrill Lynch & Co., Inc. (MTN)
6.510% due 03/19/01 300 300
Nationsbank Corp.
7.625% due 04/15/05 900 937
News America Holdings, Inc.
7.450% due 06/01/00 200 204
Norfolk Southern Corp.
6.700% due 05/01/00 500 504
Norwest Financial, Inc.
Series B (MTN)
6.375% due 10/01/99 500 501
Pitney Bowes Credit Corp.
Series C (MTN)
6.540% due 07/15/99 700 705
Raytheon Co.
6.450% due 08/15/02 1,000 991
Sears Roebuck Acceptance Corp.
Series II (MTN)
6.540% due 05/06/99 500 502
Societe Generale - New York
7.400% due 06/01/06 90 91
Worldcom, Inc.
7.750% due 04/01/07 750 774
----------
25,408
----------
EURODOLLAR BONDS - 0.2%
Korea Development Bank
6.625% due 11/21/03 85 82
---------
82
---------
MORTGAGE-BACKED SECURITIES - 4.1%
Federal Home Loan Mortgage Corp.
Participation Certificate
Group #L7-3986
4.500% due 04/01/01 405 382
Federal Home Loan Mortgage Corp.
Participation Certificate Pools
# 328962 6.000% due 01/01/09 575 563
# 367205 5.500% due 07/01/11 299 287
10 Annual Report
<PAGE>
SSgA
INTERMEDIATE FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
Government National Mortgage
Association Pools (c)
# 008022 7.125% due 07/20/22 $ 235 $ 242
# 008061 6.875% due 10/20/22 237 244
# 008162 7.000% due 03/20/23 237 244
# 008217 7.375% due 06/20/23 235 241
----------
2,203
----------
UNITED STATES GOVERNMENT
AGENCIES - 4.7%
Federal Home Loan Bank
6.995% due 04/02/07 300 307
Federal National Mortgage Association
6.600% due 06/24/99 250 252
5.450% due 10/10/03 500 475
Federal National Mortgage
Association (MTN)
6.480% due 06/28/04 350 350
Private Export Funding Corp.
Series AAA
7.010% due 04/30/04 340 350
Series ZZ
7.110% due 04/15/07 200 205
State of Israel United States Government
Guaranteed Notes
Series 2-Z
Zero Coupon due 03/15/05 115 70
Series 3-A
6.000% due 02/15/99 450 450
Series 9-Z
Zero Coupon due 03/15/05 130 68
----------
2,527
----------
UNITED STATES GOVERNMENT
TREASURIES - 14.9%
United States Treasury Bonds
12.000% due 08/15/13 340 482
12.500% due 08/15/14 155 230
United States Treasury Notes
6.000% due 08/15/99 560 560
6.000% due 08/15/00 2,350 2,344
6.500% due 05/31/01 1,250 1,263
6.500% due 05/31/02 820 828
5.875% due 02/15/04 60 59
7.250% due 08/15/04 350 368
7.875% due 11/15/04 120 130
7.000% due 07/15/06 690 717
6.125% due 08/15/07 1,025 1,009
United States Treasury
Principal Only Strip
Zero Coupon due 05/15/99 60 55
----------
8,045
----------
YANKEE BONDS - 15.8%
ABN AMRO North America, Inc.
(Chicago)
7.550% due 06/28/06 500 521
Australia & New Zealand Banking
Group LTD.
6.250% due 02/01/04 500 485
Bell Cablemedia PLC
Step Up Bond
Zero Coupon due 07/15/04 250 229
Finland, Republic of
7.875% due 07/28/04 215 231
Ireland, Republic of
7.875% due 12/01/01 400 421
7.125% due 07/15/02 300 308
Malayan Banking Berhad New York
7.125% due 09/15/05 500 492
Annual Report 11
<PAGE>
SSgA
INTERMEDIATE FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- -----------
Manitoba, Province of
6.875% due 09/15/02 $ 500 $ 507
Manitoba, Province of Series CK
9.000% due 12/15/00 500 538
New Zealand, Government of
8.750% due 12/15/06 500 570
Ontario, Province of
8.000% due 10/17/01 250 263
7.375% due 01/27/03 500 518
Poland, Government of
7.125% due 07/01/04 500 502
Quebec, Province of
9.125% due 03/01/00 1,275 1,354
Victorian Public Authority
Financial Agency
8.450% due 10/01/01 500 535
Westpac Banking, Ltd.
7.875% due 10/15/02 1,000 1,052
----------
8,526
----------
TOTAL LONG-TERM INVESTMENTS
(cost $53,063) 53,181
----------
SHORT-TERM INVESTMENTS - 2.7%
Dreyfus Cash Management Plus, Inc.
Money Market Fund (a) 32 32
Franklin
Money Market Fund (a) 3 3
Valiant Money Market Fund
Class A (a) 1,451 1,451
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $1,486) 1,486
----------
TOTAL INVESTMENTS
(identified cost $54,549)(b) - 101.5% 54,667
OTHER ASSETS AND LIABILITIES,
NET - (1.5%) (833)
----------
NET ASSETS - 100.0% $ 53,834
----------
----------
(a) At cost, which approximates market.
(b) See Note 2 for federal income tax information.
(c) Adjustable or floating rate securities.
ABBREVIATIONS:
MTN-Medium Term Note
The accompanying notes are an integral part of the financial statements.
12 Annual Report
<PAGE>
SSgA
INTERMEDIATE FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1997
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $54,549)(Note 2). . . . . . . . . . . . . . . . . . . . . . . . . $ 54,667
Receivables: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends and interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 855
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
--------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,675
LIABILITIES
Payables:
Investments purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,109
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 679
Accrued fees to affiliates and trustees (Note 4) . . . . . . . . . . . . . . . . . . . 40
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
--------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,841
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 53,834
--------------
--------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 733
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (171)
Unrealized appreciation (depreciation) on investments. . . . . . . . . . . . . . . . . . . . . . . . . . 118
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,148
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 53,834
--------------
--------------
NET ASSET VALUE, offering and redemption price per share:
($53,833,626 divided by 5,513,305 shares of $.001
par value shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . $ 9.76
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 13
<PAGE>
SSgA
INTERMEDIATE FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Fiscal Year Ended August 31, 1997
Amounts
in thousands
<S> <C> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,899
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
--------------
Total Investment Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,974
EXPENSES (Notes 2 and 4):
Advisory fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 373
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Amortization of deferred organization expenses . . . . . . . . . . . . . . . . . . . 9
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
--------------
Expenses before reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 607
Expense reductions (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . (328)
--------------
Total Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 279
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,695
--------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Net change in unrealized appreciation or depreciation of investments . . . . . . . . . . . . . . . . . . 790
--------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 885
--------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . . . $ 3,580
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 Annual Report
<PAGE>
SSgA
INTERMEDIATE FUND
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Fiscal Years Ended August 31,
Amounts in thousands
1997 1996
----------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,695 $ 2,316
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 156
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . . . . 790 (883)
----------------- -----------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . 3,580 1,589
----------------- -----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,564) (2,233)
----------------- -----------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions . . . . . . . . 11,300 8,269
----------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . 12,316 7,625
NET ASSETS
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,518 33,893
----------------- -----------------
End of year (including undistributed net investment income of
$733 and $602, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 53,834 $ 41,518
----------------- -----------------
----------------- -----------------
</TABLE>
<TABLE>
<CAPTION>
FUND SHARE TRANSACTIONS 1997 1996
------------------------------------- -------------------------------------
SHARES DOLLARS SHARES DOLLARS
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Proceeds from shares sold. . . . . . . . . 3,454 $ 33,329 3,901 $ 37,719
Proceeds from reinvestment
of distributions . . . . . . . . . . . 242 2,313 197 1,896
Payments for shares redeemed . . . . . . . (2,519) (24,342) (3,248) (31,346)
----------------- ----------------- ----------------- -----------------
Total net increase (decrease). . . . . . . 1,177 $ 11,300 850 $ 8,269
----------------- ----------------- ----------------- -----------------
----------------- ----------------- ----------------- -----------------
</TABLE>
The accompanying notes are an integral part of the financial
Annual Report 15
<PAGE>
SSgA
INTERMEDIATE FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each fiscal
year or period and other performance information derived from the financial statements.
1997 1996 1995 1994*
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . . . . . . . $ 9.57 $ 9.72 $ 9.37 $ 10.00
---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . .54 .53 .56 .42
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . . . . . . . . . . . . .20 (.14) .34 (.76)
---------- ---------- ---------- ----------
Total Income From Investment Operations. . . . . . . . . . . .74 .39 .90 (.34)
---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . (.55) (.54) (.55) (.29)
---------- ---------- ---------- ----------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . . . . . . . $ 9.76 $ 9.57 $ 9.72 $ 9.37
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . 8.00 4.12 10.05 (3.42)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of year ($000 omitted) . . . . . . . . . . . . 53,834 41,518 33,893 19,963
Ratios to average net assets (%)(b):
Operating expenses, net (c). . . . . . . . . . . . . . . . . . .60 .60 .60 .60
Operating expenses, gross (c). . . . . . . . . . . . . . . . . 1.30 1.38 1.67 1.51
Net investment income . . . . . . . . . . . . . . . . . . . . 5.78 5.57 6.29 5.11
Portfolio turnover (%)(b). . . . . . . . . . . . . . . . . . . 242.76 221.73 26.31 15.70
Per share amount of expense reductions
($ omitted)(c) . . . . . . . . . . . . . . . . . . . . . . . .0665 .0743 .0946 .0755
</TABLE>
* For the period September 1, 1993 (commencement of operations) to
August 31, 1994.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended August 31, 1994 are annualized.
(c) See Note 4 for current period amounts.
16 Annual Report
<PAGE>
SSgA
INTERMEDIATE FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1997
1. ORGANIZATION
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 17 investment portfolios which are in operation as
of August 31, 1997. In December 1996, the Investment Company changed its
name from "The Seven Seas Series Fund" to the "SSgA Funds." These financial
statements report on one portfolio, the SSgA Intermediate Fund (the
"Fund"). The Investment Company is a registered and diversified open-end
investment company, as defined in the Investment Company Act of 1940, as
amended (the "1940 Act"), that was organized as a Massachusetts business
trust on October 3, 1987 and operates under a First Amended and Restated
Master Trust Agreement, dated October 13, 1993, as amended (the
"Agreement"). The Investment Company's Agreement permits the Board of
Trustees to issue an unlimited number of full and fractional shares of
beneficial interest at a $.001 par value.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
SECURITY VALUATION: United States fixed-income securities listed and traded
principally on any national securities exchange are valued on the basis of
the last sale price or, lacking any sale, at the closing bid price, on the
primary exchange on which the security is traded. United States
over-the-counter, fixed-income securities and options are valued on the
basis of the closing bid price.
Many fixed-income securities do not trade each day, and thus last sale or
bid prices are frequently not available. Fixed-income securities may be
valued using prices provided by a pricing service when such prices are
believed to reflect the market value of such securities.
Money market instruments maturing within 60 days of the valuation date are
valued at amortized cost, a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed, unless the Board of
Trustees determines that amortized cost does not represent fair value.
The Fund may value securities for which market quotations are not readily
available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
SECURITIES TRANSACTIONS: Securities transactions are recorded on a trade
date basis. Realized gains and losses from securities transactions are
recorded on the basis of identified cost.
INVESTMENT INCOME: Dividend income is recorded on the ex-dividend date and
interest income is recorded daily on the accrual basis.
Annual Report 17
<PAGE>
SSgA
INTERMEDIATE FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
AMORTIZATION AND ACCRETION: All zero-coupon bond discounts and original
issue discounts are accreted for both tax and financial reporting purposes.
All short- and long-term market premiums/discounts are amortized/accreted
for both tax and financial reporting purposes.
FEDERAL INCOME TAXES: Since the Investment Company is a Massachusetts
business trust, each sub-trust is a separate corporate taxpayer and
determines its net investment income and capital gains (or losses) and the
amounts to be distributed to each fund's shareholders without regard to the
income and capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company, as
defined by the Internal Revenue Code of 1986, as amended. This requires the
Fund to distribute all of its taxable income. Therefore, the Fund paid no
federal income taxes and no federal income tax provision was required. At
August 31, 1997, the Fund had net tax basis capital loss carryovers of
$6,763 and $155,968 which may be applied against any realized net taxable
gains in each succeeding year or until their expiration dates of August 31,
2003 and August 31, 2004, respectively, whichever occurs first.
The Fund's aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of August 31, 1997 are as follows:
NET
UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
------------ ------------ -------------- --------------
$ 54,558,072 $ 297,161 $ (188,553) $ 108,608
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date. Dividends
are generally declared and paid quarterly. Capital gain distributions are
generally declared and paid annually. An additional distribution may be
paid by the Fund to avoid imposition of federal income tax on any remaining
undistributed net investment income and capital gains.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP"). As
a result, net investment income and net realized gain (or loss) on
investment transactions for a reporting period may differ significantly
from distributions during such period. The differences between tax
regulations and GAAP relate primarily to investments in certain
mortgage-backed securities and certain securities sold at a loss.
Accordingly, the Fund may periodically make reclassifications among certain
of its capital accounts without impacting its net asset value.
18 Annual Report
<PAGE>
SSgA
INTERMEDIATE FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
EXPENSES: Most expenses can be directly attributed to the Fund. Expenses
which cannot be directly attributed are allocated among all funds based
principally on their relative net assets.
DEFERRED ORGANIZATION EXPENSES: The Fund incurred expenses in connection
with its organization and initial registration. These costs have been
deferred and are being amortized over 60 months on a straight-line basis.
REPURCHASE AGREEMENTS: The Fund may engage in repurchase and tri-party
repurchase agreements with several financial institutions whereby the Fund,
through its custodian or third-party custodian, receives delivery of the
underlying securities. The market value of these securities (including
accrued interest) on acquisition date is required to be an amount equal to
at least 102% of the repurchase price. The Fund's Adviser will monitor
repurchase agreements daily to determine that the market value (including
accrued interest) of the underlying securities remains equal to at least
102% of the repurchase price at Fedwire closing time. The Adviser or
third-party custodian will notify the seller to immediately increase the
collateral on the repurchase agreement to 102% of the repurchase price if
collateral falls below 102%.
FORWARD COMMITMENTS: The Fund may contract to purchase securities for a
fixed price at a future date beyond customary settlement time (not to
exceed 120 days)(i.e., a "forward commitment" or "delayed settlement"
transaction, e.g., to be announced ("TBA")) consistent with a Fund's
ability to manage its investment portfolio and meet redemption requests.
The price of the underlying securities and the date upon which the
securities will be delivered and paid for are fixed at the time the
transaction is negotiated. The Fund may dispose of a forward commitment
transaction prior to settlement, if it is appropriate to do so, and realize
short-term gains (or losses) upon such sale. When effecting such
transactions, cash or liquid high-grade debt obligations of the Fund will
be segregated on the Fund's records in a dollar amount sufficient to make
payment for the portfolio securities to be purchased at the trade date and
maintained until the transaction is settled. A forward commitment
transaction involves a risk of loss if the value of the security to be
purchased declines prior to the settlement date or the other party to the
transaction fails to complete the transaction.
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the year ended August 31, 1997, purchases and
sales of investment securities, excluding US Government and Agency
obligations and short-term investments, aggregated to $42,410,557, and
$30,466,023, respectively.
For the year ended August 31, 1997, purchases and sales of US Government
and Agency obligations, excluding short-term investments, aggregated to
$80,728,296 and $80,238,715, respectively.
4. RELATED PARTIES
ADVISER: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company (the "Adviser") under which the Adviser
directs the investments of the Fund in accordance with its
Annual Report 19
<PAGE>
SSgA
INTERMEDIATE FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
investment objectives, policies, and limitations. For these services, the
Fund pays a fee to the Adviser, calculated daily and paid monthly, at the
annual rate of .80% of its average daily net assets. For the year ended
August 31, 1997, the Adviser voluntarily agreed to reimburse the Fund for
all expenses in excess of .60% of average daily net assets on an annual
basis. As of August 31, 1997, the receivable due from the Adviser for
expenses in excess of the expense cap has been netted against the Adviser
fee payable. The Investment Company also has contracts with the Adviser to
provide custody, shareholder servicing and transfer agent services to the
Fund. These amounts are presented in the accompanying Statement of
Operations.
ADMINISTRATOR: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator") under
which the Administrator supervises all non-portfolio investment aspects of
the Investment Company's operations and provides adequate office space and
all necessary office equipment and services, including telephone service,
utilities, stationery supplies, and similar items. The Investment Company
pays the Administrator the following fees for services supplied by the
Administrator pursuant to the Administration Agreement: (i) an annual fee,
payable monthly on a pro rata basis, based on the following percentages of
the average daily net assets of all domestic funds: $0 up to and including
$500 million - .06%; over $500 million to and including $1 billion - .05%;
over $1 billion - .03%; (ii) less an amount equal to the sum of certain
distribution-related expenses incurred by the Investment Company's
Distributor on behalf of the Fund (up to a maximum of 10% of the
asset-based fee determined in (i)); (iii) out-of-pocket expenses; and (iv)
start-up costs for new funds.
DISTRIBUTOR AND SHAREHOLDER SERVICING: The Investment Company has entered
into a Distribution Agreement with Russell Fund Distributors (the
"Distributor") which is a wholly-owned subsidiary of the Administrator to
promote and offer shares of the Investment Company. The Distributor may
have entered into sub-distribution agreements with other non-related
parties. The amounts paid to the Distributor are included in the
accompanying Statement of Operations.
The Investment Company has also adopted a Distribution Plan pursuant to
Rule 12b-1 (the "Plan") under the 1940 Act. Under this Plan, the Investment
Company is authorized to make payments to the Distributor, or any
Shareholder Servicing Agent, as defined in the Plan, for providing
distribution and marketing services, for furnishing assistance to investors
on an ongoing basis, and for the reimbursement of direct out-of-pocket
expenses incurred by the Distributor in connection with the distribution
and marketing of shares of the Investment Company and the servicing of
investor accounts.
The Fund has entered into service agreements with the Adviser, State Street
Brokerage Services, Inc. ("SSBSI"), a wholly-owned subsidiary of the
Adviser, the Adviser's Retirement Investment Services Division ("RIS"), and
the Adviser's Metropolitan Division of Commercial Banking ("Commercial
Banking")(collectively the "Agents"), as well as several unaffiliated
service providers. For these services, the Fund pays .025%, .175%, .175%,
and .175% to the Adviser, SSBSI, RIS, and Commercial Banking,
20 Annual Report
<PAGE>
SSgA
INTERMEDIATE FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
respectively, based upon the average daily value of all Fund shares held by
or for customers of these Agents. For the year ended August 31, 1997, the
Fund incurred expenses of $12,202, $2,533 and $2,041, or a total of $16,776
from the Adviser, RIS and SSBSI, respectively. The Fund did not incur any
expenses from Commercial Banking during this period.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The Trustees or a majority of the
Fund's shareholders have the right, however, to terminate the Distribution
Plan and all payments thereunder at any time. The Fund will not be
obligated to reimburse the Distributor for carryover expenses subsequent to
the Distribution Plan's termination or noncontinuance. There were no
carryover expenses as of August 31, 1997.
BOARD OF TRUSTEES: The Investment Company pays each Trustee not affiliated
with the Investment Company a retainer of $44,000 annually, $1,000 for each
board meeting attended, an additional $1,000 for attending the annual audit
committee meeting, and reimbursement for out-of-pocket expenses. These
expenses are allocated among all of the Funds based upon their relative net
assets.
ACCRUED FEES PAYABLE TO AFFILIATES AND TRUSTEES AS OF AUGUST 31, 1997 WERE
AS FOLLOWS:
Advisory fees $ 12,836
Administration fees 1,439
Custodian fees 6,888
Distribution fees 1,035
Shareholder servicing fees 1,831
Transfer agent fees 16,061
----------
$ 40,090
----------
----------
BENEFICIAL INTEREST: As of August 31, 1997, one shareholder (who was also
an affiliate of the Investment Company) was a record owner of approximately
20% of the total outstanding shares of the Fund.
5. DIVIDENDS
On September 2, 1997, the Board of Trustees declared a dividend of $.1272
from net investment income, payable on September 10, 1997 to shareholders
of record on September 3, 1997.
Annual Report 21
<PAGE>
SSgA INTERMEDIATE FUND
Two International Place, 35th Floor
Boston, Massachusetts 02110
(800) 997-7327
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
George W. Weber, Senior Vice President and Treasurer
J. David Griswold, Vice President and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND OFFICE OF SHAREHOLDER INQUIRIES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 647-7327
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(800) 997-7327
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar LLP LLP
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
22 Annual Report
<PAGE>
SSgA-SM- FUNDS
US GOVERNMENT MONEY MARKET FUND
Annual Report
August 31, 1997
Table of Contents
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion. . . . . . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . 14
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . 15
Fund Management and Service Providers. . . . . . . . . . . . . . . . 19
"SSgA-SM-" IS A SERVICE MARK OF STATE STREET CORPORATION AND IS LICENSED FOR
USE BY THE SSgA FUNDS.
THIS REPORT IS PREPARED FROM THE BOOKS AND RECORDS OF THE FUND AND IT IS
SUBMITTED FOR THE GENERAL INFORMATION OF SHAREHOLDERS. THIS INFORMATION IS FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR ACCOMPANIED BY A
SSgA FUNDS PROSPECTUS CONTAINING MORE COMPLETE INFORMATION CONCERNING THE
INVESTMENT OBJECTIVE AND OPERATIONS OF THE FUND, CHARGES AND EXPENSES. THE
PROSPECTUS SHOULD BE READ CAREFULLY BEFORE AN INVESTMENT IS MADE.
PERFORMANCE IS HISTORICAL AND ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL
GAINS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN WHEN PURCHASED.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. AN INVESTMENT IN A MONEY
MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY THE US GOVERNMENT. THERE CAN BE
NO ASSURANCE THAT A MONEY MARKET FUND WILL BE ABLE TO MAINTAIN A STABLE NET
ASSET VALUE OF $1.00 PER SHARE. RUSSELL FUND DISTRIBUTORS, INC., IS THE
DISTRIBUTOR OF THE SSgA FUNDS.
<PAGE>
SSgA US GOVERNMENT MONEY MARKET FUND
LETTER FROM THE CHAIRMAN OF STATE STREET GLOBAL ADVISORS
DEAR SHAREHOLDERS,
I am pleased to provide you with the SSgA Funds annual report for the fiscal
year ended August 31, 1997. Over the past year, the Funds have grown to include
seventeen portfolios covering a broad range of investment strategies from the
far corners of the emerging markets countries to the domestic stock and bond
markets. This report contains summaries on the market environment, performance
and financial statements for the US Government Money Market Fund. I hope you
find this information a useful tool as you review your overall investment
strategy.
The SSgA Funds opened three additional funds in fiscal 1997. These three asset
allocation funds, called Life Solutions Funds, were opened on July 1, 1997. Each
Life Solutions Fund seeks to achieve its investment objective by diversifying
its assets in shares of certain Funds of the Investment Company, referred to as
Underlying Funds.
The Life Solutions Income and Growth Fund seeks income and, secondarily,
long-term growth of capital.
The Life Solutions Balanced Fund seeks a balance of growth of capital and
income.
The Life Solutions Growth Fund seeks long-term growth of capital.
During the past fiscal year, the SSgA Funds were proud to announce that the SSgA
Matrix Fund and the SSgA Small Cap Fund achieved five year track records. We are
proud of our long-term record and look forward to having additional funds
complete their five year anniversary.
SSGA is strategically growing by continuing to build an organization that
delivers comprehensive services striving to meet your investment requirements.
In an effort to compete in this ever-changing complex world, we focus on our
expertise, our knowledge and our commitment to better serve your investment
needs.
As Chairman and Chief Executive Officer of State Street Global Advisors, which
serves as the investment adviser to the SSgA Funds, I would like to thank you
for choosing the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
SSgA US GOVERNMENT MONEY MARKET FUND
MANAGEMENT OF THE FUNDS
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A TEAM APPROACH TO INVESTMENT MANAGEMENT
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio managers work together to develop and enhance the
techniques that drive our investment processes. The result is that the
portfolios we manage benefit from the knowledge of the entire team.
Ms. Lisa Hatfield, Vice President, has been the portfolio manager primarily
responsible for investment decisions regarding the SSgA US Government Money
Market Fund since June 1994. Ms. Hatfield has been with State Street since 1986
and has managed several money market funds since 1987. She received a BS from
Suffolk University. There are 10 other portfolio managers working with Ms.
Hatfield.
Annual Report 5
<PAGE>
SSgA US GOVERNMENT MONEY MARKET FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
OBJECTIVE: Maximize current income; preservation of capital and liquidity.
INVESTS IN: Obligations of the US Government, its Agencies or
Instrumentalities.
STRATEGY: Fund Managers base their decisions on the relative attractiveness
of different money market investments which can vary depending on the general
level of interest rates as well as supply/demand imbalances in the market.
[GRAPH]
DATES US GOV'T MONEY MARKET SALOMAN BROTHERS 3-MONTH T-BILL INDEX
Inception* $10,000 $10,000
1991 $10,306 $10,293
1992 $10,769 $10,731
1993 $11,100 $11,061
1994 $11,466 $11,454
1995 $12,083 $12,093
1996 $12,720 $12,740
1997 $13,381 $13,409
- --------------------------------------------------------------------------------
Total $91,825 $91,781
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SSgA
US GOVERNMENT MONEY MARKET FUND
Period Ended Growth of Total
08/31/97 $10,000 Return
- ------------- ------------- -------------
1 Year $ 10,519 5.19%
5 Years $ 12,426 4.44%+
Inception $ 13,381 4.58%+
SALOMAN BROTHERS
3-MONTH TREASURY BILL INDEX
Period Ended Growth of Total
08/31/97 $10,000 Return
- ------------- ------------- -------------
1 Year $ 10,525 5.25%
5 Years $ 12,495 4.56%+
Inception $ 13,409 4.62%+
SEE RELATED NOTES ON THE FOLLOWING PAGE.
PERFORMANCE REVIEW
Market participants spent most of the second half of 1996 debating whether the
Federal Reserve's Open Market Committee (FOMC) would need to raise the target
rate for federal funds, targeted at 5.25%. The fear of tightening kept pressure
on rates during the period. However, by the end of November, positive data
relating to the budget deficit, the outlook for reduced financing needs of the
Treasury, and a historically high amount of Treasury securities held by foreign
investors lent a positive tone. Yields hit their lows during November, with
one-year Treasuries falling to 5.36%, two-year Treasuries dropping to 5.59% and
thirty-year Treasuries down to 6.35%. Pressure relating to year end caused money
market rates to rise in December. The rush to issue securities prior to year end
also pressured the corporate market, causing spreads to widen during the month;
however, the theme of 1996 for this sector was narrowing spreads to Treasuries.
The spread widening between Treasuries and corporates, and yield back-up from
year end financing pressures were
6 Annual Report
<PAGE>
SSgA US GOVERNMENT MONEY MARKET FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
erased by the end of January. Signs of unexpected strength were tempered by
lower inflation indicators. The Treasury yield curve steepened as the data
suggested a stronger economy and the market began pricing the possibility of an
increase in interest rates. Consequently, the long-awaited shift in Federal
Reserve policy finally occurred on March 26th, with a fed funds increase of 25
basis points. While the move itself was not a surprise, the FOMC's comment
expressing concern over the strength of the economy and its impact on inflation
was strong enough to focus market attention on the possibility of further
tightening. Pessimism pervaded and yields rose through April, with one-year
Treasuries peaking at 6.08%, two-years backing up to 6.54% and thirty-years at
7.17%. News of first quarter GDP at 5.6% was offset by the producer price index
turning negative and consumer price indices declining to 2.3% annualized.
Going into the third quarter, high consumer confidence and healthier consumer
balance sheets have many economists fearing a surge in consumer spending would
spur further growth. Capital spending continues at a healthy clip keeping the
base level of growth well above the target non-inflationary rate of 2.5%.
Nevertheless, by the end of August, yields had again dropped with one-year
Treasuries closing at 5.57%, two-years at 5.96%, and thirty-years at 6.61%.
Skepticism for the new era of higher non-inflationary growth abounds. The growth
side does not appear ready to slow down and with labor markets tight and getting
tighter, the market trades nervously as if anticipating the FOMC to move again
to raise rates in the upcoming quarters. Because of the uncertainty,
opportunities continue to arise which allow for buying on weakness and extending
portfolio maturity.
The Fund had a one-year total return of 5.19% for the fiscal year ended August
31, 1997 as compared to the Salomon Brothers 3-Month Treasury Bill Index return
of 5.25% for the same period. This return, while slightly lagging the Index, is
net of fund operating expenses, whereas Index results do not include expenses of
any kind. The Salomon Brothers 3-Month Treasury Bill Index was chosen as a
standard, well-known representation of money market rates.
PORTFOLIO HIGHLIGHTS
In the last year, the SSgA US Government Money Market Fund's net assets have
grown 32%. This was partially due to the Fund receiving a AAAm rating - the
highest available from Standard & Poor's Corporation.
The Fund was managed consistently with its objective of providing safety of
principal and liquidity by investing in high quality investments providing
competitive returns. Investments of the Fund included US Government Treasuries
and Agencies, and floating rate notes. At year end, 40% of the Fund was invested
in floating rate notes using standard money market indices such as one- and
three-month LIBOR (London InterBank Offering Rate), Prime and three-month
Treasury Bills. Investments are made based on relative value in the marketplace.
The average maturity of the Fund over the course of the year was in the 33 to 55
day range, below that of the 60 days allowable by Standard & Poor's rating
agency and the 90 days required by regulations governing money market funds.
----------------------------
NOTES: THE FOLLOWING NOTES RELATE TO THE GROWTH OF $10,000 GRAPH AND TABLE ON
THE PRECEDING PAGE.
* The Fund commenced operations on March 1, 1991. Index comparison also
began on March 1, 1991.
** Equal dollar amounts of 3-month Treasury bills are purchased at the
beginning of each of three consecutive months. As each bill matures,
all proceeds are rolled over or reinvested in a new 3-month bill. The
income used to calculate the monthly return is derived by subtracting
the original amount invested from the maturity value. The yield curve
average is the basis for calculating the return on the Index. The
Index is rebalanced monthly by market capitalization.
+ Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
An investment in a money market fund is neither insured nor guaranteed by the US
Government. There can be no assurance that a money market fund will be able to
maintain a stable net asset value of $1.00 per share.
Annual Report 7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of the SSgA Funds:
We have audited the accompanying statement of assets and liabilities and
statement of net assets of SSgA US Government Money Market Fund (formerly The
Seven Seas Series US Government Money Market Fund)(the "Fund"), as of August 31,
1997, and the related statement of operations for the fiscal year then ended,
the statements of changes in net assets for each of the two fiscal years in the
period then ended and the financial highlights for each of the five fiscal years
in the period then ended. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
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 free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We 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 of the Fund as of August 31, 1997, the results of its operations for
the fiscal year then ended, the changes in its net assets for each of the two
fiscal years in the period then ended, and the financial highlights for each of
the five fiscal years in the period then ended in conformity with generally
accepted accounting principles.
Boston, Massachusetts /s/ COOPERS & LYBRAND L.L.P.
October 7, 1997
8 Annual Report
<PAGE>
SSgA
US GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
August 31, 1997
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY (000)
------------------------------------------------------
<S> <C> <C> <C> <C>
UNITED STATES GOVERNMENT AGENCIES - 69.1%
FEDERAL FARM CREDIT BANK (a) . . . . . . . . . . . . . $ 20,000 5.425% 10/02/97 $ 19,998
FEDERAL FARM CREDIT BANK (a) . . . . . . . . . . . . . 25,000 5.500 11/14/97 24,995
FEDERAL FARM CREDIT BANK (a) . . . . . . . . . . . . . 25,000 5.500 12/11/97 24,993
FEDERAL FARM CREDIT BANK (a) . . . . . . . . . . . . . 35,000 5.462 12/17/97 34,991
FEDERAL FARM CREDIT BANK (a) . . . . . . . . . . . . . 25,000 5.550 02/03/98 24,993
FEDERAL FARM CREDIT BANK . . . . . . . . . . . . . . . 20,000 5.450 03/03/98 19,976
FEDERAL HOME LOAN BANK (a) . . . . . . . . . . . . . . 20,000 5.448 09/24/97 19,999
FEDERAL HOME LOAN BANK (a) . . . . . . . . . . . . . . 10,000 5.527 12/16/97 9,999
FEDERAL HOME LOAN BANK (a) . . . . . . . . . . . . . . 25,000 5.485 12/19/97 24,995
FEDERAL HOME LOAN BANK . . . . . . . . . . . . . . . . 10,000 5.710 01/21/98 9,999
FEDERAL HOME LOAN BANK . . . . . . . . . . . . . . . . 10,000 5.705 03/24/98 9,991
FEDERAL HOME LOAN BANK (a) . . . . . . . . . . . . . . 35,000 5.470 05/28/98 34,951
FEDERAL HOME LOAN BANK (a) . . . . . . . . . . . . . . 25,000 5.398 07/07/98 24,979
FEDERAL HOME LOAN BANK . . . . . . . . . . . . . . . . 30,000 5.825 07/07/98 29,983
FEDERAL HOME LOAN MORTGAGE CORP. . . . . . . . . . . . 5,000 5.715 03/17/98 4,997
FEDERAL HOME LOAN MORTGAGE CORP. DISCOUNT NOTES. . . . 50,000 5.475 09/30/97 49,779
FEDERAL NATIONAL MORTGAGE ASSOCIATION (a). . . . . . . 40,000 5.632 09/12/97 39,999
FEDERAL NATIONAL MORTGAGE ASSOCIATION (a). . . . . . . 25,000 5.570 11/14/97 24,996
FEDERAL NATIONAL MORTGAGE ASSOCIATION. . . . . . . . . 5,000 6.080 05/06/98 4,996
FEDERAL NATIONAL MORTGAGE ASSOCIATION DISCOUNT NOTES . 10,000 5.640 10/20/97 9,923
FEDERAL NATIONAL MORTGAGE ASSOCIATION (MTN). . . . . . 100,000 12.500 10/16/97 100,812
FEDERAL NATIONAL MORTGAGE ASSOCIATION (MTN)(a) . . . . 50,000 5.520 06/19/98 49,969
FEDERAL NATIONAL MORTGAGE ASSOCIATION (MTN). . . . . . 15,000 5.710 09/09/98 14,977
STUDENT LOAN MARKETING ASSOCIATION (MTN) . . . . . . . 5,000 5.615 10/29/97 4,999
STUDENT LOAN MARKETING ASSOCIATION (MTN)(a). . . . . . 5,000 5.465 02/05/98 4,994
---------
TOTAL UNITED STATES GOVERNMENT AGENCIES (cost $625,283) 625,283
---------
UNITED STATES GOVERNMENT TREASURIES - 5.0%
United States Treasury Notes . . . . . . . . . . . . . 25,000 5.250 12/31/97 24,970
United States Treasury Notes . . . . . . . . . . . . . 15,000 5.000 01/31/98 14,954
United States Treasury Notes . . . . . . . . . . . . . 5,000 6.125 03/31/98 5,010
---------
TOTAL UNITED STATES GOVERNMENT TREASURIES (cost $44,934) . . . . . . . . . . . . . . . . . . . . . . . . 44,934
---------
TOTAL INVESTMENTS (amortized cost $670,217) - 74.1% . . . . . . . . . . . . . . . . . . . . . . . . . . 670,217
---------
</TABLE>
Annual Report 9
<PAGE>
SSgA
US GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
VALUE
(000)
----------
<S> <C>
REPURCHASE AGREEMENTS - 27.1%
Agreement with First Boston of $75,221
acquired August 29, 1997 at 5.500% to be repurchased at $75,267
on September 2, 1997, collateralized by:
$27,725 Federal Home Loan Mortgage Corp. Discount Note
5.521% due 11/05/97 valued at $27,443
$50,000 Federal National Mortgage Association Discount Note
5.538% due 11/25/97 valued at $49,341. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 75,221
Agreement with Swiss Bancorp of $170,000
acquired August 29, 1997 at 5.560% to be repurchased at $170,105
on September 2, 1997, collateralized by:
$169,172 United States Treasury Notes,
6.625% due 06/30/01 valued at $173,484 . . . . . . . . . . . . . . . . . . . . . . . . . . . 170,000
----------
TOTAL REPURCHASE AGREEMENTS (identified cost $245,221) . . . . . . . . . . . . . . . . . . . . . . 245,221
----------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS (cost $915,438)(b) - 101.2%. . . . . . . . . . . . . . 915,438
OTHER ASSETS AND LIABILITIES, NET - (1.2)% . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,955)
----------
NET ASSETS - 100.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 904,483
----------
----------
</TABLE>
(a) Adjustable or floating rate security.
(b) The identified cost for federal income tax purposes is the same as
shown above.
ABBREVIATIONS:
MTN - Medium Term Note
The accompanying notes are an integral part of the financial statements.
10 Annual Report
<PAGE>
SSgA
US GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1997
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at amortized cost which approximates market (Note 2) . . . . . . . . . . . . . . . . . . . . $ 670,217
Repurchase agreements (identified cost $245,221)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . 245,221
Interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,731
--------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 924,169
LIABILITIES
Payables:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,059
Investments purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,977
Accrued fees to affiliates and trustees (Note 4) . . . . . . . . . . . . . . . . . . 624
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
--------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,686
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 904,483
--------------
--------------
NET ASSETS CONSIST OF:
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 904
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 903,576
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 904,483
--------------
--------------
NET ASSET VALUE, offering and redemption price per share:
($904,482,649 divided by 904,480,134 shares of $.001 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.00
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 11
<PAGE>
SSgA
US GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Fiscal Year Ended August 31, 1997
Amounts
in thousands
<S> <C> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 46,162
--------------
EXPENSES (Notes 2 and 4):
Advisory fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,091
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 287
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 720
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
--------------
Total Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,659
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,503
--------------
REALIZED GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
--------------
Net increase in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . . . . . . . $ 42,544
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 Annual Report
<PAGE>
SSgA
US GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Fiscal Years Ended August 31,
Amounts in thousands
1997 1996
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . $ 42,503 $ 31,690
Net realized gain (loss) . . . . . . . . . . . . . . . . . . 41 120
---------------- ----------------
Net increase in net assets resulting from operations. . . 42,544 31,810
---------------- ----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income. . . . . . . . . . . . . . . . . . . . (42,503) (31,690)
---------------- ----------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from
Fund share transactions . . . . . . . . . . . . . . . . . . 221,232 192,952
---------------- ----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . 221,273 193,072
NET ASSETS
Beginning of year. . . . . . . . . . . . . . . . . . . . . . 683,210 490,138
---------------- ----------------
End of year. . . . . . . . . . . . . . . . . . . . . . . . . $ 904,483 $ 683,210
---------------- ----------------
---------------- ----------------
FUND SHARE TRANSACTIONS
(ON A CONSTANT DOLLAR BASIS):
Proceeds from shares sold. . . . . . . . . . . . . . . . . . . 7,924,123 7,802,330
Proceeds from reinvestment of distributions. . . . . . . . . . 26,342 25,091
Payments for shares redeemed . . . . . . . . . . . . . . . . . (7,729,233) (7,634,469)
---------------- ----------------
Total net increase (decrease). . . . . . . . . . . . . . . . . 221,232 192,952
---------------- ----------------
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 13
<PAGE>
SSgA
US GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each fiscal
year or period and other performance information derived from the financial statements.
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . .0500 .0515 .0528 .0324 .0304
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . (.0500) (.0515) (.0528) (.0324) (.0304)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
TOTAL RETURN (%) . . . . . . . . . . . . . . . . . . 5.19 5.27 5.38 3.30 3.08
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of year ($000 omitted) . . . . . . 904,483 683,210 490,138 251,165 137,136
Ratios to average net assets (%):
Operating expenses, net. . . . . . . . . . . . . .44 .40 .42 .38 .39
Operating expenses, gross. . . . . . . . . . . . .44 .40 .42 .39 .46
Net investment income. . . . . . . . . . . . . . 5.08 5.12 5.37 3.27 3.04
Per share amount of expense reductions
($ omitted). . . . . . . . . . . . . . . . . . . -- -- -- .0001 .0007
</TABLE>
14 Annual Report
<PAGE>
SSgA
US GOVERNMENT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1997
1. ORGANIZATION
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 17 investment portfolios which are in operation as
of August 31, 1997. In December 1996, the Investment Company changed its
name from "The Seven Seas Series Fund" to the "SSgA Funds." These financial
statements report on one portfolio, the SSgA US Government Money Market
Fund (the "Fund"). The Investment Company is a registered and diversified
open-end investment company, as defined in the Investment Company Act of
1940, as amended (the "1940 Act"), that was organized as a Massachusetts
business trust on October 3, 1987 and operates under a First Amended and
Restated Master Trust Agreement, dated October 13, 1993, as amended (the
"Agreement"). The Investment Company's Agreement permits the Board of
Trustees to issue an unlimited number of full and fractional Class A shares
of beneficial interest at a $.001 par value. The Investment Company has
available Class B and Class C shares of the Fund as of August 15, 1994;
however, shares have not been offered on these classes as of the date of
these financial statements.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
SECURITY VALUATION: The Fund's portfolio investments are valued on the
basis of amortized cost, a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed. The Fund utilizes the
amortized cost valuation method in accordance with Rule 2a-7 of the 1940
Act.
SECURITIES TRANSACTIONS: Securities transactions are recorded on the trade
date, which in most instances is the same as the settlement date. Realized
gains and losses from the securities transactions, if any, are recorded on
the basis of identified cost.
INVESTMENT INCOME: Interest income is recorded daily on the accrual basis.
FEDERAL INCOME TAXES: Since the Investment Company is a Massachusetts
business trust, each sub-trust is a separate corporate taxpayer and
determines its net investment income and capital gains (or losses) and the
amounts to be distributed to each fund's shareholders without regard to the
income and capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company, as
defined by the Internal Revenue Code of 1986, as amended. This requires the
Fund to distribute all of its taxable income. Therefore, the Fund paid no
federal income taxes and no federal income tax provision was required.
Annual Report 15
<PAGE>
SSgA
US GOVERNMENT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Fund declares and records
dividends on net investment income daily and pays them monthly. Capital
gain distributions, if any, are generally declared and paid annually. An
additional distribution may be paid by the Fund to avoid imposition of
federal income tax on any remaining undistributed net investment income and
capital gains. The Fund may periodically make reclassifications among
certain of its capital accounts without impacting net asset value for
differences between federal tax regulations and generally accepted
accounting principles.
EXPENSES: Most expenses can be directly attributed to the Fund. Expenses
which cannot be directly attributed are allocated among all funds based
principally on their relative net assets.
REPURCHASE AGREEMENTS: The Fund may engage in repurchase and tri-party
repurchase agreements with several financial institutions whereby the Fund,
through its custodian or third-party custodian, receives delivery of the
underlying securities. The market value of these securities (including
accrued interest) on acquisition date is required to be an amount equal to
at least 102% of the repurchase price. The Fund's Adviser will monitor
repurchase agreements daily to determine that the market value (including
accrued interest) of the underlying securities remains equal to at least
102% of the repurchase price at Fedwire closing time. The Adviser or
third-party custodian will notify the seller to immediately increase the
collateral on the repurchase agreement to 102% of the repurchase price if
collateral falls below 102%.
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the year ended August 31, 1997, purchases,
sales, and maturities of US Government and Agency obligations, excluding
repurchase agreements aggregated to $3,889,013,099, $131,750,409, and
$3,561,190,000, respectively.
4. RELATED PARTIES
ADVISER: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company (the "Adviser") under which the Adviser
directs the investments of the Fund in accordance with its investment
objectives, policies, and limitations. For these services, the Fund pays a
fee to the Adviser, calculated daily and paid monthly, at the annual rate
of .25% of its average daily net assets. The Investment Company also has
contracts with the Adviser to provide custody, shareholder servicing and
transfer agent services to the Fund. These amounts are presented in the
accompanying Statement of Operations.
ADMINISTRATOR: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator") under
which the Administrator supervises all non-portfolio investment aspects of
the Investment Company's operations and provides adequate office space and
all necessary office equipment and services, including telephone service,
utilities, stationery supplies, and similar
16 Annual Report
<PAGE>
SSgA
US GOVERNMENT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
items. The Investment Company pays the Administrator the following fees for
services supplied by the Administrator pursuant to the Administration
Agreement: (i) an annual fee, payable monthly on a pro rata basis, based on
the following percentages of the average daily net assets of all domestic
funds: $0 up to and including $500 million - .06%; over $500 million to and
including $1 billion - .05%; over $1 billion - .03%; (ii) less an amount
equal to the sum of certain distribution-related expenses incurred by the
Investment Company's Distributor on behalf of the Fund (up to a maximum of
10% of the asset-based fee determined in (i)); (iii) out-of-pocket
expenses; and (iv) start-up costs for new funds.
DISTRIBUTOR AND SHAREHOLDER SERVICING: The Investment Company has entered
into a Distribution Agreement with Russell Fund Distributors (the
"Distributor") which is a wholly-owned subsidiary of the Administrator to
promote and offer shares of the Investment Company. The Distributor may
have entered into sub-distribution agreements with other non-related
parties. The amounts paid to the Distributor are included in the
accompanying Statement of Operations.
The Investment Company has also adopted a Distribution Plan pursuant to
Rule 12b-1 (the "Plan") under the 1940 Act. Under this Plan, the
Investment Company is authorized to make payments to the Distributor, or
any Shareholder Servicing Agent, as defined in the Plan, for providing
distribution and marketing services, for furnishing assistance to investors
on an ongoing basis, and for the reimbursement of direct out-of-pocket
expenses incurred by the Distributor in connection with the distribution
and marketing of shares of the Investment Company and the servicing of
investor accounts.
The Fund has entered into service agreements with the Adviser, State Street
Brokerage Services, Inc. ("SSBSI"), a wholly-owned subsidiary of the
Adviser, the Adviser's Retirement Investment Division ("RIS"), and the
Adviser's Metropolitan Division of Commercial Banking ("Commercial
Banking")(collectively the "Agents"), as well as other non-related party
service providers. For these services, the Fund pays .025%, .175%, .175%,
and .175% to the Adviser, SSBSI, RIS, and Commercial Banking, respectively,
based upon the average daily value of all Fund shares held by or for
customers of these Agents. For the year ended August 31, 1997, the Fund
incurred expenses of $209,116, $479, and $436,627, or a total of $646,222,
from the Adviser, RIS and Commercial Banking, respectively. The Fund did
not incur any expenses from SSBSI during this period. The remaining amount
of $73,770 was paid to other third-party providers.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The Trustees or a majority of the
Fund's shareholders have the right, however, to terminate the Distribution
Plan and all payments thereunder at any time. The Fund will not be
obligated to reimburse the Distributor for
Annual Report 17
<PAGE>
SSgA
US GOVERNMENT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
carryover expenses subsequent to the Distribution Plan's termination or
noncontinuance. There were no carryover expenses as of August 31, 1997.
BOARD OF TRUSTEES: The Investment Company pays each Trustee not affiliated
with the Investment Company a retainer of $44,000 annually, $1,000 for each
board meeting attended, an additional $1,000 for attending the annual audit
committee meeting, and reimbursement for out-of-pocket expenses. These
expenses are allocated among all of the Funds based upon their relative net
assets.
ACCRUED FEES PAYABLE TO AFFILIATES AND TRUSTEES AS OF AUGUST 31, 1997 WERE
AS FOLLOWS:
Advisory fees $ 420,754
Administration fees 23,286
Custodian fees 17,810
Distribution fees 5,225
Shareholder servicing fees 155,100
Transfer agent fees 1,869
---------
$ 624,044
---------
---------
BENEFICIAL INTEREST: As of August 31, 1997, one shareholder (who was also
an affiliate of the Investment Company) was a record owner of approximately
34% of the total outstanding shares of the Fund.
18 Annual Report
<PAGE>
SSgA US GOVERNMENT MONEY MARKET FUND
Two International Place, 35th Floor
Boston, Massachusetts 02110
(800) 997-7327
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
George W. Weber, Senior Vice President and Treasurer
J. David Griswold, Vice President and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND OFFICE OF SHAREHOLDER INQUIRIES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 647-7327
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(800) 997-7327
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
Annual Report 19
<PAGE>
SSgA-SM- FUNDS
BOND MARKET FUND
Annual Report
August 31, 1997
Table of Contents
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion. . . . . . . . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . 18
Fund Management and Service Providers. . . . . . . . . . . . . . . . . . 23
"SSgA-SM-" IS A SERVICE MARK OF STATE STREET CORPORATION AND IS LICENSED FOR USE
BY THE SSgA FUNDS.
THIS REPORT IS PREPARED FROM THE BOOKS AND RECORDS OF THE FUND AND IT IS
SUBMITTED FOR THE GENERAL INFORMATION OF SHAREHOLDERS. THIS INFORMATION IS FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR ACCOMPANIED BY A
SSgA FUNDS PROSPECTUS CONTAINING MORE COMPLETE INFORMATION CONCERNING THE
INVESTMENT OBJECTIVE AND OPERATIONS OF THE FUND, CHARGES AND EXPENSES. THE
PROSPECTUS SHOULD BE READ CAREFULLY BEFORE AN INVESTMENT IS MADE.
PERFORMANCE IS HISTORICAL AND ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL
GAINS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN WHEN PURCHASED.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. RUSSELL FUND DISTRIBUTORS,
INC., IS THE DISTRIBUTOR OF THE SSgA FUNDS.
<PAGE>
SSgA BOND MARKET FUND
LETTER FROM THE CHAIRMAN OF STATE STREET GLOBAL ADVISORS
DEAR SHAREHOLDERS,
I am pleased to provide you with the SSgA Funds annual report for the fiscal
year ended August 31, 1997. Over the past year, the Funds have grown to include
seventeen portfolios covering a broad range of investment strategies from the
far corners of the emerging markets countries to the domestic stock and bond
markets. This report contains summaries on the market environment, performance
and financial statements for the Bond Market Fund. I hope you find this
information a useful tool as you review your overall investment strategy.
The SSgA Funds opened three additional funds in fiscal 1997. These three asset
allocation funds, called Life Solutions Funds, were opened on July 1, 1997. Each
Life Solutions Fund seeks to achieve its investment objective by diversifying
its assets in shares of certain Funds of the Investment Company, referred to as
Underlying Funds.
The Life Solutions Income and Growth Fund seeks income and, secondarily,
long-term growth of capital.
The Life Solutions Balanced Fund seeks a balance of growth of capital and
income.
The Life Solutions Growth Fund seeks long-term growth of capital.
During the past fiscal year, the SSgA Funds were proud to announce that the SSgA
Matrix Fund and the SSgA Small Cap Fund achieved five year track records. We are
proud of our long-term record and look forward to having additional funds
complete their five year anniversary.
SSGA is strategically growing by continuing to build an organization that
delivers comprehensive services striving to meet your investment requirements.
In an effort to compete in this ever-changing complex world, we focus on our
expertise, our knowledge and our commitment to better serve your investment
needs.
As Chairman and Chief Executive Officer of State Street Global Advisors, which
serves as the investment adviser to the SSgA Funds, I would like to thank you
for choosing the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
SSgA BOND MARKET FUND
MANAGEMENT OF THE FUNDS
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A TEAM APPROACH TO INVESTMENT MANAGEMENT
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio managers work together to develop and enhance the
techniques that drive our investment processes. The result is that the
portfolios we manage benefit from the knowledge of the entire team.
Mr. John Kirby, Assistant Vice President, has been the portfolio manager
primarily responsible for investment decisions regarding the SSgA Bond Market
Fund. Prior to joining State Street Bank in 1995, Mr. Kirby was an account
manager with Lowell, Blake & Associates. Prior to that he worked as a portfolio
manager with One Federal Asset Management and an asset/liability risk specialist
at Cambridge Port Savings. He has a BA from Boston College and is a CFA
candidate. There are six other portfolio managers working with Mr. Kirby.
Annual Report 5
<PAGE>
SSgA BOND MARKET FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
OBJECTIVE: Maximize total return by investing in fixed income securities.
INVESTS IN: High quality, investment grade, debt instruments including: US
Government Treasuries and Agencies, corporate bonds, asset-backed securities,
and mortgage-backed securities.
STRATEGY: Fund Managers make investment decisions to seek to match or exceed
the return of the Lehman Brothers Aggregate Bond Index. The Fund seeks to match
the Index's duration at all times while adding value through issue and sector
selection.
[GRAPH]
DATES BOND MARKET FUND LEHMAN BROTHERS AGGREGATE BOND INDEX**
Inception* $10,000 $10,000
1996 $9,781 $9,824
1997 $10,707 $10,806
- --------------------------------------------------------------------------------
Total $30,488 $30,630
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SSgA
BOND MARKET FUND
Period Ended Growth of Total
08/31/97 $10,000 Return
- ------------ ------------ ------------
1 Year $ 10,947 9.47%
Inception $ 10,707 4.47%+
LEHMAN BROTHERS AGGREGATE
BOND INDEX
Period Ended Growth of Total
08/31/97 $10,000 Return
- ------------ ------------ ------------
1 Year $ 11,000 10.00%
Inception $ 10,806 5.02%+
SEE RELATED NOTES ON THE FOLLOWING PAGE.
PERFORMANCE REVIEW
For the fiscal year ended August 31, 1997, the SSgA Bond Market Fund returned
9.47% versus 10.00% for its benchmark, the Lehman Brothers Aggregate Bond Index.
Deviation from the benchmark was principally due to the payment of operating
expenses by the Fund, whereas Index results do not include expenses of any kind.
The Fund does not pursue active interest rate exposure. Over the year, the
portfolio averaged 35 basis points of tracking error versus the Index. The
primary source of tracking error was sector allocations, a risk profile that
will be less volatile than one resulting from active duration management.
The fiscal year was favorable for fixed income markets. During the period,
moderate economic growth coupled with little, if any, real inflationary
pressures prevailed.
6 Annual Report
<PAGE>
SSgA BOND MARKET FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
The Federal Reserve (Fed) tempered the stock and bond "rally" by making it known
it would be vigilant about containing inflationary pressure. The long
anticipated Fed move on March 26th to increase the Fed Funds rate (+.25%), and
the accompanying comments expressing concerns over inflation and economic
strength, set the tone for rising interest rates in the middle of the year. The
Fed's "pre-emptive strike" was well anticipated by investors and its cautious
tone prevailed until it was clearer that the Fed's work was done for the
near-term, allowing rates to move lower for the last part of fiscal 1997.
PORTFOLIO HIGHLIGHTS
The Fund was managed consistently with its objective to maximize total return by
investing in fixed income securities including those represented by the Lehman
Brothers Aggregate Bond Index. At August 31, 1997, the Fund's duration matched
the Index at 4.63 years. The Fund was overweighted in non-government sectors in
order to capture incremental yield.
The strategy in place for all of fiscal 1997 was to overweight domestic
corporate, AAA rated asset-backed, Yankee and mortgage-backed securities. US
Treasuries were underweighted. This strategy provided the portfolio with extra
yield and created the opportunity for enhanced returns versus the Index.
Additionally, the Fund has taken an active exposure to the global economy by
overweighting corporates through investments in US dollar denominated debt and
is concentrated in sovereign and corporate securities domiciled in Europe,
Canada and Australia/New Zealand. Asia presented too many uncertainties and was
kept at a neutral weighting to the Index.
TOP TEN ISSUERS
(AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31, 1997
Federal National Mortgage Association 15.0%
United States Treasuries 12.8
Government National Mortgage Association 10.2
Federal Home Loan Mortgage Corp. 4.4
Ford Motor Credit Co. 3.2
General Motors Acceptance Corp. 3.0
International Lease Finance Corp. 2.3
Lockheed Martin Corp. 1.8
General Electric Capital Corp. 1.8
SunTrust Banks, Inc. 1.7
--------------------
NOTES: THE FOLLOWING NOTES RELATE TO THE GROWTH OF $10,000 GRAPH AND TABLE ON
PRECEDING PAGE.
* The Bond Market Fund commenced operations on February 7, 1996. Index
comparisons began February 1, 1996.
** The Lehman Brothers Aggregate Bond Index is composed of all bonds
covered by the Lehman Brothers Government/Corporate Bond Index,
Mortgage-Backed Securities Index, and the Asset-Backed Securities
Index. Total returns comprises price appreciation/depreciation and
income as a percentage of the original investment.
+ Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Annual Report 7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of the SSgA Funds:
We have audited the accompanying statement of assets and liabilities and
statement of net assets of SSgA Bond Market Fund (formerly The Seven Seas Series
Bond Market Fund)(the "Fund"), as of August 31 1997, and the related statement
of operations, the statement of changes in net assets and the financial
highlights for the period February 7, 1996 (commencement of operations) to
August 31, 1996. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit.
We conducted our audit 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
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of August 31, 1997 by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides 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 of the
Fund as of August 31, 1997, the results of its operations, the changes in its
net assets and the financial highlights for the period February 7, 1996
(commencement of operations) to August 31, 1996 in conformity with generally
accepted accounting principles.
Boston, Massachusetts /s/ COOPERS & LYBRAND L.L.P.
October 7, 1997
8 Annual Report
<PAGE>
SSgA
BOND MARKET FUND
STATEMENT OF NET ASSETS
August 31, 1997
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
LONG-TERM INVESTMENTS - 98.4%
ASSET-BACKED SECURITIES - 5.0%
American Express Master Trust
5.375% due 07/15/01 $ 900 $ 875
Chase Manhattan Grantor Trust
Pass-thru Certificate
Series 1996-A Class A
5.200% due 04/15/02 96 95
CIT RV Trust
6.400% due 02/15/07 300 301
Citibank Credit Card Master Trust I
Series 1997-7 Class A
6.350% due 08/15/02 1,000 1,000
Discover Card Master Trust I
Series 1996-3 Class A
6.050% due 08/18/08 200 190
Ford Credit Auto Loan Master Trust
Series 1995-1 Class A
6.500% due 08/15/02 200 200
Premier Auto Trust
Series 1996-2 Class A4
6.575% due 10/06/00 1,000 1,007
Series 1997-1 Class A4
6.350% due 04/06/02 250 251
Series 1997-2 Class A4
6.250% due 06/06/01 125 125
Standard Credit Card Master Trust I
Series A
7.875% due 11/07/98 300 305
----------
4,349
----------
CORPORATE BONDS AND NOTES - 37.6%
ABN - Amro Bank NV
7.250% due 05/31/05 500 510
A.H. Belo Corp.
6.875% due 06/01/02 550 553
AON Capital Trust A
8.205% due 01/01/27 1,000 1,049
Applied Materials, Inc. (MTN)
Series A
7.000% due 09/06/05 290 290
BankAmerica Corp.
9.375% due 03/01/01 279 303
Bayerische Landesbank (MTN)
7.500% due 06/15/04 150 157
Boeing Co.
7.875% due 04/15/43 65 71
Branch Banking & Trust Co.
5.700% due 02/01/01 250 244
Burlington Northern Santa Fe
7.290% due 06/01/36 200 207
Caterpillar Financial Services (MTN)
6.800% due 06/15/99 800 808
Caterpillar, Inc.
7.375% due 03/01/97 250 249
Chemical Bank New York Corp.
7.250% due 09/15/02 40 41
CIT Group Holdings, Inc. (MTN)
6.250% due 03/22/99 350 352
6.250% due 10/04/99 500 500
Commercial Credit Group, Inc.
6.000% due 06/15/00 350 346
Crestar Capital Trust I
8.160% due 12/15/26 500 513
Crown Cork & Seal, Inc.
7.000% due 06/15/99 800 809
Enron Corp.
9.650% due 05/15/01 250 274
First Data Corp. Series B (MTN)
6.820% due 09/18/01 500 504
Annual Report 9
<PAGE>
SSgA
BOND MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
First National Bank of Boston
8.375% due 12/15/02 $ 700 $ 749
First Union National Bank of Florida
Series 1
6.180% due 02/15/36 320 307
Ford Motor Co.
7.700% due 05/15/97 220 227
Ford Motor Credit Co.
5.625% due 01/15/99 800 794
7.250% due 05/15/99 300 304
6.375% due 09/15/99 500 501
Ford Motor Credit Co. (MTN)
6.110% due 12/28/01 900 883
Ford Motor Credit Co. (Regd)
6.375% due 10/06/00 500 498
General Electric Capital Corp.
8.300% due 09/20/09 1,000 1,113
General Electric Capital Corp.
Series A (MTN)
8.090% due 04/01/04 (d) 500 535
General Motors Acceptance Corp.
7.125% due 06/01/99 944 957
8.400% due 10/15/99 450 469
General Motors Acceptance Corp. (MTN)
5.950% due 12/28/98 950 949
6.625% due 04/24/00 440 442
GTE Corp.
9.375% due 12/01/00 800 866
Harris Corp.
6.650% due 08/01/06 520 522
Inter-American Development Bank (MTN)
6.750% due 07/15/27 1,000 967
International Business Machines Corp.
7.125% due 12/01/96 184 177
International Lease Finance Corp.
6.125% due 11/01/99 1,000 996
6.375% due 01/18/00 1,000 999
6.625% due 08/15/00 200 201
John Deere Capital Corp.
6.000% due 02/01/99 190 190
Kemper Corp.
6.875% due 09/15/03 345 346
KFW International Finance, Inc.
7.625% due 02/15/04 100 105
7.000% due 03/01/13 250 252
Korea Development Bank
6.625% due 11/21/03 75 72
Lockheed Martin Corp.
6.550% due 05/15/99 1,200 1,205
6.850% due 05/15/01 500 504
McDonnell Douglas Corp.
6.875% due 11/01/06 400 403
Morgan Stanley Group, Inc. (MTN)
5.625% due 03/01/99 1,500 1,488
Nationsbank Corp.
7.625% due 04/15/05 1,000 1,041
Norfolk Southern Corp.
7.900% due 05/15/97 250 262
6.700% due 05/01/00 310 312
Norwest Corp. Series G (MTN)
6.000% due 10/13/98 500 500
Private Export Funding Corp.
Series AAA
7.010% due 04/30/04 250 257
Series ZZ
7.110% due 04/15/07 200 205
Raytheon Co.
6.450% due 08/15/02 1,000 991
Suntrust Banks, Inc.
6.125% due 02/15/04 1,300 1,255
6.000% due 02/15/26 300 282
Tennessee Gas Pipeline Co.
7.625% due 04/01/37 500 506
Time Warner, Inc.
9.150% due 02/01/23 100 113
10 Annual Report
<PAGE>
SSgA
BOND MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
Travelers Group, Inc.
9.500% due 03/01/02 $ 60 $ 66
Wachovia Corp.
6.605% due 10/01/25 350 350
Worldcom, Inc.
7.750% due 04/01/07 750 774
7.750% due 04/01/27 250 263
----------
32,978
----------
MORTGAGE-BACKED SECURITIES - 31.5%
Federal Home Loan Mortgage Corp.
Participation Certificate Groups
#38-0061 9.000% due 12/01/04 76 80
#38-0095 9.000% due 08/01/05 520 545
#C0-0509 7.500% due 04/01/27 904 915
#D6-9139 6.500% due 03/01/26 527 509
#D7-0627 6.500% due 04/01/26 1,551 1,499
#E6-5409 8.000% due 09/01/11 205 212
#E6-5911 6.000% due 12/01/11 118 114
#M9-0463 7.000% due 08/01/01 213 215
Federal National Mortgage Association
10.350% due 12/10/15 65 87
8.950% due 02/12/18 55 67
6.500% 15 Year TBA (c) 700 691
7.500% 30 Year TBA (c) 11,200 11,312
Federal National Mortgage
Association Pools
#201543 8.000% due 02/01/23 9 9
#250819 6.000% due 10/01/11 29 28
#296351 8.500% due 12/01/24 36 38
#303785 6.000% due 03/01/11 185 179
#304928 8.500% due 03/01/25 83 87
#313002 9.000% due 06/01/26 162 173
#316260 7.500% due 07/01/25 161 163
#319059 6.500% due 08/01/25 294 284
#328962 6.000% due 01/01/09 182 179
#349452 8.000% due 09/01/26 251 258
#352617 6.500% due 02/01/27 281 271
#367205 5.500% due 07/01/11 184 176
Government National Mortgage Association Pools
#008022 7.125% due 07/20/22 (d) 235 242
#008061 6.875% due 10/20/22 (d) 237 244
#008162 7.000% due 03/20/23 (d) 237 244
#008217 7.375% due 06/20/23 (d) 235 242
#104190 10.000% due 11/15/13 23 26
#112115 10.000% due 04/15/14 14 15
#328956 7.500% due 12/15/22 17 17
#334751 8.500% due 06/15/25 332 347
#352018 6.500% due 11/15/23 107 104
#358703 6.500% due 11/15/23 445 431
#371259 7.000% due 01/15/24 112 111
#372896 6.500% due 12/15/23 495 479
#380248 7.500% due 02/15/24 263 266
#381189 8.500% due 09/15/26 44 46
#382395 6.500% due 01/15/24 42 40
#411565 8.000% due 01/15/26 30 31
#415444 9.500% due 06/15/25 217 235
#417285 8.000% due 03/15/26 839 862
#420894 8.000% due 02/15/27 28 29
#432949 8.000% due 09/15/26 65 66
#433310 8.000% due 11/15/26 929 955
#435904 7.500% due 07/15/27 72 73
#436581 8.000% due 12/15/26 196 202
#441317 8.000% due 11/15/26 70 72
#446425 7.500% due 06/15/27 701 707
#447277 7.500% due 06/15/27 45 45
#451322 7.500% due 07/15/27 1,160 1,170
#780424 8.000% due 01/15/99 165 172
Government National Mortgage Association
8.500% 30 Year TBA (c) 2,000 2,089
----------
27,653
----------
Annual Report 11
<PAGE>
SSgA
BOND MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
UNITED STATES GOVERNMENT
AGENCIES - 0.9%
Federal Home Loan Bank
6.995% due 04/02/07 $ 300 $ 307
State of Israel Guaranteed Notes
Series 2-Z
Zero Coupon due 03/15/05 185 113
Series 3-B
6.625% due 02/15/04 250 252
Series 9-Z
Zero Coupon due 05/15/07 210 111
----------
783
----------
UNITED STATES GOVERNMENT
TREASURIES - 13.7%
United States Treasury Bonds
12.000% due 08/15/13 90 128
12.500% due 08/15/14 315 467
11.250% due 02/15/15 250 368
8.875% due 08/15/17 300 372
8.125% due 08/15/19 1,200 1,395
8.750% due 08/15/20 670 830
7.875% due 02/15/21 100 114
6.625% due 02/15/27 2,685 2,678
United States Treasury Notes
6.000% due 06/30/99 400 400
5.875% due 11/15/99 500 499
6.500% due 05/31/01 650 657
6.250% due 06/30/02 800 800
5.875% due 02/15/04 60 59
7.250% due 05/15/04 300 315
7.250% due 08/15/04 350 368
7.875% due 11/15/04 1,225 1,331
7.000% due 07/15/06 855 889
6.125% due 08/15/07 300 294
United States Treasury
Principal Only Strip
Zero Coupon due 05/15/99 95 85
----------
12,049
----------
YANKEE BONDS - 9.7%
Australia & New Zealand
Banking Group, Ltd.
6.250% due 02/01/04 500 485
7.550% due 09/15/06 1,000 1,036
Bell Cablemedia PLC Step Up Bond
Zero Coupon due 07/15/04 500 459
Enersis SA
6.600% due 12/01/26 300 295
Finland, Republic of
6.950% due 02/15/26 200 196
Ireland, Republic of
7.875% due 12/01/01 500 527
Malayan Banking Berhad - New York
7.125% due 09/15/05 500 492
Manitoba, Province of
Series C-J
9.500% due 10/01/00 351 381
Midland Bank PLC
7.650% due 05/01/25 150 159
National Australia Bank, Ltd.
9.700% due 10/15/98 250 260
New Zealand, Government of
8.750% due 12/15/06 300 342
Ontario, Province of
7.375% due 01/27/03 300 311
Poland, Government of
7.125% due 07/01/04 550 552
12 Annual Report
<PAGE>
SSgA
BOND MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
Quebec, Province of
9.125% due 03/01/00 $ 500 $ 531
Quebecor Printing, Inc.
6.500% due 08/01/27 1,000 972
Victorian Public Authority Financial Agency
8.450% due 10/01/01 150 159
Westpac Banking, Ltd.
9.125% due 08/15/01 500 542
7.875% due 10/15/02 750 788
----------
8,487
----------
TOTAL LONG-TERM INVESTMENTS
(cost $86,145) 86,299
----------
SHORT-TERM INVESTMENTS - 8.4%
Franklin
Money Market Fund (a) 3,962 3,962
Valiant Money Market Fund
Class A (a) 3,368 3,368
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $7,330) 7,330
----------
TOTAL INVESTMENTS
(identified cost $93,475)(b) - 106.8% 93,629
OTHER ASSETS AND LIABILITIES,
Net - (6.8%) (5,959)
----------
NET ASSETS - 100.0% $ 87,670
----------
----------
(a) At cost, which approximates market.
(b) See Note 2 for federal income tax information.
(c) Forward commitment. See Note 2.
(d) Adjustable or floating rate securities.
ABBREVIATIONS:
MTN - Medium Term Note
PLC - Public Limited Company
TBA - To be announced security
The accompanying notes are an integral part of the financial statements.
Annual Report 13
<PAGE>
SSgA
BOND MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1997
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $93,475)(Note 2). . . . . . . . . . . . . . . . . . . . . . . . . $ 93,629
Receivables:
Dividends and interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,154
Investments sold (regular settlement). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,305
Investments sold (delayed settlement)(Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,933
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195
--------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103,216
LIABILITIES
Payables:
Investments purchased (regular settlement) . . . . . . . . . . . . . . . . . . . . $ 1,399
Investments purchased (delayed settlement)(Note 2) . . . . . . . . . . . . . . . . 14,046
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Accrued fees to affiliates (Note 4). . . . . . . . . . . . . . . . . . . . . . . . 36
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
--------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,546
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 87,670
--------------
--------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,053
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (161)
Unrealized appreciation (depreciation) on investments. . . . . . . . . . . . . . . . . . . . . . . . . . 154
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,615
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 87,670
--------------
--------------
NET ASSET VALUE, offering and redemption price per share:
($87,670,286 divided by 8,794,953 shares of $.001
par value shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . $ 9.97
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 Annual Report
<PAGE>
SSgA
BOND MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Fiscal Year Ended August 31, 1997
Amounts in
thousands
<S> <C> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,035
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
Total Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,151
--------------
EXPENSES (Notes 2 and 4):
Advisory fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 144
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
--------------
Expenses before reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 355
Expense reductions (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . (115)
--------------
Total Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,911
--------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230
Net change in unrealized appreciation or depreciation of investments . . . . . . . . . . . . . . . . . . 853
--------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,083
--------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . . . $ 3,994
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 15
<PAGE>
SSgA
BOND MARKET FUND
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Fiscal Years Ended August 31,
Amounts in thousands
1997 1996
----------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,911 $ 731
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230 (391)
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . . . . 853 (699)
---------------- ----------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . 3,994 (359)
---------------- ----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,242) (353)
---------------- ----------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions . . . . . . . . 56,903 29,727
---------------- ----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . 58,655 29,015
NET ASSETS
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,015 --
End of period (including undistributed net investment income of ---------------- ----------------
$1,053 and $384, respectively). . . . . . . . . . . . . . . . . . . . . . . . . $ 87,670 $ 29,015
---------------- ----------------
---------------- ----------------
</TABLE>
<TABLE>
<CAPTION>
FUND SHARE TRANSACTIONS 1997 1996*
------------------------------------ ------------------------------------
SHARES DOLLARS SHARES DOLLARS
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Proceeds from shares sold. . . . . . . . . 8,168 $ 80,169 3,218 $ 31,721
Proceeds from reinvestment
of distributions. . . . . . . . . . . . 32 315 1 3
Payments for shares redeemed . . . . . . . (2,417) (23,581) (207) (1,997)
---------------- ---------------- ---------------- ----------------
Total net increase (decrease). . . . . . . 5,783 $ 56,903 3,012 $ 29,727
---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ----------------
</TABLE>
* For the period Februry 7, 1996 (commencement of operations) to
August 31, 1996.
The accompanying notes are an integral part of the financial statements.
16 Annual Report
<PAGE>
SSgA
BOND MARKET FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each fiscal
year or period and other performance information derived from the financial statements.
1997 1996
---------- ----------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9.63 $ 10.00
---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53 .27
Net realized and unrealized gain (loss) on investments . . . . . . . . . . . . . . . . . . . .35 (.49)
---------- ----------
Total Income From Investment Operations . . . . . . . . . . . . . . . . . . . . . . . . . .88 (.22)
---------- ----------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.54) (.15)
---------- ----------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9.97 $ 9.63
---------- ----------
---------- ----------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.47 (2.19)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of year ($000 omitted) . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,670 29,015
Ratios to average net assets (%)(b):
Operating expenses, net (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50 .63
Operating expenses, gross (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .74 .93
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.05 5.66
Portfolio turnover (%)(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 453.14 313.85
Per share amount of expense reductions ($ omitted)(c). . . . . . . . . . . . . . . . . . . . .0212 .0148
</TABLE>
* For the period February 7, 1996 (commencement of operations) to
August 31, 1996.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended August 31, 1996 are annualized.
(c) See Note 4 for current period amounts.
Annual Report 17
<PAGE>
SSgA
BOND MARKET FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1997
1. ORGANIZATION
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 17 investment portfolios which are in operation as
of August 31, 1997. In December 1996, the Investment Company changed its
name from "The Seven Seas Series Fund" to the "SSgA Funds." These financial
statements report on one portfolio, the SSgA Bond Market Fund (the "Fund").
The Investment Company is a registered and diversified open-end investment
company, as defined in the Investment Company Act of 1940, as amended (the
"1940 Act"), that was organized as a Massachusetts business trust on
October 3, 1987 and operates under a First Amended and Restated Master
Trust Agreement, dated October 13, 1993, as amended (the "Agreement"). The
Investment Company's Agreement permits the Board of Trustees to issue an
unlimited number of full and fractional shares of beneficial interest at a
$.001 par value.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
SECURITY VALUATION: United States fixed-income securities listed and traded
principally on any national securities exchange are valued on the basis of
the last sale price or, lacking any sale, at the closing bid price, on the
primary exchange on which the security is traded. United States
over-the-counter, fixed-income securities and options are valued on the
basis of the closing bid price.
Many fixed-income securities do not trade each day, and thus last sale or
bid prices are frequently not available. Fixed-income securities may be
valued using prices provided by a pricing service when such prices are
believed to reflect the market value of such securities.
Money market instruments maturing within 60 days of the valuation date are
valued at amortized cost, a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed, unless the Board of
Trustees determines that amortized cost does not represent fair value.
The Fund may value securities for which market quotations are not readily
available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
SECURITIES TRANSACTIONS: Securities transactions are recorded on a trade
date basis. Realized gains and losses from securities transactions are
recorded on the basis of identified cost.
INVESTMENT INCOME: Dividend income is recorded on the ex-dividend date and
interest income is recorded daily on the accrual basis.
18 Annual Report
<PAGE>
SSgA
BOND MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
AMORTIZATION AND ACCRETION: All zero-coupon bond discounts and original
issue discounts are accreted for both tax and financial reporting purposes.
All short- and long-term market premiums/discounts are amortized/accreted
for both tax and financial reporting purposes.
FEDERAL INCOME TAXES: Since the Investment Company is a Massachusetts
business trust, each sub-trust is a separate corporate taxpayer and
determines its net investment income and capital gains (or losses) and the
amounts to be distributed to each fund's shareholders without regard to the
income and capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company, as
defined by the Internal Revenue Code of 1986, as amended. This requires the
Fund to distribute all of its taxable income. Therefore, the Fund paid no
federal income taxes and no federal income tax provision was required. At
August 31, 1997, the Fund had a net tax basis capital loss carryover of
$5,379, which may be applied against any realized net taxable gains in each
succeeding year or until its expiration date of August 31, 2005. As
permitted by tax regulations, the Fund intends to defer a net realized
capital loss of $88,439 incurred from November 1, 1996 to August 31, 1997,
and treat it as arising in fiscal year 1998.
The Fund's aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of August 31, 1997 are as follows:
NET
UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
-------------- -------------- -------------- --------------
$ 93,521,694 $ 645,663 $ (538,119) $ 107,544
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date. Dividends
are generally declared and paid quarterly. Capital gain distributions are
generally declared and paid annually. An additional distribution may be
paid by the Fund to avoid imposition of federal income tax on any remaining
undistributed net investment income and capital gains.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP"). As
a result, net investment income and net realized gain (or loss) on
investment transactions for a reporting period may differ significantly
from distributions during such period. The differences between tax
regulations and GAAP relate primarily to investment in certain fixed income
securities purchased at a discount, in mortgage-backed securities and
certain securities sold at a loss. Accordingly, the Fund may periodically
make reclassifications among certain of its capital accounts without
impacting its net asset value.
Annual Report 19
<PAGE>
SSgA
BOND MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
EXPENSES: Most expenses can be directly attributed to the Fund. Expenses
which cannot be directly attributed are allocated among all funds based
principally on their relative net assets.
DEFERRED ORGANIZATION EXPENSES: The Fund incurred expenses in connection
with its organization and initial registration. These costs have been
deferred and are being amortized over 60 months on a straight-line basis.
REPURCHASE AGREEMENTS: The Fund may engage in repurchase and tri-party
repurchase agreements with several financial institutions whereby the Fund,
through its custodian or third-party custodian, receives delivery of the
underlying securities. The market value of these securities (including
accrued interest) on acquisition date is required to be an amount equal to
at least 102% of the repurchase price. The Fund's Adviser will monitor
repurchase agreements daily to determine that the market value (including
accrued interest) of the underlying securities remains equal to at least
102% of the repurchase price at Fedwire closing time. The Adviser or
third-party custodian will notify the seller to immediately increase the
collateral on the repurchase agreement to 102% of the repurchase price if
collateral falls below 102%.
FORWARD COMMITMENTS/MORTGAGE DOLLAR ROLLS: The Fund may contract to
purchase securities for a fixed price at a future date beyond customary
settlement time (not to exceed 120 days)(i.e., a "forward commitment" or
"delayed settlement" transaction, e.g., to be announced ("TBA")) consistent
with a Fund's ability to manage its investment portfolio and meet
redemption requests. For example, the Fund may enter into mortgage dollar
rolls (principally in TBA's) in which the Fund purchases a mortgage
security and sells a similar mortgage security before settlement of the
purchased mortgage security occurs. The Fund may realize a short-term gain
(or loss), based on market movements, upon such sale. When effecting such
transactions, cash or liquid high-grade debt obligations of the Fund will
be segregated on the Fund's records in a dollar amount sufficient to make
payment for the portfolio securities to be purchased at the trade date and
maintained until the transaction is settled. A forward commitment
transaction involves a risk of loss if the value of the security to be
purchased declines prior to the settlement date or the other party to the
transaction fails to complete the transaction.
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the year ended August 31, 1997, purchases and
sales of investment securities, excluding US Government and Agency
obligations and short-term investments, aggregated to $55,588,595 and
$23,550,591, respectively.
For the year ended August 31, 1997, purchases and sales of US Government
and Agency obligations, excluding short-term investments, aggregated to
$218,535,854 and $193,549,404, respectively.
20 Annual Report
<PAGE>
SSgA
BOND MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
4. RELATED PARTIES
ADVISER: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company (the "Adviser") under which the Adviser
directs the investments of the Fund in accordance with its investment
objectives, policies, and limitations. For these services, the Fund pays a
fee to the Adviser, calculated daily and paid monthly, at the annual rate
of .30% of its average daily net assets. For the year ended August 31,
1997, the Adviser voluntarily agreed to waive one-half of its advisory fee
to the Fund. Additionally, the Adviser has agreed to waive up to the full
amount of its remaining advisory fee to the extent that total expenses
exceed .50% of average daily net assets on an annual basis. The Investment
Company also has contracts with the Adviser to provide custody, shareholder
servicing and transfer agent services to the Fund. These amounts are
presented in the accompanying Statement of Operations.
ADMINISTRATOR: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator") under
which the Administrator supervises all non-portfolio investment aspects of
the Investment Company's operations and provides adequate office space and
all necessary office equipment and services, including telephone service,
utilities, stationery supplies, and similar items. The Investment Company
pays the Administrator the following fees for services supplied by the
Administrator pursuant to the Administration Agreement: (i) an annual fee,
payable monthly on a pro rata basis, based on the following percentages of
the average daily net assets of all domestic funds: $0 up to and including
$500 million - .06%; over $500 million to and including $1 billion - .05%;
over $1 billion - .03%; (ii) less an amount equal to the sum of certain
distribution-related expenses incurred by the Investment Company's
Distributor on behalf of the Fund (up to a maximum of 10% of the
asset-based fee determined in (i)); (iii) out-of-pocket expenses; and (iv)
start-up costs for new funds.
DISTRIBUTOR AND SHAREHOLDER SERVICING: The Investment Company has entered
into a Distribution Agreement with Russell Fund Distributors (the
"Distributor") which is a wholly-owned subsidiary of the Administrator to
promote and offer shares of the Investment Company. The Distributor may
have entered into sub-distribution agreements with other non-related
parties. The amounts paid to the Distributor are included in the
accompanying Statement of Operations.
The Investment Company has also adopted a Distribution Plan pursuant to
Rule 12b-1 (the "Plan") under the 1940 Act. Under this Plan, the Investment
Company is authorized to make payments to the Distributor, or any
Shareholder Servicing Agent, as defined in the Plan, for providing
distribution and marketing services, for furnishing assistance to investors
on an ongoing basis, and for the reimbursement of direct out-of-pocket
expenses incurred by the Distributor in connection with the distribution
and marketing of shares of the Investment Company and the servicing of
investor accounts.
The Fund has entered into service agreements with the Adviser, the
Adviser's Retirement Investment Services Division ("RIS"), and the
Adviser's Metropolitan Division of Commercial Banking ("Commercial
Banking")(collectively the "Agents"), as well as several unaffiliated
service providers. For these services, the Fund pays .025%, .050%, and
.050% to the Adviser, RIS, and Commercial Banking, respectively, based upon
Annual Report 21
<PAGE>
SSgA
BOND MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
the average daily value of all Fund shares held by or for customers of
these Agents. For the year ended August 31, 1997, the Fund incurred
expenses of $10,607 from the Adviser. The Fund did not incur any expenses
from RIS or Commercial Banking during this period.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The Trustees or a majority of the
Fund's shareholders have the right, however, to terminate the Distribution
Plan and all payments thereunder at any time. The Fund will not be
obligated to reimburse the Distributor for carryover expenses subsequent to
the Distribution Plan's termination or noncontinuance. There were no
carryover expenses as of August 31, 1997.
BOARD OF TRUSTEES: The Investment Company pays each Trustee not affiliated
with the Investment Company a retainer of $44,000 annually, $1,000 for each
board meeting attended, an additional $1,000 for attending the annual audit
committee meeting, and reimbursement for out-of-pocket expenses. These
expenses are allocated among all of the Funds based upon their relative net
assets.
ACCRUED FEES PAYABLE TO AFFILIATES AND TRUSTEES AS OF AUGUST 31, 1997 WERE
AS FOLLOWS:
Advisory $ 14,886
Administration fees 2,242
Custodian fees 11,323
Distribution fees 1,731
Shareholder servicing fees 1,110
Transfer agent fees 4,617
Trustees' fees 44
----------
$ 35,953
----------
----------
BENEFICIAL INTEREST: As of August 31, 1997, one shareholder was a record
owner of approximately 14% of the total outstanding shares of the Fund.
5. DIVIDENDS
On September 2, 1997, the Board of Trustees declared a dividend of $.1150
from net investment income, payable on September 10, 1997 to shareholders
of record on September 3, 1997.
22 Annual Report
<PAGE>
SSgA BOND MARKET FUND
Two International Place, 35th Floor
Boston, Massachusetts 02110
(800) 997-7327
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
George W. Weber, Senior Vice President and Treasurer
J. David Griswold, Vice President and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND OFFICE OF SHAREHOLDER INQUIRIES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 647-7327
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(800) 997-7327
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
Annual Report 23
<PAGE>
SSgA-SM- FUNDS
YIELD PLUS FUND
Annual Report
August 31, 1997
Table of Contents
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion. . . . . . . . . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . 16
Fund Management and Service Providers. . . . . . . . . . . . . . . . . . . 21
"SSgA-SM-" IS A SERVICE MARK OF STATE STREET CORPORATION AND IS LICENSED FOR USE
BY THE SSgA FUNDS.
THIS REPORT IS PREPARED FROM THE BOOKS AND RECORDS OF THE FUND AND IT IS
SUBMITTED FOR THE GENERAL INFORMATION OF SHAREHOLDERS. THIS INFORMATION IS FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR ACCOMPANIED BY A
SSgA FUNDS PROSPECTUS CONTAINING MORE COMPLETE INFORMATION CONCERNING THE
INVESTMENT OBJECTIVE AND OPERATIONS OF THE FUND, CHARGES AND EXPENSES. THE
PROSPECTUS SHOULD BE READ CAREFULLY BEFORE AN INVESTMENT IS MADE.
PERFORMANCE IS HISTORICAL AND ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL
GAINS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN WHEN PURCHASED.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. RUSSELL FUND DISTRIBUTORS,
INC., IS THE DISTRIBUTOR OF THE SSgA FUNDS.
<PAGE>
SSgA YIELD PLUS FUND
LETTER FROM THE CHAIRMAN OF STATE STREET GLOBAL ADVISORS
DEAR SHAREHOLDERS,
I am pleased to provide you with the SSgA Funds annual report for the fiscal
year ended August 31, 1997. Over the past year, the Funds have grown to include
seventeen portfolios covering a broad range of investment strategies from the
far corners of the emerging markets countries to the domestic stock and bond
markets. This report contains summaries on the market environment, performance
and financial statements for the Yield Plus Fund. I hope you find this
information a useful tool as you review your overall investment strategy.
The SSgA Funds opened three additional funds in fiscal 1997. These three asset
allocation funds, called Life Solutions Funds, were opened on July 1, 1997. Each
Life Solutions Fund seeks to achieve its investment objective by diversifying
its assets in shares of certain Funds of the Investment Company, referred to as
Underlying Funds.
The Life Solutions Income and Growth Fund seeks income and, secondarily,
long-term growth of capital.
The Life Solutions Balanced Fund seeks a balance of growth of capital and
income.
The Life Solutions Growth Fund seeks long-term growth of capital.
During the past fiscal year, the SSgA Funds were proud to announce that the SSgA
Matrix Fund and the SSgA Small Cap Fund achieved five year track records. We are
proud of our long-term record and look forward to having additional funds
complete their five year anniversary.
SSgA is strategically growing by continuing to build an organization that
delivers comprehensive services striving to meet your investment requirements.
In an effort to compete in this ever-changing complex world, we focus on our
expertise, our knowledge and our commitment to better serve your investment
needs.
As Chairman and Chief Executive Officer of State Street Global Advisors, which
serves as the investment adviser to the SSgA Funds, I would like to thank you
for choosing the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
SSgA YIELD PLUS FUND
MANAGEMENT OF THE FUNDS
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A TEAM APPROACH TO INVESTMENT MANAGEMENT
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio managers work together to develop and enhance the
techniques that drive our investment processes. The result is that the
portfolios we manage benefit from the knowledge of the entire team.
Ms. Rena Williams, Vice President, has been the portfolio manager primarily
responsible for investment decisions regarding the SSgA Yield Plus Fund since
early 1996. Ms. Williams is the Mutual Funds Unit Head responsible for oversight
of money market and other short-term funds. Prior to joining State Street, she
was a portfolio manager with PNC Bank and the Calvert Group. She holds a BA in
International Relations from the University of Virginia. There are 10 other
portfolio managers working with Ms. Williams.
Annual Report 5
<PAGE>
SSgA YIELD PLUS FUND
PORTFOLIO MANAGEMENT DISCUSSION
OBJECTIVE: Maximize current income; preservation of capital and liquidity.
INVESTS IN: High quality, investment grade, debt instruments including: US
Government Treasuries and Agencies, corporate bonds, asset-backed securities,
mortgage-backed securities, and high quality money market instruments
maintaining duration to one year or less.
STRATEGY: Fund Managers base their decisions on the relative attractiveness
of different investments which can vary depending on the general level of
interest rates as well as supply/demand imbalances in the market.
[GRAPH]
DATES YIELD PLUS FUND SALOMAN 3-MONTH T-BILL SALOMAN 6-MONTH T-BILL
Inception* $10,000 $10,000 $10,000
1993 $10,285 $10,256 $10,273
1994 $10,660 $10,621 $10,650
1995 $11,301 $11,213 $11,271
1996 $11,948 $11,813 $11,888
1997 $12,626 $12,433 $12,533
- --------------------------------------------------------------------------------
Total $66,820 $66,336 $66,615
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SSgA
YIELD PLUS FUND
Period Ended Growth of Total
08/31/97 $10,000 Return
- ------------ ------------ ------------
1 Year $ 10,567 5.67%
Inception $ 12,626 4.97%+
SALOMON BROTHERS 3-MONTH
TREASURY BILL INDEX
Period Ended Growth of Total
08/31/97 $10,000 Return
- ------------ ------------ ------------
1 Year $ 10,525 5.25%
Inception $ 12,433 4.61%+
NARROWLY BASED INDEX:
SALOMON BROTHERS 6-MONTH
TREASURY BILL INDEX
Period Ended Growth of Total
08/31/97 $10,000 Return
- ------------ ------------ ------------
1 Year $ 10,542 5.42%
Inception $ 12,533 4.78%+
SEE RELATED NOTES ON THE FOLLOWING PAGE.
PERFORMANCE REVIEW
The Fund had a one year return of 5.67% for the fiscal year ended August 31,
1997. Although the Fund is not a money market fund, it is managed in a manner to
provide higher returns than typically available from a money market fund,
without substantially increasing duration risk. The Fund outperformed its
benchmarks, the Salomon Brothers 3-Month and 6-Month Treasury Bill Indexes of
5.25% and 5.42%, respectively by 0.42 and 0.25 percentage points.
The SSgA Yield Plus Fund closed the year with net assets very close to where the
year began at $835 million; however, assets fluctuated between a high of nearly
$1.1 billion and a low of $760 million. Throughout this volatility, the average
duration of the Fund was kept within a tight range around 90 days.
6 Annual Report
<PAGE>
SSgA YIELD PLUS FUND
PORTFOLIO MANAGEMENT DISCUSSION
PORTFOLIO HIGHLIGHTS
The solid performance of the Fund can be attributed to the continued tightening
of spreads to Treasuries for corporate, asset-backed and mortgage-backed
securities. The Fund's investments are actively traded to strategically adjust
its sector weightings and take advantage of market inefficiencies. The Fund
typically purchased securities which, when held over time, appreciate in value
due to the steepness of the yield curve. When the securities reached a maturity
of one year or less and became money market eligible investments, the Fund was
generally able to sell into the "rich" part of the curve. This is reflective of
the overwhelming demand from money market type funds for these short-term
securities. Proceeds were then reinvested in securities farther out on the yield
curve to enhance yield. This type of investment strategy provided excellent
liquidity and allowed the Fund to capitalize on the greater credit and maturity
risk premiums available in longer term securities while limiting duration risk
and avoiding the "expensive" part of the investment curve. The strategy also
performed well in the past year as the Federal Reserve only moved to tighten
rates by 25 basis points during the year.
The Fund continues to focus its investment concentrations on high quality fixed
and floating rate corporate bonds and fixed and floating rate AAA rated
asset-backed securities. Specific securities are selected based on relative
value analysis. Approximately, 75% of the Fund was invested in floating rate
securities using one- and three-month LIBOR (London InterBank Offering Rate) as
indices for resets. The Fund was able to purchase securities at more attractive
spreads than money market type funds by buying floating rate securities with
maturities beyond the standard money market one-year range. This was
accomplished while maintaining duration exposure to the very short end of the
yield curve.
TOP TEN ISSUERS
(AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31, 1997
First USA Credit Card Master Trust 5.0%
Citicorp 4.9
Superior Wholesale Inventory Financing Trust 4.9
MBNA Master Credit Card Trust II 4.3
Carco Auto Loan Master Trust 4.3
Standard Credit Card Master Trust I 4.2
Associates Corp. North America 3.7
Main Place Funding Corp. 3.1
AT&T Universal Card Master Trust 3.1
NationsBank Auto Owner Trust 2.7
--------------------
NOTES: THE FOLLOWING NOTES RELATE TO THE GROWTH OF $10,000 GRAPH
AND TABLE ON THE PRECEDING PAGE.
* The Fund commenced operations on November 9, 1992. Index comparisons
began November 1, 1992.
++ Equal dollar amounts of 3-month Treasury bills are purchased at the
beginning of each of three consecutive months. As each bill matures
all proceeds are rolled over or reinvested in a new 3-month bill. The
income used to calculate the monthly return is derived by subtracting
the original amount invested from the maturity value. The yield curve
average is the basis for calculating the return on the Index. The
Index is rebalanced monthly by market capitalization.
++++ The total return calculated for the Salomon Brothers 6-Month Treasury
Bills Index includes principal gain or loss, income and reinvestment
of proceeds. The Index is based on a rolling maturity concept and
holding the bond to maturity. For example, the Index will contain, at
any point, issues with 1-6 months of remaining maturity.
+ Annualized
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Annual Report 7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of the SSgA Funds:
We have audited the accompanying statement of assets and liabilities and
statement of net assets of SSgA Yield Plus Fund (formerly The Seven Seas Series
Yield Plus Fund)(the "Fund"), as of August 31, 1997, and the related statement
of operations for the fiscal year then ended, the statements of changes in net
assets for each of the two fiscal years in the period then ended, and the
financial highlights for each of the four fiscal years in the period then ended
and for the period November 9, 1992 (commencement of operations) to August 31,
1993. These financial statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
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 free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We 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 of the Fund as of August 31, 1997, the results of its operations for
the fiscal year then ended, the changes in its net assets for each of the two
fiscal years in the period then ended, and the financial highlights for each of
the four fiscal years in the period then ended and for the period November 9,
1992 (commencement of operations) to August 31, 1993 in conformity with
generally accepted accounting principles.
Boston, Massachusetts /s/ COOPERS & LYBRAND L.L.P.
October 7, 1997
8 Annual Report
<PAGE>
SSgA
YIELD PLUS FUND
STATEMENT OF NET ASSETS
August 31, 1997
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
LONG-TERM INVESTMENTS - 95.6%
ASSET-BACKED SECURITIES - 52.9%
Advanta Credit Card Master Trust
Series 1993-4 Class A
5.875% due 12/31/00 (a) $ 5,000 $ 5,006
AT&T Universal Card Master Trust
Series 1996 - 3 Class A
5.881% due 09/17/03 (a) 25,000 25,000
BA Master Credit Card Trust
Series 1996-A Class A
5.782% due 08/15/03 (a) 11,455 11,462
Series 1997-A Class A
5.762% due 07/15/04 (a) 14,750 14,736
BankBoston Recreational Vehicle
Asset Backed Trust
Series 1997-1 Class A3
6.432% due 12/15/02 (a) 5,000 5,004
Carco Auto Loan Master Trust
Series 1995-1 Class A
5.808% due 06/15/00 (a) 35,000 35,022
Chase Manhattan Auto Owner Trust
Series 1996-C Class A-2
5.750% due 05/15/99 9,901 9,901
Chase Manhattan Grantor Trust
Pass-thru Certificate
Series 1996-A Class A
5.200% due 02/15/02 5,204 5,157
First Chicago Master Trust II
Series 1995-N Class A
5.812% due 12/15/00 (a) 5,000 5,005
First USA Credit Card Master Trust
Series 1996-1 Class A
5.812% due 11/15/03 (a) 26,000 26,023
Series 1997 - 3 Class A
5.755% due 02/17/05 (a) 15,000 15,002
Ford Credit Auto Loan Master Trust
Series 1994-1 Class A
5.920% due 07/15/01 (a) 15,050 15,073
Ford Credit Grantor Trust
Series 1995-B Class A
5.900% due 10/15/00 2,169 2,168
Household Affinity
Credit Card Master Trust I
Series 1995-1 Class A
5.802% due 02/15/02 (a) 7,000 7,011
Main Place Funding Corp.
Series 1995-1
5.835% due 07/17/98 (a) 25,000 25,068
MBNA Master Credit Card Trust
Series 1993-3 Class A
5.400% due 09/15/00 3,685 3,656
Series 1996-L Class A
5.780% due 11/15/01 (a) 4,000 3,996
Series 1997-E Class A
5.830% due 09/15/04 (a) 10,000 9,988
MBNA Master Credit Card Trust II
Series 1995-I Class A
5.822% due 03/15/03 (a) 35,000 35,076
NationsBank Auto Owner Trust
Series 1996-A Class A2
6.125% due 07/15/99 (a) 22,112 22,140
Navistar Financial Owner Trust
Series 1997-A Class A2
6.350% due 01/15/00 (a) 8,250 8,268
Premier Auto Trust
Series 1993-6 Class A2
4.650% due 11/02/99 2,442 2,423
Series 1993-6 Class A3
5.841% due 11/02/99 (a) 5,835 5,840
Series 1996-3 Class A3
6.500% due 03/06/00 14,815 14,894
Series 1997-2 Class A2
6.010% due 11/06/99 (a) 7,500 7,500
Annual Report 9
<PAGE>
SSgA
YIELD PLUS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
Signet Credit Card Master Trust
Series 1993-1 Class A
5.200% due 02/15/02 $ 14,350 $ 14,233
SLMA Student Loan Trust
Series 1996 - 4 Class A1
5.740% due 07/25/04 (a) 17,112 17,092
Standard Credit Card Master Trust I
Series 1995-11 Class A
5.840% due 11/15/00 (a) 34,000 34,010
Student Loan Marketing Association
Series 1997-2 Class A1
5.800% due 10/25/05 19,200 19,198
Superior Wholesale Inventory
Financing Trust
Series 1995-A Class A
5.782% due 08/15/00 (a) 40,000 40,000
----------
444,952
----------
CORPORATE BONDS AND NOTES - 39.9%
Associates Corp. North America
6.625% due 07/15/99 30,000 30,220
BankAmerica Corp.
5.790% due 10/15/99 (a) 12,150 12,159
Branch Banking & Trust Co.
5.779% due 04/28/00 (a) 7,500 7,488
Caterpillar Financial Services (MTN)
Series E
5.760% due 10/06/99 (a) 20,000 19,992
Series F
5.791% due 09/01/99 (a) 15,000 14,977
CIT Group Holdings, Inc.
6.250% due 10/04/99 10,000 10,003
Citicorp Series C (MTN)
5.790% due 02/15/00 (a) 25,000 25,024
6.043% due 06/01/00 (a) 15,000 15,057
Dean Witter Discover & Co.
6.188% due 03/01/00 (a) 9,000 9,049
Series E
5.844% due 08/21/99 (a) 20,000 20,020
Series I
5.773% due 05/14/99 (a) 8,000 8,021
First Bank Systems, Inc. (MTN)
Series F
5.773% due 10/21/98 (a) 15,000 15,018
First Chicago Corp. (MTN)
6.011% due 12/13/99 (a) 5,000 5,018
Series G
5.747% due 05/05/00 (a) 7,000 6,975
5.869% due 07/03/00 (a) 5,000 4,989
Ford Motor Credit Co. (MTN)
5.969% due 02/01/99 (a) 10,000 10,008
6.032% due 03/05/01 (a) 15,000 15,024
Series 1
6.051% due 03/21/01 (a) 10,000 10,042
General Motors Acceptance Corp.
5.844% due 04/29/02 (a) 20,000 19,984
General Motors
Acceptance Corp. (MTN)
5.852% due 06/04/99 (a) 12,000 12,008
Merrill Lynch & Co., Inc. (MTN)
Series B
6.150% due 02/15/00 (a) 16,000 16,092
5.781% due 11/22/99 (a) 21,700 21,722
NationsBank Corp. (MTN)
Series D
5.906% due 08/25/99 (a) 5,000 5,017
Series E
5.951% due 06/25/02 (a) 18,500 18,472
NTC Capital I Series A
6.270% due 01/15/27 (a) 3,500 3,436
----------
335,815
----------
10 Annual Report
<PAGE>
SSgA
YIELD PLUS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
MORTGAGE-BACKED SECURITIES - 0.8%
Federal Home Loan Mortgage Corp.
Participation Certificate Groups
#G5-0305 7.000% due 11/01/00 $ 1,459 $ 1,470
Main Place Real Estate
Investment Trust Co.,
Series 97 - 1
5.831% due 03/25/00 (a) 5,000 5,009
----------
6,479
----------
MUNICIPAL BONDS - 1.2%
Student Loan Funding Corporation
Ohio Student Loan Revenue
5.860% due 09/01/07 (a) 10,000 9,997
----------
9,997
----------
YANKEE BONDS - 0.8%
Chase Capital II
6.219% due 02/01/27 (a) 3,250 3,174
NationsBank Capital Trust III
6.300% due 01/15/27 3,250 3,193
----------
6,367
----------
TOTAL INVESTMENTS
(cost $803,175) 803,610
----------
REPURCHASE AGREEMENTS - 1.7%
Agreement with HSBC of $14,000
aquired 08/29/97 at 5.600%
to be repurchased at $14,008
on 09/02/97 collateralized by:
$14,380 Federal National Mortgage
Association Discount Note,
Zero Coupon due 10/03/97,
valued at $14,256 $ 14,000
----------
TOTAL REPURCHASE AGREEMENTS
(cost $14,000) 14,000
----------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS
(identified cost $817,175)(b) - 97.3% 817,610
OTHER ASSETS AND LIABILITIES, NET - 2.7% 22,445
----------
NET ASSETS - 100.0% $ 840,055
----------
----------
(a) Adjustable or floating-rate securities.
(b) See Note 2 for federal income tax information.
ABBREVIATIONS:
MTN - Medium Term Note
The accompanying notes are an integral part of the financial statements.
Annual Report 11
<PAGE>
SSgA
YIELD PLUS FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1997
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $817,175)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . $ 817,610
Receivables:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,587
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,239
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
--------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 840,584
LIABILITIES
Payables:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 79
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Accrued fees to affiliates and trustees (Note 4) . . . . . . . . . . . . . . . . . 419
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
--------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 529
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 840,055
--------------
--------------
NET ASSETS CONSIST OF:
Accumulated distributions in excess of net investment income . . . . . . . . . . . . . . . . . . . . . . $ (136)
Accumulated net realized loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,513)
Unrealized appreciation (depreciation) on investments. . . . . . . . . . . . . . . . . . . . . . . . . . 435
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 841,185
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 840,055
--------------
--------------
NET ASSET VALUE, offering and redemption price per share:
($840,055,491 divided by 83,943,027 shares of $.001
par value shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . $ 10.01
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 Annual Report
<PAGE>
SSgA
YIELD PLUS FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Fiscal Year Ended August 31, 1997
Amounts in
thousands
<S> <C> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 53,593
EXPENSES (Notes 2 and 4):
Advisory fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,310
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 290
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 275
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Amortization of deferred organization expenses . . . . . . . . . . . . . . . . . . 9
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
--------------
Total Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,528
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,065
--------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 902
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125 1,027
--------------
Net change in unrealized appreciation or depreciation of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 443
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (549) (106)
-------------- --------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 921
--------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . . . $ 50,986
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 13
<PAGE>
SSgA
YIELD PLUS FUND
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Fiscal Years Ended August 31,
Amounts in thousands
1997 1996
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 50,065 $ 77,374
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,027 857
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . . . . (106) (867)
---------------- ----------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . 50,986 77,364
---------------- ----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (50,066) (77,330)
In excess of net investment income . . . . . . . . . . . . . . . . . . . . . . . . (136) --
---------------- ----------------
Total Distributions to Shareholders . . . . . . . . . . . . . . . . . . . . . . (50,202) (77,330)
---------------- ----------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions . . . . . . . . (94,214) (513,647)
---------------- ----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . (93,430) (513,613)
NET ASSETS
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 933,485 1,447,098
---------------- ----------------
End of year (including accumulated distributions in excess of
net investment income of $136 and undistributed
net investment income of $1, respectively). . . . . . . . . . . . . . . . . . . . $ 840,055 $ 933,485
---------------- ----------------
---------------- ----------------
</TABLE>
<TABLE>
<CAPTION>
FUND SHARE TRANSACTIONS 1997 1996
------------------------------------- -------------------------------------
SHARES DOLLARS SHARES DOLLARS
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Proceeds from shares sold. . . . . . . . . 206,514 $ 2,066,206 147,332 $ 1,473,441
Proceeds from reinvestment
of distributions . . . . . . . . . . . . 4,931 49,336 7,636 76,373
Payments for shares redeemed . . . . . . . (220,864) (2,209,756) (206,335) (2,063,461)
----------------- ----------------- ----------------- -----------------
Total net increase (decrease). . . . . . . (9,419) $ (94,214) (51,367) $ (513,647)
----------------- ----------------- ----------------- -----------------
----------------- ----------------- ----------------- -----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 Annual Report
<PAGE>
SSgA
YIELD PLUS FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each fiscal
year or period and other performance information derived from the financial statements.
1997 1996 1995 1994 1993*
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . $ 10.00 $ 10.00 $ 9.99 $ 10.01 $ 10.00
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . .54 .56 .56 .38 .27
Net realized and unrealized gain
(loss) on investments. . . . . . . . . . . . . .01 -- .02 (.02) .01
---------- ---------- ---------- ---------- ----------
Total Income From Investment Operations. . . . .55 .56 .58 .36 .28
---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . . . . . . (.54) (.56) (.56) (.38) (.27)
In excess of net realized gain on investments . . -- -- (.01) -- --
---------- ---------- ---------- ---------- ----------
Total Distributions. . . . . . . . . . . . . . (.54) (.56) (.57) (.38) (.27)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . $ 10.01 $ 10.00 $ 10.00 $ 9.99 $ 10.01
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . 5.67 5.73 6.01 3.65 2.85
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of year ($000 omitted). . . . . . 840,055 933,485 1,447,097 1,358,464 589,594
Ratios to average net assets (%)(b):
Operating expenses . . . . . . . . . . . . . . .38 .36 .38 .35 .38
Net investment income. . . . . . . . . . . . . 5.42 5.59 5.64 3.82 3.54
Portfolio turnover (%)(b) . . . . . . . . . . . . 92.38 97.05 199.69 142.68 137.86
Per share amount of expense reductions
($ omitted). . . . . . . . . . . . . . . . . . -- -- -- -- .00042
</TABLE>
* For the period November 9, 1992 (commencement of operations) to
August 31, 1993.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended August 31, 1993 are annualized.
Annual Report 15
<PAGE>
SSgA
YIELD PLUS FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1997
1. ORGANIZATION
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 17 investment portfolios which are in operation as
of August 31, 1997. In December 1996, the Investment Company changed its
name from "The Seven Seas Series Fund" to the "SSgA Funds." These financial
statements report on one portfolio, the SSgA Yield Plus Fund (the "Fund").
The Investment Company is a registered and diversified open-end investment
company, as defined in the Investment Company Act of 1940, as amended (the
"1940 Act"), that was organized as a Massachusetts business trust on
October 3, 1987 and operates under a First Amended and Restated Master
Trust Agreement, dated October 13, 1993, as amended (the "Agreement"). The
Investment Company's Agreement permits the Board of Trustees to issue an
unlimited number of full and fractional shares of beneficial interest at a
$.001 par value.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
SECURITY VALUATION: United States fixed-income securities listed and traded
principally on any national securities exchange are valued on the basis of
the last sale price or, lacking any sale, at the closing bid price, on the
primary exchange on which the security is traded. United States
over-the-counter, fixed-income securities and options are valued on the
basis of the closing bid price. Futures contracts are valued on the basis
of the last sale price.
Many fixed-income securities do not trade each day, and thus last sale or
bid prices are frequently not available. Fixed-income securities may be
valued using prices provided by a pricing service when such prices are
believed to reflect the market value of such securities.
Money market instruments maturing within 60 days of the valuation date are
valued at amortized cost, a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed, unless the Board of
Trustees determines that amortized cost does not represent fair value.
The Fund may value securities for which market quotations are not readily
available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
SECURITIES TRANSACTIONS: Securities transactions are recorded on a trade
date basis. Realized gains and losses from securities transactions are
recorded on the basis of identified cost.
INVESTMENT INCOME: Interest income is recorded daily on the accrual basis.
AMORTIZATION AND ACCRETION: All zero-coupon bond discounts and original
issue discounts are accreted for both tax and financial reporting purposes.
All short- and long-term market premiums/discounts are amortized/accreted
for both tax and financial reporting purposes.
FEDERAL INCOME TAXES: Since the Investment Company is a Massachusetts
business trust, each sub-trust is a separate corporate taxpayer and
determines its net investment income and capital gains (or losses) and the
16 Annual Report
<PAGE>
SSgA
YIELD PLUS FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
amounts to be distributed to each fund's shareholders without regard to the
income and capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company, as
defined by the Internal Revenue Code of 1986,] as amended. This requires
the Fund to distribute all of its taxable income. Therefore, the Fund paid
no federal income taxes and no federal income tax provision was required.
At August 31, 1997, the Fund had a net tax basis capital loss carryover of
$1,538,342 which may be applied against any realized net taxable gains in
each succeeding year or until its expiration date of August 31, 2004.
The Fund's aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of August 31, 1997 are as follows:
NET
UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
-------------- -------------- -------------- --------------
$ 817,186,315 $ 791,389 $ (367,650) $ 423,739
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Fund declares and records
dividends on net investment income daily and pays them monthly. Capital
gain distributions, if any, are generally declared and paid annually. An
additional distribution may be paid by the Fund to avoid imposition of
federal income tax on any remaining undistributed net investment income and
capital gains.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP"). As
a result, net investment income and net realized gain (or loss) from
investment transactions for a reporting period may differ significantly
from distributions during such period. The differences between tax
regulations and GAAP relate primarily to investments in certain fixed
income securities purchased at a discount in futures, mortgage-backed
securities, and certain securities sold at a loss. Accordingly, the Fund
may periodically make reclassifications among certain of its capital
accounts without impacting its net asset value.
EXPENSES: Most expenses can be directly attributed to the Fund. Expenses
which cannot be directly attributed are allocated among all funds based
principally on their relative net assets.
DEFERRED ORGANIZATION EXPENSES: The Fund incurred expenses in connection
with its organization and initial registration. These costs have been
deferred and are being amortized over 60 months on a straight-line basis.
REPURCHASE AGREEMENTS: The Fund may engage in repurchase and tri-party
repurchase agreements with several financial institutions whereby the Fund,
through its custodian or third-party custodian, receives delivery of the
underlying securities. The market value of these securities (including
accrued interest) on acquisition date is required to be an amount equal to
at least 102% of the repurchase price. The Fund's Adviser will monitor
repurchase agreements daily to determine that the market value (including
accrued interest) of the underlying securities remains equal to at least
100% of the repurchase price at Fedwire closing time. The Adviser or
third-party custodian will notify the seller to immediately increase the
collateral on the repurchase agreement to 102% of the repurchase price if
collateral falls below 100%.
Annual Report 17
<PAGE>
SSgA
YIELD PLUS FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
DERIVATIVES: To the extent permitted by the investment objective,
restrictions and policies set forth in the Fund's Prospectus and Statement
of Additional Information, the Fund may participate in various
derivative-based transactions. Derivative securities are instruments or
agreements whose value is derived from an underlying security or index. The
Fund's use of derivatives includes exchange-traded futures and options on
futures. These instruments offer unique characteristics and risks that
assist the Fund in meeting its investment objective.
The Fund typically uses derivatives in three ways: cash equitization,
hedging, and return enhancement. Cash equitization is a technique that may
be used by the Fund through the use of options and futures to earn
"market-like" returns with the Fund's excess and liquidity reserve cash
balances. Hedging is used by the Fund to limit or control risks, such as
adverse movements in exchange rates and interest rates. Return enhancement
can be accomplished through the use of derivatives in the Fund. By
purchasing certain instruments, the Fund may more effectively achieve the
desired portfolio characteristics that assist in meeting the Fund's
investment objectives. Depending on how the derivatives are structured and
utilized, the risks associated with them may vary widely. These risks are
generally categorized as market risk, liquidity risk and counterparty or
credit risk.
FUTURES: The Fund utilized exchange-traded futures contracts. The primary
risks associated with the use of futures contracts are an imperfect
correlation between the change in market value of the securities held by
the Funds and the prices of futures contracts and the possibility of an
illiquid market. Changes in initial settlement value are accounted for as
unrealized appreciation (depreciation) until the contracts are terminated,
at which time realized gains and losses are recognized.
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the year ended August 31, 1997, purchases,
sales and maturities of investment securities, excluding US Government and
Agency obligations, short-term investments, futures contracts, and
repurchase agreements aggregated to $747,564,788, $735,823,280, and
$5,000,000, respectively.
FUTURES TRANSACTIONS: Fund transactions in futures contracts during the
year ended August 31, 1997 were as follows:
<TABLE>
<CAPTION>
FUTURES CONTRACTS FUTURES CONTRACTS
SOLD SHORT PURCHASED
----------------------------- -----------------------------
AGGREGATE AGGREGATE
NUMBER OF FACE VALUE OF NUMBER OF FACE VALUE OF
CONTRACTS CONTRACTS (1) CONTRACTS CONTRACTS (1)
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Outstanding at August 31, 1996 (386) $(363,888,200) -- $ --
Contracts opened 566 533,385,200 25 23,450,000
Contracts closed (180) (169,497,000) (25) (23,450,000)
------------- ------------- ------------- -------------
Outstanding at August 31, 1997 -- $ -- -- $ --
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
(1) The aggregate face value of contracts is computed on the date each contract
was opened. Three month Eurodollar financial futures contracts have a notional
face amount of $1,000,000 and an equivalent duration of 13 weeks or .25 years.
18 Annual Report
<PAGE>
SSgA
YIELD PLUS FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
For the year ended August 31, 1997, purchases and sales of US Government
and Agency obligations, excluding short-term investments, futures
contracts, and repurchase agreements aggregated to $90,124,557 and
$59,385,039, respectively.
4. RELATED PARTIES
ADVISER: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company (the "Adviser") under which the Adviser
directs the investments of the Fund in accordance with its investment
objectives, policies, and limitations. For these services, the Fund pays a
fee to the Adviser, calculated daily and paid monthly, at the annual rate
of .25% of its average daily net assets. The Investment Company also has
contracts with the Adviser to provide custody, shareholder servicing, and
transfer agent services to the Fund. These amounts are presented in the
accompanying Statement of Operations.
ADMINISTRATOR: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator") under
which the Administrator supervises all non-portfolio investment aspects of
the Investment Company's operations and provides adequate office space and
all necessary office equipment and services, including telephone service,
utilities, stationery supplies, and similar items. The Investment Company
pays the Administrator the following fees for services supplied by the
Administrator pursuant to the Administration Agreement: (i) an annual fee,
payable monthly on a pro rata basis, based on the following percentages of
the average daily net assets of all domestic funds: $0 up to and including
$500 million - .06%; over $500 million to and including $1 billion - .05%;
over $1 billion - .03%; (ii) less an amount equal to the sum of certain
distribution-related expenses incurred by the Investment Company's
Distributor on behalf of the Fund (up to a maximum of 10% of the
asset-based fee determined in (i)); (iii) out-of-pocket expenses; and (iv)
start-up costs for new funds.
DISTRIBUTOR AND SHAREHOLDER SERVICING: The Investment Company has entered
into a Distribution Agreement with Russell Fund Distributors (the
"Distributor") which is a wholly-owned subsidiary of the Administrator to
promote and offer shares of the Investment Company. The Distributor may
have entered into sub-distribution agreements with other non-related
parties. The amounts paid to the Distributor are included in the
accompanying Statement of Operations.
The Investment Company has also adopted a Distribution Plan pursuant to
Rule 12b-1 (the "Plan") under the 1940 Act. Under this Plan, the Investment
Company is authorized to make payments to the Distributor, or any
Shareholder Servicing Agent, as defined in the Plan, for providing
distribution and marketing services, for furnishing assistance to investors
on an ongoing basis, and for the reimbursement of direct out-of-pocket
expenses incurred by the Distributor in connection with the distribution
and marketing of shares of the Investment Company and the servicing of
investor accounts.
The Fund has entered into service agreements with the Adviser, State Street
Brokerage Services, Inc. ("SSBSI"), a wholly-owned subsidiary of the
Adviser, the Adviser's Retirement Investment Services Division
Annual Report 19
<PAGE>
SSgA
YIELD PLUS FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
("RIS"), and the Adviser's Metropolitan Division of Commercial Banking
("Commercial Banking")(collectively the "Agents"), as well as several
unaffiliated service providers. For these services, the Fund pays .025%,
.175%, .175%, and .175% to the Adviser, SSBSI, RIS, and Commercial Banking,
respectively, based upon the average daily value of all Fund shares held by
or for customers of these Agents. For the year ended August 31, 1997, the
Fund incurred expenses of $250,959, $3,801 and $441, or a total of
$255,201, from the Adviser, SSBSI, and Commercial Banking, respectively.
The Fund did not incur any expenses from RIS during this period.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The Trustees or a majority of the
Fund's shareholders have the right, however, to terminate the Distribution
Plan and all payments thereunder at any time. The Fund will not be
obligated to reimburse the Distributor for carryover expenses subsequent to
the Distribution Plan's termination or noncontinuance. There were no
carryover expenses as of August 31, 1997.
BOARD OF TRUSTEES: The Investment Company pays each Trustee not affiliated
with the Investment Company a retainer of $44,000 annually, $1,000 for each
board meeting attended, an additional $1,000 for attending the annual audit
committee meeting, and reimbursement for out-of-pocket expenses. These
expenses are allocated among all of the Funds based upon their relative net
assets.
ACCRUED FEES PAYABLE TO AFFILIATES AND TRUSTEES AS OF AUGUST 31, 1997 WERE
AS FOLLOWS:
Advisory fees $ 346,771
Administration fees 21,642
Custodian fees 21,856
Distribution fees 8,390
Shareholder servicing fees 17,706
Transfer agent fees 2,484
Trustees' fees 82
---------
$ 418,931
---------
---------
BENEFICIAL INTEREST: As of August 31, 1997, one shareholder (who was also
an affiliate of the Investment Company) was a record owner of approximately
65% of the total outstanding shares of the Fund.
20 Annual Report
<PAGE>
SSgA YIELD PLUS FUND
Two International Place, 35th Floor
Boston, Massachusetts 02110
(800) 997-7327
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
George W. Weber, Senior Vice President and Treasurer
J. David Griswold, Vice President and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND OFFICE OF SHAREHOLDER INQUIRIES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 647-7327
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(800) 997-7327
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
Annual Report 21
<PAGE>
SSgA-SM- FUNDS
MONEY MARKET FUND
Annual Report
August 31, 1997
Table of Contents
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion. . . . . . . . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . 17
Fund Management and Service Providers. . . . . . . . . . . . . . . . . . 21
"SSgA-SM-" IS A SERVICE MARK OF STATE STREET CORPORATION AND IS LICENSED FOR
USE BY THE SSgA FUNDS.
THIS REPORT IS PREPARED FROM THE BOOKS AND RECORDS OF THE FUND AND IT IS
SUBMITTED FOR THE GENERAL INFORMATION OF SHAREHOLDERS. THIS INFORMATION IS FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR ACCOMPANIED BY A
SSgA FUNDS PROSPECTUS CONTAINING MORE COMPLETE INFORMATION CONCERNING THE
INVESTMENT OBJECTIVE AND OPERATIONS OF THE FUND, CHARGES AND EXPENSES. THE
PROSPECTUS SHOULD BE READ CAREFULLY BEFORE AN INVESTMENT IS MADE.
PERFORMANCE IS HISTORICAL AND ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL
GAINS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN WHEN PURCHASED.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. AN INVESTMENT IN A MONEY
MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY THE US GOVERNMENT. THERE CAN BE
NO ASSURANCE THAT A MONEY MARKET FUND WILL BE ABLE TO MAINTAIN A STABLE NET
ASSET VALUE OF $1.00 PER SHARE. RUSSELL FUND DISTRIBUTORS, INC. IS THE
DISTRIBUTOR OF THE SSgA FUNDS.
<PAGE>
SSgA MONEY MARKET FUND
LETTER FROM THE CHAIRMAN OF STATE STREET GLOBAL ADVISORS
DEAR SHAREHOLDERS,
I am pleased to provide you with the SSgA Funds annual report for the fiscal
year ended August 31, 1997. Over the past year, the Funds have grown to include
seventeen portfolios covering a broad range of investment strategies from the
far corners of the emerging markets countries to the domestic stock and bond
markets. This report contains summaries on the market environment, performance
and financial statements for the Money Market Fund. I hope you find this
information a useful tool as you review your overall investment strategy.
The SSgA Funds opened three additional funds in fiscal 1997. These three asset
allocation funds, called Life Solutions Funds, were opened on July 1, 1997. Each
Life Solutions Fund seeks to achieve its investment objective by diversifying
its assets in shares of certain Funds of the Investment Company, referred to as
Underlying Funds.
The Life Solutions Income and Growth Fund seeks income and, secondarily,
long-term growth of capital.
The Life Solutions Balanced Fund seeks a balance of growth of capital and
income.
The Life Solutions Growth Fund seeks long-term growth of capital.
During the past fiscal year, the SSgA Funds were proud to announce that the SSgA
Matrix Fund and the SSgA Small Cap Fund achieved five year track records. We are
proud of our long-term record and look forward to having additional funds
complete their five year anniversary.
SSGA is strategically growing by continuing to build an organization that
delivers comprehensive services striving to meet your investment requirements.
In an effort to compete in this ever-changing complex world, we focus on our
expertise, our knowledge and our commitment to better serve your investment
needs.
As Chairman and Chief Executive Officer of State Street Global Advisors, which
serves as the investment adviser to the SSgA Funds, I would like to thank you
for choosing the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
SSgA MONEY MARKET FUND
MANAGEMENT OF THE FUNDS
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A TEAM APPROACH TO INVESTMENT MANAGEMENT
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio managers work together to develop and enhance the
techniques that drive our investment processes. The result is that the
portfolios we manage benefit from the knowledge of the entire team.
Ms. Rena Williams, Vice President, has been the portfolio manager primarily
responsible for investment decisions regarding the SSgA Money Market Fund since
her arrival at State Street in February 1994. Ms. Williams is the Mutual Funds
Unit Head responsible for oversight of money market and other short-term funds.
Prior to joining State Street, she was a portfolio manager with PNC Bank and the
Calvert Group. She holds a BA in International Relations from the University of
Virginia. There are 10 other portfolio managers working with Ms. Williams.
Annual Report 5
<PAGE>
SSgA MONEY MARKET FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
OBJECTIVE: Maximize current income; preservation of capital and liquidity.
INVESTS IN: High quality money market instruments, including certificates of
deposits, time deposits, bankers acceptances, commercial paper, corporate
medium-term notes, US Government Treasury and Agency notes, and repurchase
agreements.
STRATEGY: Fund Managers base their decisions on the relative attractiveness
of different money market investments which can vary depending on the general
level of interest rates as well as supply/demand imbalances in the market.
[GRAPH]
DATES MONEY MARKET SALOMAN BROTHERS 3-MONTH T-BILL INDEX
Inception* $10,000 $10,000
1988 $10,241 $10,220
1989 $11,183 $11,087
1990 $12,132 $11,990
1991 $12,991 $12,775
1992 $13,599 $13,320
1993 $14,040 $13,729
1994 $14,510 $14,217
1995 $15,310 $15,010
1996 $16,132 $15,813
1997 $16,983 $16,643
- --------------------------------------------------------------------------------
Total $147,121 $144,804
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SSgA
MONEY MARKET FUND
Period Ended Growth of Total
08/31/97 $10,000 Return
- ------------ ------------ ------------
1 Year $ 10,528 5.28%
5 Years $ 12,492 4.55%+
Inception $ 16,983 5.84%+
SALOMON BROTHERS
3-MONTH TREASURY BILL INDEX
Period Ended Growth of Total
08/31/97 $10,000 Return
- ------------ ------------ ------------
1 Year $ 10,525 5.25%
5 Years $ 12,495 4.56%+
Inception $ 16,643 5.61%+
SEE RELATED NOTES ON THE FOLLOWING PAGE.
PERFORMANCE REVIEW
Market participants spent most of the second half of 1996 debating whether the
Federal Reserve's Open Market Committee (FOMC) would need to raise the target
rate for federal funds, targeted at 5.25%. The fear of tightening kept pressure
on rates during the period. However, by the end of November, positive data
relating to the budget deficit, the outlook for reduced financing needs of the
Treasury, and a historically high amount of Treasury securities held by foreign
investors lent a positive tone. Yields hit their lows during November, with
one-year Treasuries falling to 5.36%, two-year Treasuries dropping to 5.59% and
thirty-year Treasuries down to 6.35%. Pressure relating to year end caused money
market rates to rise in December. The rush to issue securities prior to year end
also pressured the corporate market, causing spreads to widen during the month;
however, the theme of 1996 for this sector was narrowing spreads to Treasuries.
The spread widening between Treasuries and corporates, and yield back-up from
year end financing pressures were erased by the end of January. Signs of
unexpected strength were tempered by lower inflation indicators. The Treasury
yield curve steepened as the data suggested a stronger economy and the market
began pricing the possibility of an increase in interest rates. Consequently,
the long-awaited
6 Annual Report
<PAGE>
SSgA MONEY MARKET FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
shift in Federal Reserve policy finally occurred on March 26th, with a fed funds
increase of 25 basis points. While the move itself was not a surprise, the
FOMC's comment expressing concern over the strength of the economy and its
impact on inflation was strong enough to focus market attention on the
possibility of further tightening. Pessimism pervaded and yields rose through
April, with one-year Treasuries peaking at 6.08%, two-years backing up to 6.54%
and thirty-years at 7.17%. News of first quarter GDP at 5.6% was offset by the
producer price index turning negative and consumer price indices declining to
2.3% annualized.
Going into the third quarter, high consumer confidence and healthier consumer
balance sheets have many economists fearing a surge in consumer spending would
spur further growth. Capital spending continues at a healthy clip keeping the
base level of growth well above the target non-inflationary rate of 2.5%.
Skepticism for the new era of higher non-inflationary growth abounds. The growth
side does not appear ready to slow down and with labor markets tight and getting
tighter, the market trades nervously as if anticipating the FOMC to raise rates
again. Because of the uncertainty, opportunities continue to arise which allow
for buying on weakness and extending portfolio maturity.
The Fund had a one-year total return of 5.28% for the fiscal year ended August
31, 1997. This compares favorably to the return of 5.25% for the same period for
the benchmark of the Fund, the Salomon Brothers 3-Month Treasury Bill Index. The
Fund's performance is net of fund operating expenses, whereas Index results do
not include expenses of any kind. The Salomon Brothers 3-Month Treasury Bill
Index was chosen as a standard, well-known representation of money market rates.
PORTFOLIO HIGHLIGHTS
In the last year, the SSgA Money Market Fund was managed consistently with its
objective of providing safety of principal and liquidity by investing in high
quality investments and providing competitive returns. The Fund received the Am
rating from Standard and Poor's Corporation. For the fiscal year, the Fund's net
assets have increased by 19%. New cash flows were invested in a combination of
fixed and floating rate securities. Purchases of floating rate notes were
largely concentrated on those with one- and three-month LIBOR (London InterBank
Offering Rate) as reset indices. Additionally, a small percentage was invested
in floating rate notes based on Fed Funds and Prime rates. The average maturity
of the Fund ranged from 48 to 72 days over the period, as the Fund selectively
purchased one-year securities to extend its average days to maturity. This
strategy was applied to enhance yield as the yield curve steepened.
TOP FIVE HOLDINGS (BY INVESTMENT TYPE,
AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31, 1997
Yankee Certificates of Deposit 19.7%
Eurodollar Time Deposits 19.4
Corporate Bonds and Notes 18.3
Domestic Commercial Paper 13.3
United States Government Agencies 10.4
--------------------
NOTES: THE FOLLOWING NOTES RELATE TO THE GROWTH OF $10,000 GRAPH AND TABLE ON
THE PRECEDING PAGE.
* The Fund commenced operations on May 2, 1988. Index comparison began
May 1, 1988.
** Equal dollar amounts of 3-month Treasury bills are purchased at the
beginning of each of three consecutive months. As each bill matures, all
proceeds are rolled over or reinvested in a new 3-month bill. The income
used to calculate the monthly return is derived by subtracting the original
amount invested from the maturity value. The yield curve average is the
basis for calculating the return on the Index. The Index is rebalanced
monthly by market capitalization.
+ Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
An investment in a money market fund is neither insured nor guaranteed by the US
Government. There can be no assurance that a money market fund will be able to
maintain a stable net asset value of $1.00 per share.
Annual Report 7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of the SSgA Funds:
We have audited the accompanying statement of assets and liabilities and
statement of net assets of SSgA Money Market Fund (formerly The Seven Seas
Series Money Market Fund)(the "Fund"), as of August 31, 1997, and the related
statement of operations for the fiscal year then ended, the statements of
changes in net assets for each of the two fiscal years in the period then ended,
and the financial highlights for each of the five fiscal years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
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 free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1997 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We 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 of the
Fund as of August 31, 1997, the results of its operations for the fiscal year
then ended, the changes in its net assets for each of the two fiscal years in
the period then ended, and the financial highlights for each of the five fiscal
years in the period then ended in conformity with generally accepted accounting
principles.
Boston, Massachusetts /s/ COOPERS & LYBRAND L.L.P.
October 7, 1997
8 Annual Report
<PAGE>
SSgA
MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
August 31, 1997
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY (000)
-------------------------------------------------------
<S> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES - 18.8%
Abbey National PLC (MTN)(a). . . . . . . . . . . . . . . . . . . . . $ 32,000 5.532% 06/16/98 $ 31,980
Abbey National PLC (MTN)(a). . . . . . . . . . . . . . . . . . . . . 45,000 5.653 07/15/98 44,969
Bank of New York . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000 6.000 03/24/98 14,992
Bank One (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 5.640 09/04/97 50,000
Caterpillar Financial Services (MTN) . . . . . . . . . . . . . . . . 5,000 8.120 03/10/98 5,062
First National Bank of Boston. . . . . . . . . . . . . . . . . . . . 35,000 5.880 08/06/98 34,988
First National Bank of Chicago . . . . . . . . . . . . . . . . . . . 47,000 5.780 08/05/98 46,987
First Union Corp. (MTN). . . . . . . . . . . . . . . . . . . . . . . 17,500 6.750 01/15/98 17,557
Ford Motor Credit Corp. (MTN)(a) . . . . . . . . . . . . . . . . . . 28,475 5.926 10/21/97 28,483
Household Finance Corp. (MTN)(a) . . . . . . . . . . . . . . . . . . 25,000 5.731 09/30/97 25,000
IBM Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,780 5.670 01/28/98 17,768
IBM Credit Corp. (MTN)(a). . . . . . . . . . . . . . . . . . . . . . 40,000 5.687 06/05/98 39,981
Key Bank National Association (MTN). . . . . . . . . . . . . . . . . 10,000 5.605 12/19/97 9,996
Key Bank National Association (MTN)(a) . . . . . . . . . . . . . . . 30,000 5.532 12/10/97 29,995
Merrill Lynch & Co. (MTN)(a) . . . . . . . . . . . . . . . . . . . . 50,000 5.742 03/04/98 49,995
Merrill Lynch & Co. (MTN)(a) . . . . . . . . . . . . . . . . . . . . 50,000 5.742 03/09/98 49,995
Morgan Guaranty Trust Co. (MTN)(a) . . . . . . . . . . . . . . . . . 50,000 5.625 11/14/97 49,993
National City Bank, Cleveland. . . . . . . . . . . . . . . . . . . . 25,000 5.800 03/03/98 24,995
Northern Trust Co. . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 5.750 03/04/98 24,988
Old Kent Bank & Trust Co. (a). . . . . . . . . . . . . . . . . . . . 20,000 5.680 04/29/98 19,995
Ontario, Province of . . . . . . . . . . . . . . . . . . . . . . . . 50,000 5.700 10/01/97 49,996
Tiers Trust (MTN)(a) . . . . . . . . . . . . . . . . . . . . . . . . 50,000 5.682 10/15/97 50,000
Wachovia Bank. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,000 6.650 09/05/97 14,001
Westpac Banking (MTN). . . . . . . . . . . . . . . . . . . . . . . . 30,000 5.920 08/28/98 29,986
World Savings & Loan (MTN)(a). . . . . . . . . . . . . . . . . . . . 40,000 5.893 11/10/97 40,017
----------
TOTAL CORPORATE BONDS AND NOTES (cost $801,719). . . . . . . . . . . 801,719
----------
DOMESTIC CERTIFICATES OF DEPOSIT - 6.9%
Bank One (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 5.640 07/01/98 49,967
Branch Banking & Trust Co. (a) . . . . . . . . . . . . . . . . . . . 25,000 5.656 07/01/98 24,989
Colorado National Bank (a) . . . . . . . . . . . . . . . . . . . . . 25,000 5.532 02/18/98 24,992
</TABLE>
Annual Report 9
<PAGE>
SSgA
MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY (000)
-------------------------------------------------------
<S> <C> <C> <C> <C>
Colorado National Bank (a) . . . . . . . . . . . . . . . . . . . . . $ 25,000 5.532% 01/22/98 $ 24,993
PNC Bank, Pittsburgh (a) . . . . . . . . . . . . . . . . . . . . . . 26,000 5.546 01/09/98 25,994
PNC Bank, Pittsburgh (a) . . . . . . . . . . . . . . . . . . . . . . 20,000 5.620 02/13/98 19,994
PNC Bank, Pittsburgh (a) . . . . . . . . . . . . . . . . . . . . . . 50,000 5.670 07/01/98 49,953
PNC Bank, Pittsburgh . . . . . . . . . . . . . . . . . . . . . . . . 50,000 5.600 09/02/98 49,964
United States National Bank of Oregon (a). . . . . . . . . . . . . . 25,000 5.651 06/26/98 24,986
----------
TOTAL DOMESTIC CERTIFICATES OF DEPOSIT (cost $295,832) . . . . . . . 295,832
----------
DOMESTIC COMMERCIAL PAPER - 13.6%
Asset Securitization Co-op Corp. . . . . . . . . . . . . . . . . . . 50,000 5.530 11/06/97 49,493
Asset Securitization Co-op Corp. . . . . . . . . . . . . . . . . . . 90,000 5.530 11/10/97 89,032
Coca-Cola Co.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 5.550 10/08/97 49,715
Delaware Funding Corp. . . . . . . . . . . . . . . . . . . . . . . . 50,000 5.530 10/28/97 49,562
Delaware Funding Corp. . . . . . . . . . . . . . . . . . . . . . . . 46,903 5.515 10/30/97 46,479
General Electric Capital Corp. . . . . . . . . . . . . . . . . . . . 135,000 5.650 09/02/97 134,979
General Electric Capital Corp. . . . . . . . . . . . . . . . . . . . 50,000 5.560 10/06/97 49,730
General Motors Acceptance Corp.. . . . . . . . . . . . . . . . . . . 50,000 5.820 10/29/97 49,531
Merrill Lynch & Co.. . . . . . . . . . . . . . . . . . . . . . . . . 40,000 5.750 11/05/97 39,585
Woolwich . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 5.570 09/29/97 24,892
----------
TOTAL DOMESTIC COMMERCIAL PAPER (cost $582,998). . . . . . . . . . . 582,998
----------
EURODOLLAR CERTIFICATES OF DEPOSIT - 3.2%
Abbey National PLC, London . . . . . . . . . . . . . . . . . . . . . 50,000 5.610 12/15/97 50,000
Barclays Bank PLC. . . . . . . . . . . . . . . . . . . . . . . . . . 45,000 5.750 02/10/98 45,008
Morgan Guaranty Trust Co.. . . . . . . . . . . . . . . . . . . . . . 40,000 5.550 10/22/97 40,001
----------
TOTAL EURODOLLAR CERTIFICATES OF DEPOSIT (cost $135,009) . . . . . . 135,009
----------
EURODOLLAR TIME DEPOSITS - 19.9%
Abbey National PLC . . . . . . . . . . . . . . . . . . . . . . . . . 200,000 5.687 09/02/97 200,000
Canadian Imperial Bank . . . . . . . . . . . . . . . . . . . . . . . 150,000 5.656 09/02/97 150,000
Credit Suisse London . . . . . . . . . . . . . . . . . . . . . . . . 200,000 5.687 09/02/97 200,000
Kredietbank. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000 5.625 09/02/97 200,000
Societe Generale . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000 5.625 09/02/97 100,000
----------
TOTAL EURODOLLAR TIME DEPOSITS (cost $850,000) . . . . . . . . . . . 850,000
----------
</TABLE>
10 Annual Report
<PAGE>
SSgA
MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY (000)
-------------------------------------------------------
<S> <C> <C> <C> <C>
TIME DEPOSITS - 9.1%
Branch Bank & Trust Co.. . . . . . . . . . . . . . . . . . . . . . . $ 83,544 5.500% 09/02/97 $ 83,544
First Union National Bank, Charlotte . . . . . . . . . . . . . . . . 16,965 5.500 09/02/97 16,965
Fleet Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140,000 5.625 09/02/97 140,000
Suntrust Banks, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 150,000 5.625 09/02/97 150,000
----------
TOTAL TIME DEPOSITS (cost $390,509). . . . . . . . . . . . . . . . . 390,509
----------
UNITED STATES GOVERNMENT AGENCIES - 10.6%
Federal Farm Credit Bank (a) . . . . . . . . . . . . . . . . . . . . 50,000 5.500 12/11/97 49,986
Federal Home Loan Bank . . . . . . . . . . . . . . . . . . . . . . . 25,000 5.997 09/30/97 25,005
Federal Home Loan Bank (a) . . . . . . . . . . . . . . . . . . . . . 50,000 5.484 12/19/97 49,989
Federal Home Loan Mortgage Discount Notes. . . . . . . . . . . . . . 150,000 5.475 09/30/97 149,338
Federal National Mortgage Association (a). . . . . . . . . . . . . . 100,000 5.632 09/12/97 99,997
Federal National Mortgage Association (a). . . . . . . . . . . . . . 25,000 5.558 11/19/97 24,996
Federal National Mortgage Association (MTN)(a) . . . . . . . . . . . 55,000 5.538 11/25/97 54,990
----------
TOTAL UNITED STATES GOVERNMENT AGENCIES (cost $454,301). . . . . . . 454,301
----------
YANKEE CERTIFICATES OF DEPOSIT - 20.1%
ABN AMRO Bank. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,000 5.520 09/22/97 44,999
ABN AMRO Bank. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 6.140 05/01/98 20,010
Bank of Montreal (a) . . . . . . . . . . . . . . . . . . . . . . . . 40,000 5.641 06/30/98 39,980
Bayerische Landesbank (a). . . . . . . . . . . . . . . . . . . . . . 65,000 5.495 06/26/98 64,959
Canadian Imperial Bank . . . . . . . . . . . . . . . . . . . . . . . 25,000 5.910 08/11/98 24,980
Deutsche Bank. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,500 5.700 01/06/98 22,492
Deutsche Bank. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 5.730 02/27/98 24,994
Deutsche Bank. . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,000 5.611 07/01/98 69,943
Landesbank Hessen Thuringen. . . . . . . . . . . . . . . . . . . . . 20,000 5.790 02/04/98 19,997
Landesbank Hessen Thuringen. . . . . . . . . . . . . . . . . . . . . 15,000 5.960 03/20/98 14,997
Landesbank Hessen Thuringen. . . . . . . . . . . . . . . . . . . . . 80,000 5.930 06/30/98 79,934
National Australia Bank, Ltd.. . . . . . . . . . . . . . . . . . . . 25,000 5.665 03/05/98 24,994
National Westminister Bank PLC . . . . . . . . . . . . . . . . . . . 25,000 5.670 02/11/98 24,987
National Westminister Bank PLC . . . . . . . . . . . . . . . . . . . 35,000 5.685 02/27/98 34,996
National Westminister Bank PLC . . . . . . . . . . . . . . . . . . . 50,000 5.680 03/02/98 49,993
National Westminister Bank PLC . . . . . . . . . . . . . . . . . . . 75,000 5.660 03/05/98 74,985
National Westminister Bank PLC . . . . . . . . . . . . . . . . . . . 25,000 5.860 08/10/98 24,991
Royal Bank Of Canada . . . . . . . . . . . . . . . . . . . . . . . . 18,000 5.825 08/25/98 17,987
</TABLE>
Annual Report 11
<PAGE>
SSgA
MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY (000)
-------------------------------------------------------
<S> <C> <C> <C> <C>
Societe Generale . . . . . . . . . . . . . . . . . . . . . . . . . . $ 75,000 5.540% 09/02/97 $ 75,000
Swiss Bank Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000 5.980 03/19/98 14,998
Westpac Banking. . . . . . . . . . . . . . . . . . . . . . . . . . . 35,000 5.860 01/15/98 34,996
Westpac Banking. . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000 5.830 01/27/98 14,999
Westpac Banking. . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 6.240 04/07/98 24,996
Westpac Banking. . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000 5.790 08/05/98 14,996
----------
TOTAL YANKEE CERTIFICATES OF DEPOSIT (cost $860,203) . . . . . . . . 860,203
----------
TOTAL INVESTMENTS (amortized cost $4,370,571)(b) - 102.2%. . . . . . 4,370,571
OTHER ASSETS AND LIABILITIES, NET - (2.2%) . . . . . . . . . . . . . (92,406)
----------
NET ASSETS - 100%. . . . . . . . . . . . . . . . . . . . . . . . . . $4,278,165
----------
----------
</TABLE>
(a) Adjustable or floating rate security.
(b) The identified cost for federal income tax purposes is the same as shown
above.
ABBREVIATIONS:
MTN - Medium Term Note
PLC - Public Limited Company
The accompanying notes are an integral part of the financial statements.
12 Annual Report
<PAGE>
SSgA
MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1997
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at amortized cost which approximates market (Note 2) . . . . . . . . . . . . . . . . . . . . $ 4,370,571
Interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,196
--------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,400,767
LIABILITIES
Payables:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,830
Investments purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,964
Accrued fees to affiliates and trustees (Note 4) . . . . . . . . . . . . . . . . . 2,581
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227
--------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122,602
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,278,165
--------------
--------------
NET ASSETS CONSIST OF:
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (2,715)
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,281
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,276,599
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,278,165
--------------
--------------
NET ASSET VALUE, offering and redemption price per share:
($4,278,165,391 divided by 4,280,879,508 shares of $.001 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.00
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 13
<PAGE>
SSgA
MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Fiscal Year Ended August 31, 1997
Amounts
in thousands
<S> <C> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 236,540
EXPENSES (Notes 2 and 4):
Advisory fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,639
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,245
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 839
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,580
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,551
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 291
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172
--------------
Total Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,673
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219,867
--------------
REALIZED GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 697
--------------
Net increase in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . . . . . . . $ 220,564
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 Annual Report
<PAGE>
SSgA
MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Fiscal Years Ended August 31,
Amounts in thousands
1997 1996
----------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 219,867 $ 178,204
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 697 753
----------------- -----------------
Net increase in net assets resulting from operations. . . . . . . . . . . . . . 220,564 178,957
----------------- -----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (219,867) (178,405)
----------------- -----------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions . . . . . . . . 802,059 721,962
----------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . 802,756 722,514
NET ASSETS
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,475,409 2,752,895
----------------- -----------------
End of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,278,165 $ 3,475,409
----------------- -----------------
----------------- -----------------
FUND SHARE TRANSACTIONS
(ON A CONSTANT DOLLAR BASIS):
Proceeds from shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,548,475 45,284,105
Proceeds from reinvestment of distributions. . . . . . . . . . . . . . . . . . . . . 194,301 161,571
Payments for shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . (58,940,717) (44,723,714)
----------------- -----------------
Total net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . 802,059 721,962
----------------- -----------------
----------------- -----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 15
<PAGE>
SSgA
MONEY MARKET FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each fiscal
year or period and other performance information derived from the financial statements.
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . .0516 .0524 .0538 .0330 .0320
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . . . . (.0516) (.0524) (.0538) (.0330) (.0320)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
TOTAL RETURN (%) . . . . . . . . . . . . . . . . 5.28 5.36 5.52 3.35 3.24
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of year ($000 omitted). . . . 4,278,165 3,475,409 2,752,895 3,020,796 2,502,483
Ratios to average net assets (%):
Operating expenses, net . . . . . . . . . .39 .39 .39 .36 .33
Operating expenses, gross . . . . . . . . .39 .39 .39 .36 .38
Net investment income . . . . . . . . . . 5.17 5.20 5.37 3.33 3.20
Per share amount of expense reductions
($ omitted). . . . . . . . . . . . . . . . -- -- -- -- .0005
</TABLE>
16 Annual Report
<PAGE>
SSgA
MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1997
1. ORGANIZATION
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 17 investment portfolios which are in operation as
of August 31, 1997. In December 1996, the Investment Company changed its
name from "The Seven Seas Series Fund" to the "SSgA Funds." These financial
statements report on one portfolio, the SSgA Money Market Fund (the
"Fund"). The Investment Company is a registered and diversified open-end
investment company, as defined in the Investment Company Act of 1940, as
amended (the "1940 Act"), that was organized as a Massachusetts business
trust on October 3, 1987 and operates under a First Amended and Restated
Master Trust Agreement, dated October 13, 1993, as amended (the
"Agreement"). The Investment Company's Agreement permits the Board of
Trustees to issue an unlimited number of full and fractional Class A shares
of beneficial interest at a $.001 par value. The Investment Company has
available Class B and Class C shares of the Fund as of August 15, 1994;
however, shares have not been offered on these classes as of the date of
these financial statements.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
SECURITY VALUATION: The Fund's portfolio investments are valued on the
basis of amortized cost, a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed. The Fund utilizes the
amortized cost valuation method in accordance with Rule 2a-7 of the 1940
Act.
SECURITIES TRANSACTIONS: Securities transactions are recorded on the trade
date, which in most instances is the same as the settlement date. Realized
gains and losses from the securities transactions, if any, are recorded on
the basis of identified cost.
INVESTMENT INCOME: Interest income is recorded daily on the accrual basis.
FEDERAL INCOME TAXES: Since the Investment Company is a Massachusetts
business trust, each sub-trust is a separate corporate taxpayer and
determines its net investment income and capital gains (or losses) and the
amounts to be distributed to each fund's shareholders without regard to the
income and capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company, as
defined by the Internal Revenue Code of 1986, as amended. This requires the
Fund to distribute all of its taxable income. Therefore, the Fund paid no
federal income taxes and no federal income tax provision was required. At
August 31, 1997, the Fund had a net tax basis capital loss carryover of
$2,714,108, which may be
Annual Report 17
<PAGE>
SSgA
MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
applied against any realized net taxable gains in each succeeding year or
until its expiration date of August 31, 2003.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Fund declares and records
dividends on net investment income daily and pays them monthly. Capital
gain distributions, if any, are generally declared and paid annually. An
additional distribution may be paid by the Fund to avoid imposition of
federal income tax on any remaining undistributed net investment income and
capital gains. The Fund may periodically make reclassifications among
certain of its capital accounts without impacting net asset value for
differences between federal tax regulations and generally accepted
accounting principles.
EXPENSES: Most expenses can be directly attributed to the Fund. Expenses
which cannot be directly attributed are allocated among all funds based
principally on their relative net assets.
REPURCHASE AGREEMENTS: The Fund may engage in repurchase and tri-party
repurchase agreements with several financial institutions whereby the Fund,
through its custodian or third-party custodian, receives delivery of the
underlying securities. The market value of these securities (including
accrued interest) on acquisition date is required to be an amount equal to
at least 102% of the repurchase price. The Fund's Adviser will monitor
repurchase agreements daily to determine that the market value (including
accrued interest) of the underlying securities remains equal to at least
102% of the repurchase price at Fedwire closing time. The Adviser or
third-party custodian will notify the seller to immediately increase the
collateral on the repurchase agreement to 102% of the repurchase price if
collateral falls below 102%.
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the year ended August 31, 1997, purchases,
sales, and maturities of investment securities, excluding US Government and
Agency obligations and repurchase agreements, for the Fund aggregated to
$203,929,503,772, $341,045,332, and $202,265,434,000, respectively.
For the year ended August 31, 1997, purchases, sales, and maturities of US
Government and Agency obligations, excluding repurchase agreements
aggregated to $1,412,677,110, $584,210,229, and $1,122,525,000,
respectively.
4. RELATED PARTIES
ADVISER: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company (the "Adviser") under which the Adviser
directs the investments of the Fund in accordance with its investment
objectives, policies, and limitations. For these services, the Fund pays a
fee to the Adviser, calculated daily and paid monthly, at the annual rate
of .25% of its average daily net assets. The Investment Company also has
contracts with the Adviser to provide custody, shareholder servicing and
transfer agent services to the Fund. These amounts are presented in the
accompanying Statement of Operations.
18 Annual Report
<PAGE>
SSgA
MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
ADMINISTRATOR: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator") under
which the Administrator supervises all non-portfolio investment aspects of
the Investment Company's operations and provides adequate office space and
all necessary office equipment and services, including telephone service,
utilities, stationery supplies, and similar items. The Investment Company
pays the Administrator the following fees for services supplied by the
Administrator pursuant to the Administration Agreement: (i) an annual fee,
payable monthly on a pro rata basis, based on the following percentages of
the average daily net assets of all domestic funds: $0 up to and including
$500 million - .06%; over $500 million to and including $1 billion - .05%;
over $1 billion - .03%; (ii) less an amount equal to the sum of certain
distribution-related expenses incurred by the Investment Company's
Distributor on behalf of the Fund (up to a maximum of 10% of the
asset-based fee determined in (i)); (iii) out-of-pocket expenses; and (iv)
start-up costs for new funds.
DISTRIBUTOR AND SHAREHOLDER SERVICING: The Investment Company has entered
into a Distribution Agreement with Russell Fund Distributors (the
"Distributor") which is a wholly-owned subsidiary of the Administrator to
promote and offer shares of the Investment Company. The Distributor may
have entered into sub-distribution agreements with other non-related
parties. The amounts paid to the Distributor are included in the
accompanying Statement of Operations.
The Investment Company has also adopted a Distribution Plan pursuant to
Rule 12b-1 (the "Plan") under the 1940 Act. Under this Plan, the Investment
Company is authorized to make payments to the Distributor, or any
Shareholder Servicing Agent, as defined in the Plan, for providing
distribution and marketing services, for furnishing assistance to investors
on an ongoing basis, and for the reimbursement of direct out-of-pocket
expenses incurred by the Distributor in connection with the distribution
and marketing of shares of the Investment Company and the servicing of
investor accounts.
The Fund has entered into service agreements with the Adviser, State Street
Brokerage Services, Inc. ("SSBSI"), a wholly-owned subsidiary of the
Adviser, the Adviser's Retirement Investment Services Division ("RIS"), and
the Adviser's Metropolitan Division of Commercial Banking ("Commercial
Banking")(collectively the "Agents"), as well as several unaffiliated
service providers. For these services, the Fund pays .025%, .175%, .175%,
and .175% to the Adviser, SSBSI, RIS, and Commercial Banking, respectively,
based upon the average daily value of all Fund shares held by or for
customers of these Agents. For the year ended August 31, 1997, the Fund
incurred expenses of $1,063,853, $250,705, $106,491, and $90,344, or a
total of $1,511,393, from the Adviser, SSBSI, RIS, and Commercial Banking,
respectively.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward
Annual Report 19
<PAGE>
SSgA
MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
shall terminate at the end of two years following the year in which the
expenditure was incurred. The Trustees or a majority of the Fund's
shareholders have the right, however, to terminate the Distribution Plan
and all payments thereunder at any time. The Fund will not be obligated to
reimburse the Distributor for carryover expenses subsequent to the
Distribution Plan's termination or noncontinuance. There were no carryover
expenses as of August 31, 1997.
BOARD OF TRUSTEES: The Investment Company pays each Trustee not affiliated
with the Investment Company a retainer of $44,000 annually, $1,000 for each
board meeting attended, an additional $1,000 for attending the annual audit
committee meeting, and reimbursement for out-of-pocket expenses. These
expenses are allocated among all of the Funds based upon their relative net
assets.
ACCRUED FEES PAYABLE TO AFFILIATES AND TRUSTEES AS OF AUGUST 31, 1997 WERE
AS FOLLOWS:
Advisory fees $ 1,904,693
Administration fees 118,907
Custodian fees 140,433
Distribution fees 193,898
Shareholder servicing fees 147,825
Transfer agent fees 70,040
Trustees' fees 4,994
------------
$ 2,580,790
------------
------------
20 Annual Report
<PAGE>
SSgA MONEY MARKET FUND
Two International Place, 35th Floor
Boston, Massachusetts 02110
(800) 997-7327
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
George W. Weber, Senior Vice President and Treasurer
J. David Griswold, Vice President and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND OFFICE OF SHAREHOLDER INQUIRIES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 647-7327
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(800) 997-7327
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
Annual Report 21
<PAGE>
SSgA-SM- FUNDS
US TREASURY MONEY MARKET FUND
Annual Report
August 31, 1997
Table of Contents
Page
Chairman's Letter . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion . . . . . . . . . . . . . . . . . . . 6
Report of Independent Accountants . . . . . . . . . . . . . . . . . . 8
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . 15
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . 16
Fund Management and Service Providers . . . . . . . . . . . . . . . . 20
"SSgA-SM-" IS A SERVICE MARK OF STATE STREET CORPORATION AND IS LICENSED FOR
USE BY THE SSgA FUNDS.
THIS REPORT IS PREPARED FROM THE BOOKS AND RECORDS OF THE FUND AND IT IS
SUBMITTED FOR THE GENERAL INFORMATION OF SHAREHOLDERS. THIS INFORMATION IS FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR ACCOMPANIED BY A
SSgA FUNDS PROSPECTUS CONTAINING MORE COMPLETE INFORMATION CONCERNING THE
INVESTMENT OBJECTIVES AND OPERATIONS OF THE FUND, CHARGES AND EXPENSES. THE
PROSPECTUS SHOULD BE READ CAREFULLY BEFORE AN INVESTMENT IS MADE.
PERFORMANCE IS HISTORICAL AND ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL
GAINS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN WHEN PURCHASED.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. AN INVESTMENT IN A MONEY
MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY THE US GOVERNMENT. THERE CAN BE
NO ASSURANCE THAT A MONEY MARKET FUND WILL BE ABLE TO MAINTAIN A STABLE NET
ASSET VALUE OF $1.00 PER SHARE. RUSSELL FUND DISTRIBUTORS, INC., IS THE
DISTRIBUTOR OF THE SSgA FUNDS.
<PAGE>
SSgA US TREASURY MONEY MARKET FUND
LETTER FROM THE CHAIRMAN OF STATE STREET GLOBAL ADVISORS
DEAR SHAREHOLDERS,
I am pleased to provide you with the SSgA Funds annual report for the fiscal
year ended August 31, 1997. Over the past year, the Funds have grown to include
seventeen portfolios covering a broad range of investment strategies from the
far corners of the emerging markets countries to the domestic stock and bond
markets. This report contains summaries on the market environment, performance
and financial statements for the US Treasury Money Market Fund. I hope you find
this information a useful tool as you review your overall investment strategy.
The SSgA Funds opened three additional funds in fiscal 1997. These three asset
allocation funds, called Life Solutions Funds, were opened on July 1, 1997. Each
Life Solutions Fund seeks to achieve its investment objective by diversifying
its assets in shares of certain Funds of the Investment Company, referred to as
Underlying Funds.
The Life Solutions Income and Growth Fund seeks income and, secondarily,
long-term growth of capital.
The Life Solutions Balanced Fund seeks a balance of growth of capital and
income.
The Life Solutions Growth Fund seeks long-term growth of capital.
During the past fiscal year, the SSgA Funds were proud to announce that the SSgA
Matrix Fund and the SSgA Small Cap Fund achieved five year track records. We are
proud of our long-term record and look forward to having additional funds
complete their five year anniversary.
SSGA is strategically growing by continuing to build an organization that
delivers comprehensive services striving to meet your investment requirements.
In an effort to compete in this ever-changing complex world, we focus on our
expertise, our knowledge and our commitment to better serve your investment
needs.
As Chairman and Chief Executive Officer of State Street Global Advisors, which
serves as the investment adviser to the SSgA Funds, I would like to thank you
for choosing the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
SSgA US TREASURY MONEY MARKET FUND
MANAGEMENT OF THE FUNDS
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A TEAM APPROACH TO INVESTMENT MANAGEMENT
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio managers work together to develop and enhance the
techniques that drive our investment processes. The result is that the
portfolios we manage benefit from the knowledge of the entire team.
Ms. Susan Chaisson, Investment Officer, has been trading for the money market
portfolios as well as providing backup for the portfolio managers since February
1996. She began her career at State Street as a portfolio administrator in the
Mutual Funds Department, progressing to the operations support staff in the
domestic fixed income department prior to becoming a money market trader. Ms.
Chaisson received her BS degree in Accounting from the University of
Massachusetts and is currently pursuing a Masters in Finance from Suffolk
University. There are ten other portfolio managers working with Ms. Chaisson.
Annual Report 5
<PAGE>
SSgA US TREASURY MONEY MARKET FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
OBJECTIVE: Maximize current income; preservation of capital and liquidity.
INVESTS IN: Obligations issued, guaranteed, or backed by the US Government.
STRATEGY: Fund Managers base their decisions on the relative attractiveness
of different money market investments which can vary depending on the general
level of interest rates as well as supply/demand imbalances in the market.
[GRAPH]
<TABLE>
<CAPTION>
DATES US TREASURY MONEY MARKET FUND SALOMON BROTHERS 3-MONTH T-BILL INDEX
<S> <C> <C>
Inception* $10,000 $10,000
1994 $10,251 $10,277
1995 $10,813 $10,851
1996 $11,399 $11,431
1997 $12,010 $12,031
- --------------------------------------------------------------------------------------------
Total $54,473 $54,590
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
</TABLE>
SSgA
US TREASURY MONEY MARKET FUND
Period Ended Growth of Total
08/31/97 $10,000 Return
- ------------ --------- ------
1 Year $ 10,536 5.36%
Inception $ 12,010 5.01%+
SALOMON BROTHERS
3-MONTH TREASURY BILL INDEX
Period Ended Growth of Total
08/31/97 $10,000 Return
- ------------ --------- ------
1 Year $ 10,525 5.25%
Inception $ 12,031 5.06%+
SEE RELATED NOTES ON THE FOLLOWING PAGE.
PERFORMANCE REVIEW
Market participants spent most of the second half of 1996 debating whether the
Federal Reserve's Open Market Committee (FOMC) would need to raise the target
rate for federal funds, targeted at 5.25%. The fear of tightening kept pressure
on rates during the period. However, by the end of November, positive data
relating to the budget deficit, the outlook for reduced financing needs of the
Treasury, and a historically high amount of Treasury securities held by foreign
investors lent a positive tone. Yields hit their lows during November, with
one-year Treasuries falling to 5.36%, two-year Treasuries dropping to 5.59% and
thirty-year Treasuries down to 6.35%. Pressure relating to year end caused money
market rates to rise in December. The rush to issue securities prior to year end
also pressured the corporate market, causing spreads to widen during the month;
however, the theme of 1996 for this sector was narrowing spreads to Treasuries.
The spread widening between Treasuries and corporates, and yield back-up from
year end financing pressures were erased by the end of January. Signs of
unexpected strength
6 Annual Report
<PAGE>
SSgA US TREASURY MONEY MARKET FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
were tempered by lower inflation indicators. The Treasury yield curve steepened
as the data suggested a stronger economy and the market began pricing the
possibility of an increase in interest rates. Consequently, the long-awaited
shift in Federal Reserve policy finally occurred on March 26th, with a fed funds
increase of 25 basis points. While the move itself was not a surprise, the
FOMC's comment expressing concern over the strength of the economy and its
impact on inflation was strong enough to focus market attention on the
possibility of further tightening. Pessimism pervaded and yields rose through
April, with one-year Treasuries peaking at 6.08%, two-years backing up to 6.54%
and thirty-years at 7.17%. News of first quarter GDP at 5.6% was offset by the
producer price index turning negative and consumer price indices declining to
2.3% annualized.
Going into the third quarter, high consumer confidence and healthier consumer
balance sheets have many economists fearing a surge in consumer spending would
spur further growth. Capital spending continues at a healthy clip keeping the
base level of growth well above the target non-inflationary rate of 2.5%.
Nevertheless, by the end of August, yields had again dropped with one-year
Treasuries closing at 5.57%, two-years at 5.96%, and thirty-years at 6.61%.
Skepticism for the new era of higher non-inflationary growth abounds. The growth
side does not appear ready to slow down and with labor markets tight and getting
tighter, the market trades nervously as if anticipating the FOMC to move again
to raise rates in the upcoming quarters. Because of the uncertainty,
opportunities continue to arise which allow for buying on weakness and extending
portfolio maturity.
The Fund had a one-year total return of 5.36% for the fiscal year ended August
31, 1997. This compares favorably to the return of 5.25% for the same period for
the benchmark of the Fund, the Salomon Brothers 3-Month Treasury Bill Index. The
Fund's performance is net of fund operating expenses, whereas Index results do
not include expenses of any kind. The Salomon Brothers 3-Month Treasury Bill
Index was chosen as a standard, well-known representation of money market rates.
PORTFOLIO HIGHLIGHTS
The Fund's net assets grew from $189 million to $917 million over the year;
partially attributable to the Fund's AAAm rating from Standard and Poor's
Corporation. The Fund was managed consistently with its objective of providing
safety of principal and liquidity by investing in obligations backed by the US
Treasury. Economic news of strong growth coupled with low inflation kept the
Federal Reserve out of the picture until the March FOMC meeting where they
raised the Federal Funds rate by 25 basis points. Although there was only one
intervention by the Federal Reserve, the market traded at wider ranges, creating
opportunities for the Fund to extend and take advantage of periods when the
yield curve steepened.
As the supply of Treasury bills shrinks, the Fund has increased its percentage
of Treasury notes. Also, with the addition of new assets, the percentage of
repurchase agreements has grown. Given the relatively expensive levels of
outright Treasury purchases, the repurchase agreements provide the best return.
Throughout the year, the Fund's average maturity ranged between 24 and 57 days.
--------------------
NOTES: THE FOLLOWING NOTES RELATE TO THE GROWTH OF $10,000 GRAPH AND TABLE ON
THE PRECEDING PAGE.
* The Fund commenced operations on December 1, 1993. Index comparison
also began on December 1, 1993.
** Equal dollar amounts of 3-month Treasury bills are purchased at the
beginning of each of three consecutive months. As each bill matures,
all proceeds are rolled over or reinvested in a new 3-month bill. The
income used to calculate the monthly return is derived by subtracting
the original amount invested from the maturity value. The yield curve
average is the basis for calculating the return on the Index. The Index
is rebalanced monthly by market capitalization.
+ Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
An investment in a money market fund is neither insured nor guaranteed by the US
Government. There can be no assurance that a money market fund will be able to
maintain a stable net asset value of $1.00 per share.
Annual Report 7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of the SSgA Funds:
We have audited the accompanying statements of assets and liabilities and
statements of net assets of SSgA US Treasury Money Market Fund (formerly The
Seven Seas Series US Treasury Money Market Fund)(the "Fund")), as of August 31,
1997, and the related statement of operations for the fiscal year then ended,
the statements of changes in net assets for each of the two fiscal years in the
period then ended, and the financial highlights for each of the three fiscal
years in the period then ended and for the period December 1, 1993 (commencement
of operations) to August 31, 1994. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
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 free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1997 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We 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 of the
Fund as of August 31, 1997, the results of its operations for the fiscal year
then ended, the changes in its net assets for each of the two fiscal years in
the period then ended, and the financial highlights for each of the three fiscal
years in the period then ended and for the period December 1, 1993 (commencement
of operations) to August 31, 1994 in conformity with generally accepted
accounting principles.
Boston, Massachusetts /s/ COOPERS & LYBRAND L.L.P.
October 7, 1997
8 Annual Report
<PAGE>
SSgA
US TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
August 31, 1997
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY (000)
-------------------------------------------------------
<S> <C> <C> <C> <C>
UNITED STATES GOVERNMENT TREASURIES - 14.3%
United States Treasury Bills . . . . . . . . . . . . . . . . . . . $ 25,000 5.455% 9/15/97 $ 24,951
United States Treasury Notes . . . . . . . . . . . . . . . . . . . 35,000 7.250% 2/15/98 35,253
United States Treasury Notes . . . . . . . . . . . . . . . . . . . 35,000 8.250% 7/15/98 35,705
United States Treasury Notes . . . . . . . . . . . . . . . . . . . 35,000 6.125% 8/31/98 35,129
----------
TOTAL UNITED STATES GOVERNMENT TREASURIES (identified cost $131,038) 131,038
----------
TOTAL INVESTMENTS (amortized cost $131,038) - 14.3%. . . . . . . . 131,038
----------
REPURCHASE AGREEMENTS - 88.7%
Agreement with Aubrey Lanston & Co., Inc of $40,000
acquired August 29, 1997 at 5.430% to be repurchased at $40,024
on September 2, 1997, collateralized by:
$25,000 United States Treasury Bonds
8.125% due 08/15/19 valued at $29,888
$12,127 United States Treasury Bonds
6.250% due 08/15/23 valued at $11,827. . . . . . . . . . . 40,000
Agreement with Donaldson, Lufkin & Jenrette Securities Corp. of $35,000
acquired August 29, 1997 at 5.350% to be repurchased at $35,021
on September 2, 1997, collateralized by:
$31,681 United States Treasury Bonds
7.500% due 11/15/24 valued at $36,530. . . . . . . . . . . 35,000
Agreement with Donaldson, Lufkin & Jenrette Securities Corp. of $190,000
acquired August 29, 1997 at 5.550% to be repurchased at $190,117
on September 2, 1997, collateralized by:
$50,000 United States Treasury Bonds
12.000% due 05/15/05 valued at $69,411
$30,009 United States Treasury Bonds
12.500% due 08/15/14 valued at $45,394
$47,507 United States Treasury Notes
6.250% due 05/31/00 valued at $48,685
$31,115 United States Treasury Notes
5.500% due 02/28/99 valued at $31,013. . . . . . . . . . . 190,000
</TABLE>
Annual Report 9
<PAGE>
SSgA
US TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
VALUE
(000)
----------
<S> <C>
Agreement with Deustche Bank AG of $40,000
acquired August 29, 1997 at 5.450% to be repurchased at $40,024
on September 2, 1997, collateralized by:
$43,050 United States Treasury Bills
5.493% due 08/20/98 valued at $40,857. . . . . . . . . . . $ 40,000
Agreement with Dresdner Bank AG of $40,000
acquired August 29, 1997 at 5.450% to be repurchased at $40,024
on September 2, 1997, collateralized by:
$41,245 United States Treasury Bills
5.048% due 11/13/97 valued at $40,838. . . . . . . . . . . 40,000
Agreement with Goldman Sachs of $40,000
acquired August 29, 1997 at 5.450% to be repurchased at $40,024
on September 2, 1997, collateralized by:
$29,975 United States Treasury Bonds
12.375% due 05/15/04 valued at $41,205 . . . . . . . . . . 40,000
Agreement with First Chicago National Bank of $40,000
acquired August 29, 1997 at 5.450% to be repurchased at $40,024
on September 2, 1997, collateralized by:
$3,850 United States Treasury Bonds
6.250% due 08/15/23 valued at $3,759
$36,785 United States Treasury Notes
5.750% due 10/31/00 valued at $37,302. . . . . . . . . . . 40,000
Agreement with Greenwich Capital Market, Inc. of $40,000
acquired August 29, 1997 at 5.450% to be repurchased at $40,024
on September 2, 1997, collateralized by:
$25,233 United States Treasury Bonds
7.875% due 11/15/04 valued at $28,358
$11,000 United States Treasury Bonds
9.125% due 05/15/09 valued at $12,991. . . . . . . . . . . 40,000
Agreement with HSBC Securities, Inc. of $40,000
acquired August 29, 1997 at 5.470% to be repurchased at $40,024
on September 2, 1997, collateralized by:
$37,007 United States Treasury Bonds
7.500% due 11/15/16 valued at $42,017. . . . . . . . . . . 40,000
</TABLE>
10 Annual Report
<PAGE>
SSgA
US TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
VALUE
(000)
----------
<S> <C>
Agreement with Lehman Brothers Securities, Inc. of $42,969
acquired August 29, 1997 at 5.370% to be repurchased at $42,995
on September 2, 1997, collateralized by:
$42,490 United States Treasury Notes
6.250% due 02/28/02 valued at $42,883. . . . . . . . . . . $ 42,969
Agreement with Swiss Bank Corp. of $40,000
acquired August 29, 1997 at 5.420% to be repurchased at $40,024
on September 2, 1997, collateralized by:
$40,000 United States Treasury Notes
7.250% due 02/15/98 valued at $40,398. . . . . . . . . . . 40,000
Agreement with UBS Securities, Inc. of $35,000
acquired August 29, 1997 at 5.300% to be repurchased at $35,021
on September 2, 1997, collateralized by:
$31,489 United States Treasury Bonds
8.750% due 11/15/08 valued at $36,244. . . . . . . . . . . 35,000
Agreement with UBS Securities, Inc. of $190,000
acquired August 29, 1997 at 5.550% to be repurchased at $190,117
on September 2, 1997, collateralized by:
$100,000 United States Treasury Bonds
8.125% due 08/15/19 valued at $119,538
$67,077 United States Treasury Bonds
7.875% due 02/15/21 valued at $78,518. . . . . . . . . . . 190,000
----------
TOTAL REPURCHASE AGREEMENTS (cost $812,969). . . . . . . . . . . . 812,969
----------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS
(cost $944,007)(a) - 103.0%. . . . . . . . . . . . . . . . . . . . 944,007
OTHER ASSETS AND LIABILITIES, NET - (3.0%) . . . . . . . . . . . . (27,162)
----------
NET ASSETS - 100.0%. . . . . . . . . . . . . . . . . . . . . . . . $ 916,845
----------
----------
</TABLE>
(a) The identified cost for federal income tax purposes is the same as shown
above.
The accompanying notes are an integral part of the financial statements.
Annual Report 11
<PAGE>
SSgA
US TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1997
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at amortized cost which approximates market (Note 2) . . . . . . . . . . . . . . . . . . . . $ 131,038
Repurchase agreements (identified cost $812,969)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . 812,969
Receivables:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,943
From Adviser (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
--------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 946,066
LIABILITIES
Payables:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,939
Investments purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,951
Accrued fees to affiliates and trustees (Note 4) . . . . . . . . . . . . . . . . . 96
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235
--------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,221
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 916,845
--------------
--------------
NET ASSETS CONSIST OF:
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (43)
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 917
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 915,971
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 916,845
--------------
--------------
NET ASSET VALUE, offering and redemption price per share:
($916,845,443 divided by 916,898,891 shares of $.001 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.00
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 Annual Report
<PAGE>
SSgA
US TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Fiscal Year Ended August 31, 1997
Amounts
in thousands
<S> <C> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,594
EXPENSES (Notes 2 and 4):
Advisory fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 894
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Amortization of deferred organization expenses . . . . . . . . . . . . . . . . . . 11
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
--------------
Expenses before reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,637
Expense reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (922)
--------------
Total Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 715
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,879
--------------
REALIZED GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
--------------
Net increase in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,936
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 13
<PAGE>
SSgA
US TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Fiscal Years Ended August 31,
Amounts in thousands
1997 1996
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,879 $ 9,881
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 74
-------------- --------------
Net increase in net assets resulting from operations. . . . . . . . . . . . . . 18,936 9,955
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (18,879) (9,881)
-------------- --------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions . . . . . . . . 727,784 28,037
-------------- --------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . 727,841 28,111
NET ASSETS
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189,004 160,893
-------------- --------------
End of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 916,845 $ 189,004
-------------- --------------
-------------- --------------
FUND SHARE TRANSACTIONS
(ON A CONSTANT DOLLAR BASIS):
Proceeds from shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,609,904 349,834
Proceeds from reinvestment of distributions. . . . . . . . . . . . . . . . . . . . . 6,915 1,235
Payments for shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,889,035) (323,032)
-------------- --------------
Total net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . 727,784 28,037
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 Annual Report
<PAGE>
SSgA
US TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each fiscal
year or period and other performance information derived from the financial statements.
1997 1996 1995 1994*
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . . . . . . $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . .0515 .0529 .0536 .0249
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . . . . . . . . . . . (.0515) (.0529) (.0536) (.0249)
---------- ---------- ---------- ----------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . . . . . . $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . 5.36 5.42 5.48 2.51
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of year ($000 omitted). . . . . . . . . . . 916,845 189,004 160,893 154,858
Ratios to average net assets (%)(b):
Operating expenses, net (c). . . . . . . . . . . . . . . .20 .20 .13 13
Operating expenses, gross (c). . . . . . . . . . . . . . .46 .38 .39 .38
Net investment income . . . . . . . . . . . . . . . . . 5.28 5.29 5.38 3.28
Per share amount of expense reductions
($ omitted)(c) . . . . . . . . . . . . . . . . . . . . . .0025 .0018 .0018 .0019
</TABLE>
* For the period December 1, 1993 (commencement of operations) to
August 31, 1994.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended August 31, 1994 are annualized.
(c) See Note 4 for current period amounts.
Annual Report 15
<PAGE>
SSgA
US TREASURY MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1997
1. ORGANIZATION
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 17 investment portfolios which are in operation as
of August 31, 1997. In December 1996, the Investment Company changed its
name from "The Seven Seas Series Fund" to the "SSgA Funds." These financial
statements report on one portfolio, the SSgA US Treasury Money Market Fund
(the "Fund"). The Investment Company is a registered and diversified
open-end investment company, as defined in the Investment Company Act of
1940, as amended (the "1940 Act"), that was organized as a Massachusetts
business trust on October 3, 1987 and operates under a First Amended and
Restated Master Trust Agreement, dated October 13, 1993, as amended (the
"Agreement"). The Investment Company's Agreement permits the Board of
Trustees to issue an unlimited number of full and fractional shares of
beneficial interest at a $.001 par value.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Funds in the preparation of its
financial statements.
SECURITY VALUATION: The Fund's portfolio investments are valued on the
basis of amortized cost, a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed. The Fund utilizes the
amortized cost valuation method in accordance with Rule 2a-7 of the 1940
Act.
SECURITIES TRANSACTIONS: Securities transactions are recorded on the trade
date, which in most instances is the same as the settlement date. Realized
gains and losses from the securities transactions, if any, are recorded on
the basis of identified cost.
INVESTMENT INCOME: Interest income is recorded daily on the accrual basis.
FEDERAL INCOME TAXES: Since the Investment Company is a Massachusetts
business trust, each sub-trust is a separate corporate taxpayer and
determines its net investment income and capital gains (or losses) and the
amounts to be distributed to each funds' shareholders without regard to the
income and capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company, as
defined by the Internal Revenue Code of 1986, as amended. This requires the
Fund to distribute all of its taxable income. Therefore, the Fund paid no
federal income taxes and no federal income tax provision was required. At
August 31, 1997, the Fund had a net tax basis capital loss carryover of
$42,115, which may be applied against any realized net taxable gains in
each succeeding year or until its expiration date of August 31, 2003.
16 Annual Report
<PAGE>
SSgA
US TREASURY MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Fund declares and records
dividends on net investment income daily and pays them monthly. Capital
gain distributions, if any, are generally declared and paid annually. An
additional distribution may be paid by the Fund to avoid imposition of
federal income tax on any remaining undistributed net investment income and
capital gains. The Fund may periodically make reclassifications among
certain of its capital accounts without impacting net asset value for
differences between federal tax regulations and generally accepted
accounting principles.
EXPENSES: Most expenses can be directly attributed to the Fund. Expenses
which cannot be directly attributed are allocated among all funds based
principally on their relative net assets.
DEFERRED ORGANIZATION EXPENSES: The Fund has incurred expenses in
connection with its organization and initial registration. These costs have
been deferred and are being amortized over 60 months on a straight-line
basis.
REPURCHASE AGREEMENTS: The Fund may engage in repurchase and tri-party
repurchase agreements with several financial institutions whereby the Fund,
through its custodian or third-party custodian, receives delivery of the
underlying securities. The market value of these securities (including
accrued interest) on acquisition date is required to be an amount equal to
at least 102% of the repurchase price. The Fund's Adviser will monitor
repurchase agreements daily to determine that the market value (including
accrued interest) of the underlying securities remains equal to at least
102% of the repurchase price at Fedwire closing time. The Adviser or
third-party custodian will notify the seller to immediately increase the
collateral on the repurchase agreement to 102% of the repurchase price if
collateral falls below 102%.
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the year ended August 31, 1997, purchases,
sales, and maturities of US Government and Agency obligations, excluding
repurchase agreements aggregated to $318,743,953, $176,622,616, and
$72,700,000, respectively.
4. RELATED PARTIES
ADVISER: The Investment Company has investment advisory agreements with
State Street Bank and Trust Company (the "Adviser") under which the Adviser
directs the investments of the Fund in accordance with its investment
objectives, policies, and limitations. For these services, the Fund pays a
fee to the Adviser, calculated daily and paid monthly, at the annual rates
of .25% of its average daily net assets. The Adviser voluntarily agreed to
reimburse the Fund for all expenses in excess of .20% of its average daily
net assets on an annual basis. As of August 31, 1997, the receivables due
from the Adviser for expenses in excess of the expense caps have been
netted against the Adviser fee payables. The Investment Company also has
contracts with the Adviser to provide custody, shareholder servicing and
transfer agent services to the Fund. These amounts are presented in the
accompanying Statement of Operations.
Annual Report 17
<PAGE>
SSgA
US TREASURY MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
ADMINISTRATOR: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator") under
which the Administrator supervises all non-portfolio investment aspects of
the Investment Company's operations and provides adequate office space and
all necessary office equipment and services, including telephone service,
utilities, stationery supplies, and similar items. The Investment Company
pays the Administrator the following fees for services supplied by the
Administrator pursuant to the Administration Agreement: (i) an annual fee,
payable monthly on a pro rata basis, based on the following percentages of
the average daily net assets of all domestic funds: $0 up to and including
$500 million - .06%; over $500 million to and including $1 billion - .05%;
over $1 billion - .03%; (ii) less an amount equal to the sum of certain
distribution-related expenses incurred by the Investment Company's
Distributor on behalf of the Fund (up to a maximum of 10% of the
asset-based fee determined in (i)); (iii) out-of-pocket expenses; and (iv)
start-up costs for new funds.
DISTRIBUTOR AND SHAREHOLDER SERVICING: The Investment Company has entered
into a Distribution Agreement with Russell Fund Distributors (the
"Distributor") which is a wholly-owned subsidiary of the Administrator to
promote and offer shares of the Investment Company. The Distributor may
have entered into sub-distribution agreements with other non-related
parties. The amounts paid to the Distributor are included in the
accompanying Statement of Operations.
The Investment Company has also adopted a Distribution Plan pursuant to
Rule 12b-1 (the "Plan") under the 1940 Act. Under this Plan, the Investment
Company is authorized to make payments to the Distributor, or any
Shareholder Servicing Agent, as defined in the Plan, for providing
distribution and marketing services, for furnishing assistance to investors
on an ongoing basis, and for the reimbursement of direct out-of-pocket
expenses incurred by the Distributor in connection with the distribution
and marketing of shares of the Investment Company and the servicing of
investor accounts.
The Fund has entered into service agreements with the Adviser. For these
services, the Fund pays .025% to the Adviser, based upon the average daily
value of all Fund shares held. For the year ended August 31, 1997, the Fund
incurred shareholder servicing expenses of $89,388 from the Adviser.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The Trustees or a majority of the
Fund's shareholders have the right, however, to terminate the Distribution
Plan and all payments thereunder at any time. The Fund will not be
obligated to reimburse the Distributor for
18 Annual Report
<PAGE>
SSgA
US TREASURY MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
carryover expenses subsequent to the Distribution Plan's termination or
noncontinuance. There were no carryover expenses as of August 31, 1997.
BOARD OF TRUSTEES: The Investment Company pays each Trustee not affiliated
with the Investment Company a retainer of $44,000 annually, $1,000 for each
board meeting attended, an additional $1,000 for attending the annual audit
committee meeting, and reimbursement for out-of-pocket expenses. These
expenses are allocated among all of the Funds based upon its relative net
assets.
ACCRUED FEES PAYABLE TO AFFILIATES AND TRUSTEES AS OF AUGUST 31, 1997 WERE
AS FOLLOWS:
Administration fees $ 22,079
Custodian fees 37,017
Distribution fees 17,646
Shareholder servicing fees 18,235
Transfer agent fees 852
Trustees' fees 345
----------
$ 96,174
----------
----------
BENEFICIAL INTEREST: As of August 31, 1997, three shareholders (two were
also affiliates of the Investment Company) were record owners of
approximately 49%, 35% and 10%, respectively, of the total outstanding
shares of the Fund.
Annual Report 19
<PAGE>
SSgA US TREASURY MONEY MARKET FUND
Two International Place, 35th Floor
Boston, Massachusetts 02110
(800) 997-7327
- ------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
George W. Weber, Senior Vice President and Treasurer
J. David Griswold, Vice President and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND OFFICE OF SHAREHOLDER INQUIRIES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 647-7327
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(800) 997-7327
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
20 Annual Report
<PAGE>
SSgA-SM- FUNDS
PRIME MONEY MARKET FUND
Annual Report
August 31, 1997
Table of Contents
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion. . . . . . . . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . 16
Fund Management and Service Providers. . . . . . . . . . . . . . . . . . 20
"SSgA-SM-" IS A SERVICE MARK OF STATE STREET CORPORATION AND IS LICENSED FOR USE
BY THE SSgA Funds.
THIS REPORT IS PREPARED FROM THE BOOKS AND RECORDS OF THE FUND AND IT IS
SUBMITTED FOR THE GENERAL INFORMATION OF SHAREHOLDERS. THIS INFORMATION IS FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR ACCOMPANIED BY A
SSgA FUNDS PROSPECTUS CONTAINING MORE COMPLETE INFORMATION CONCERNING THE
INVESTMENT OBJECTIVES AND OPERATIONS OF THE FUND, CHARGES AND EXPENSES. THE
PROSPECTUS SHOULD BE READ CAREFULLY BEFORE AN INVESTMENT IS MADE.
PERFORMANCE IS HISTORICAL AND ASSUMES REINVESTMENT OF ALL DIVIDENDS AND
CAPITAL GAINS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT
AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN WHEN
PURCHASED. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. AN
INVESTMENT IN A MONEY MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY THE US
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT A MONEY MARKET FUND WILL BE ABLE
TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. RUSSELL FUND
DISTRIBUTORS, INC., IS THE DISTRIBUTOR OF THE SSgA FUNDS.
<PAGE>
SSgA PRIME MONEY MARKET FUND
LETTER FROM THE CHAIRMAN OF STATE STREET GLOBAL ADVISORS
DEAR SHAREHOLDERS,
I am pleased to provide you with the SSgA Funds annual report for the fiscal
year ended August 31, 1997. Over the past year, the Funds have grown to include
seventeen portfolios covering a broad range of investment strategies from the
far corners of the emerging markets countries to the domestic stock and bond
markets. This report contains summaries on the market environment, performance
and financial statements for the Prime Money Market Fund. I hope you find this
information a useful tool as you review your overall investment strategy.
The SSgA Funds opened three additional funds in fiscal 1997. These three asset
allocation funds, called Life Solutions Funds, were opened on July 1, 1997. Each
Life Solutions Fund seeks to achieve its investment objective by diversifying
its assets in shares of certain Funds of the Investment Company, referred to as
Underlying Funds.
The Life Solutions Income and Growth Fund seeks income and, secondarily,
long-term growth of capital.
The Life Solutions Balanced Fund seeks a balance of growth of capital and
income.
The Life Solutions Growth Fund seeks long-term growth of capital.
During the past fiscal year, the SSgA Funds were proud to announce that the SSgA
Matrix Fund and the SSgA Small Cap Fund achieved five year track records. We are
proud of our long-term record and look forward to having additional funds
complete their five year anniversary.
SSGA is strategically growing by continuing to build an organization that
delivers comprehensive services striving to meet your investment requirements.
In an effort to compete in this ever-changing complex world, we focus on our
expertise, our knowledge and our commitment to better serve your investment
needs.
As Chairman and Chief Executive Officer of State Street Global Advisors, which
serves as the investment adviser to the SSgA Funds, I would like to thank you
for choosing the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
SSgA PRIME MONEY MARKET FUND
MANAGEMENT OF THE FUNDS
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A TEAM APPROACH TO INVESTMENT MANAGEMENT
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio managers work together to develop and enhance the
techniques that drive our investment processes. The result is that the
portfolios we manage benefit from the knowledge of the entire team.
Ms. Rena Williams, Vice President, has been the portfolio manager primarily
responsible for investment decisions regarding the SSgA Prime Money Market Fund
since her arrival at State Street in February 1994. Ms. Williams is the Mutual
Funds Unit Head responsible for oversight of money market and other short-term
funds. Prior to joining State Street, she was a portfolio manager with PNC Bank
and the Calvert Group. She holds a BA in International Relations from the
University of Virginia. There are 10 other portfolio managers working with Ms.
Williams.
Annual Report 5
<PAGE>
SSgA PRIME MONEY MARKET FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
OBJECTIVE: Maximize current income; preservation of capital and liquidity.
INVESTS IN: High quality money market instruments including certificates of
deposit, time deposits, bankers acceptances, commercial paper, corporate
medium-term notes, US Government Treasury and Agency notes, and repurchase
agreements.
STRATEGY: Fund Managers base their decisions on the relative attractiveness
of different money market investments which can vary depending on the general
level of interest rates as well as supply/demand imbalances in the market.
[GRAPH]
DATES PRIME MONEY MARKET FUND SALOMON BROTHERS 3-MONTH T-BILL INDEX
Inception* $10,000 $10,000
1994 $10,209 $10,200
1995 $10,803 $10,769
1996 $11,409 $11,344
1997 $12,038 $11,940
- --------------------------------------------------------------------------------
Total $54,459 $54,253
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SSgA
PRIME MONEY MARKET FUND
Period Ended Growth of Total
08/31/97 $10,000 Return
- ------------ ------------ ------------
1 Year 10,552 5.52%
Inception 12,038 5.41%+
SALOMON BROTHERS
3-MONTH TREASURY BILL INDEX
Period Ended Growth of Total
08/31/97 $10,000 Return
- ------------ ------------ ------------
1 Year 10,525 5.25%
Inception 11,940 5.20%+
SEE RELATED NOTES ON THE FOLLOWING PAGE.
PERFORMANCE REVIEW
Market participants spent most of the second half of 1996 debating whether the
Federal Reserve's Open Market Committee (FOMC) would need to raise the target
rate for federal funds, targeted at 5.25%. The fear of tightening kept pressure
on rates during the period. However, by the end of November, positive data
relating to the budget deficit, the outlook for reduced financing needs of the
Treasury, and a historically high amount of Treasury securities held by foreign
investors lent a positive tone. Yields hit their lows during November, with
one-year Treasuries falling to 5.36%, two-year Treasuries dropping to 5.59% and
thirty-year Treasuries down to 6.35%. Pressure relating to year end caused money
market rates to rise in December. The rush to issue securities prior to year end
also pressured the corporate market, causing spreads to widen during the month;
however, the theme of 1996 for this sector was narrowing spreads to Treasuries.
The spread widening between Treasuries and corporates, and yield back-up from
year end financing pressures were erased by the end of January. Signs of
unexpected strength were tempered by lower inflation indicators. The Treasury
yield curve steepened as the data suggested a stronger economy and the market
began pricing the possibility of an increase in interest rates. Consequently,
the long-awaited shift in Federal Reserve policy finally occurred on March 26th,
with a fed funds increase of 25 basis points.
6 Annual Report
<PAGE>
SSgA PRIME MONEY MARKET FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
While the move itself was not a surprise, the FOMC's comment expressing concern
over the strength of the economy and its impact on inflation was strong enough
to focus market attention on the possibility of further tightening. Pessimism
pervaded and yields rose through April, with one-year Treasuries peaking at
6.08%, two-years backing up to 6.54% and thirty-years at 7.17%. News of first
quarter GDP at 5.6% was offset by the producer price index turning negative and
consumer price indices declining to 2.3% annualized.
Going into the third quarter, high consumer confidence and healthier consumer
balance sheets have many economists fearing a surge in consumer spending would
spur further growth. Capital spending continues at a healthy clip keeping the
base level of growth well above the target non-inflationary rate of 2.5%.
Skepticism for the new era of higher non-inflationary growth abounds. The growth
side does not appear ready to slow down and with labor markets tight and getting
tighter, the market trades nervously as if anticipating the FOMC to raise rates
again. Because of the uncertainty, opportunities continue to arise which allow
for buying on weakness and extending portfolio maturity.
The Fund had a one-year total return of 5.52% for the fiscal year ended August
31, 1997. This compares favorably to the return of 5.25% for the same period for
the benchmark of the Fund, the Salomon Brothers 3-Month Treasury Bill Index. The
Fund's performance is net of fund operating expenses, whereas Index results do
not include expenses of any kind. The Salomon Brothers 3-Month Treasury Bill
Index was chosen as a standard, well-known representation of money market rates.
PORTFOLIO HIGHLIGHTS
In the last year, the SSgA Prime Money Market Fund was managed consistently with
its objective of providing safety of principal and liquidity by investing in
high quality investments providing competitive returns. The Fund received the Am
rating from Standard and Poor's Corporation. For the period, the Fund's net
assets have increased by 28%. New cash flows were invested in a combination of
fixed and floating rate securities. Purchases of floating rate notes were
largely concentrated using one- and three-month LIBOR (London InterBank Offering
Rate) as reset indices. A small percentage was reset based on Fed Funds and
Prime rates. The average maturity of the Fund ranged from 39 to 69 days over the
period, as the Fund selectively purchased one-year securities to extend its
average days to maturity. This strategy was applied to enhance yield as the
yield curve steepened.
TOP FIVE HOLDINGS (BY INVESTMENT TYPE,
AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31, 1997
Corporate Bonds and Notes 27.2%
Yankee Certificates of Deposit 14.2
Eurodollar Time Deposits 13.9
Domestic Commercial Paper 13.3
Domestic Time Deposits 13.1
-----------------------
NOTES: THE FOLLOWING NOTES RELATE TO THE GROWTH OF $10,000 GRAPH AND TABLE ON
THE PRECEDING PAGE.
* The Fund commenced operations on February 22, 1994. Index comparison began
March 1, 1994.
** Equal dollar amounts of 3-month Treasury bills are purchased at the
beginning of each of three consecutive months. As each bill matures, all
proceeds are rolled over or reinvested in a new 3-month bill. The income
used to calculate the monthly return is derived by subtracting the original
amount invested from the maturity value. The yield curve average is the
basis for calculating the return on the Index. The Index is rebalanced
monthly by market capitalization.
+ Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
An investment in a money market fund is neither insured nor guaranteed by the US
Government. There can be no assurance that a money market fund will be able to
maintain a stable net asset value of $1.00 per share.
Annual Report 7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of the SSgA Funds:
We have audited the accompanying statement of assets and liabilities and
statement of net assets of SSgA Prime Money Market Fund (formerly The Seven Seas
Series Prime Money Market Fund)(the "Fund"), as of August 31, 1997, and the
related statement of operations for the fiscal year then ended, the statements
of changes in net assets for each of the two fiscal years in the period then
ended, and the financial highlights for each of the three fiscal years in the
period then ended and for the period February 22, 1994 (commencement of
operations) to August 31, 1994. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
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 free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1997 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We 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 of the
Fund as of August 31, 1997, the results of its operations for the fiscal year
then ended, the changes in its net assets for each of the two fiscal years in
the period then ended, and the financial highlights for each of the three fiscal
years in the period then ended and for the period February 22, 1994
(commencement of operations) to August 31, 1994 in conformity with generally
accepted accounting principles.
Boston, Massachusetts /s/ COOPERS & LYBRAND L.L.P.
October 7, 1997
8 Annual Report
<PAGE>
SSgA
PRIME MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
August 31, 1997
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY (000)
-------------------------------------------------------
<S> <C> <C> <C> <C>
CORPORTATE BONDS AND NOTES - 27.2%
Associates Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,000 6.625% 11/15/97 $ 20,020
AVCO Financial Services, Inc. (MTN)(a) . . . . . . . . . . . . . . . 25,000 5.710 11/17/97 25,000
Bank of New York . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 6.000 03/24/98 9,995
Caterpillar Financial Services (MTN)(a). . . . . . . . . . . . . . . 25,000 5.700 04/13/98 25,000
First Chicago Corp.. . . . . . . . . . . . . . . . . . . . . . . . . 19,350 8.500 06/01/98 19,712
First National Bank of Boston. . . . . . . . . . . . . . . . . . . . 10,000 5.880 08/06/98 9,996
First Union Corp. (MTN)(a) . . . . . . . . . . . . . . . . . . . . . 25,000 5.906 02/24/98 25,025
Ford Motor Credit Co. (MTN)(a) . . . . . . . . . . . . . . . . . . . 15,000 5.926 10/21/97 15,005
Ford Motor Credit Co. (MTN)(a) . . . . . . . . . . . . . . . . . . . 15,000 5.898 11/01/97 15,006
General Electric Capital Corp. . . . . . . . . . . . . . . . . . . . 5,000 7.750 11/14/97 5,016
General Motors Acceptance Corp. (MTN)(a) . . . . . . . . . . . . . . 25,000 5.957 02/02/98 25,027
IBM Credit Corp. (MTN)(a). . . . . . . . . . . . . . . . . . . . . . 38,000 5.687 06/05/98 37,982
Keycorp (MTN). . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000 6.030 03/23/98 5,003
Merrill Lynch & Co., Inc. (MTN)(a) . . . . . . . . . . . . . . . . . 17,000 6.001 05/19/98 17,029
Merrill Lynch & Co., Inc. (MTN). . . . . . . . . . . . . . . . . . . 25,000 5.880 08/10/98 24,996
Old Kent Bank & Trust Co. (MTN)(a) . . . . . . . . . . . . . . . . . 25,000 5.680 04/29/98 24,994
US National Bank of Oregon (MTN)(a). . . . . . . . . . . . . . . . . 25,000 5.507 11/20/97 24,995
Wells Fargo & Co. (MTN)(a) . . . . . . . . . . . . . . . . . . . . . 12,500 5.831 09/05/97 12,500
Wells Fargo & Co. (MTN)(a) . . . . . . . . . . . . . . . . . . . . . 40,000 5.811 12/29/97 40,007
----------
TOTAL CORPORATE BONDS AND NOTES (cost $382,308). . . . . . . . . . . 382,308
----------
CERTIFICATES OF DEPOSIT - 7.2%
Branch Banking & Trust (a) . . . . . . . . . . . . . . . . . . . . . 15,000 5.656 07/01/98 14,993
Comerica Bank, Michigan (a). . . . . . . . . . . . . . . . . . . . . 22,000 5.620 07/22/98 21,989
First USA Bank (a) . . . . . . . . . . . . . . . . . . . . . . . . . 15,000 6.000 07/22/98 15,037
PNC Bank NA (a). . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 5.620 02/13/98 24,992
PNC Bank NA (a). . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 5.670 07/01/98 24,977
----------
TOTAL CERTIFICATES OF DEPOSIT (cost $101,988). . . . . . . . . . . . 101,988
----------
DOMESTIC COMMERCIAL PAPER - 13.3%
Asset Securitization Cooperative Corp. . . . . . . . . . . . . . . . 30,000 5.530 11/07/97 29,691
Asset Securitization Cooperative Corp. . . . . . . . . . . . . . . . 19,000 5.530 11/10/97 18,796
</TABLE>
Annual Report 9
<PAGE>
SSgA
PRIME MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY (000)
-------------------------------------------------------
<S> <C> <C> <C> <C>
Asset Securitization Cooperative Corp. . . . . . . . . . . . . . . . $ 19,000 5.500% 11/26/97 $ 18,750
Delaware Funding Corp. . . . . . . . . . . . . . . . . . . . . . . . 25,000 5.515 10/30/97 24,774
General Electric Capital Corp. . . . . . . . . . . . . . . . . . . . 65,000 5.650 09/02/97 64,990
Merrill Lynch & Co., Inc.. . . . . . . . . . . . . . . . . . . . . . 10,000 5.750 11/05/97 9,896
Merrill Lynch & Co., Inc.. . . . . . . . . . . . . . . . . . . . . . 10,000 5.680 11/24/97 9,867
Merrill Lynch & Co., Inc.. . . . . . . . . . . . . . . . . . . . . . 10,000 5.550 02/09/98 9,752
----------
TOTAL DOMESTIC COMMERCIAL PAPER (cost $186,516). . . . . . . . . . . 186,516
----------
EURODOLLAR CERTIFICATES OF DEPOSIT - 1.4%
Morgan Guaranty Trust Co.. . . . . . . . . . . . . . . . . . . . . . 20,000 5.550 10/22/97 20,000
----------
TOTAL EURODOLLAR CERTIFICATES OF DEPOSIT (cost $20,000). . . . . . . 20,000
----------
EURODOLLAR TIME DEPOSITS - 13.9%
Canadian Imperial Bank . . . . . . . . . . . . . . . . . . . . . . . 65,000 5.656 09/02/97 65,000
Credit Suisse First Boston . . . . . . . . . . . . . . . . . . . . . 65,000 5.687 09/02/97 65,000
Toronto Dominion . . . . . . . . . . . . . . . . . . . . . . . . . . 65,000 5.625 09/02/97 65,000
----------
TOTAL EURODOLLAR TIME DEPOSITS (cost $195,000) . . . . . . . . . . . 195,000
----------
DOMESTIC TIME DEPOSITS - 13.1%
Bank of America. . . . . . . . . . . . . . . . . . . . . . . . . . . 65,000 5.687 09/02/97 65,000
Branch Banking & Trust Co. . . . . . . . . . . . . . . . . . . . . . 59,384 5.500 09/02/97 59,384
Fleet Bank, Grand Cayman . . . . . . . . . . . . . . . . . . . . . . 60,000 5.625 09/02/97 60,000
----------
TOTAL DOMESTIC TIME DEPOSITS (cost $184,384) . . . . . . . . . . . . 184,384
----------
UNITED STATES GOVERNMENT AGENCIES - 8.9%
Federal Home Loan Bank (a) . . . . . . . . . . . . . . . . . . . . . 25,000 5.455 10/02/97 24,998
Federal National Mortgage Association (MTN)(a) . . . . . . . . . . . 50,000 5.632 09/12/97 49,999
Federal National Mortgage Association (MTN)(a) . . . . . . . . . . . 25,000 5.558 11/19/97 24,996
Federal National Mortgage Association (MTN)(a) . . . . . . . . . . . 25,000 5.538 11/25/97 24,995
----------
Total United States Government Agencies (cost $124,988). . . . . . . 124,988
----------
YANKEE CERTIFICATES OF DEPOSIT - 14.2%
Abbey National Treasury Services (a) . . . . . . . . . . . . . . . . 15,000 5.532 06/16/98 14,991
</TABLE>
10 Annual Report
<PAGE>
SSgA
PRIME MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY (000)
-------------------------------------------------------
<S> <C> <C> <C> <C>
Deutsche Bank. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,000 5.800% 01/28/98 $ 9,998
Deutsche Bank (a). . . . . . . . . . . . . . . . . . . . . . . . . . 30,000 5.611 07/01/98 29,976
Landesbank Hessen Thuringen. . . . . . . . . . . . . . . . . . . . . 15,000 5.960 03/20/98 14,997
Landesbank Hessen Thuringen. . . . . . . . . . . . . . . . . . . . . 20,000 5.930 06/30/98 19,983
National Westminster Bank PLC. . . . . . . . . . . . . . . . . . . . 15,000 5.860 03/10/98 14,996
Royal Bank of Canada . . . . . . . . . . . . . . . . . . . . . . . . 10,000 5.825 08/25/98 9,993
Societe Generale . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 5.540 09/02/97 25,000
Svenska Handelsbanken. . . . . . . . . . . . . . . . . . . . . . . . 25,000 5.770 08/05/98 24,991
Swiss Bank Corp. New York. . . . . . . . . . . . . . . . . . . . . . 10,000 5.980 03/19/98 9,999
Westpac Banking. . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000 5.830 01/15/98 14,999
Westpac Banking. . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 5.830 01/27/98 9,999
----------
TOTAL YANKEE CERTIFICATES OF DEPOSIT (cost $199,922) . . . . . . . . 199,922
----------
TOTAL INVESTMENTS (amortized cost $1,395,106) - 99.2%. . . . . . . . 1,395,106
----------
REPURCHASE AGREEEMENTS - 0.7%
Agreement with Credit Suisse First Boston of $10,000
acquired August 29, 1997 at 5.500% to be repurchased at $10,006
on September 2, 1997, collateralized by:
$10,310 Federal Home Loan Mortgage Association Discount Note,
5.521% due November 5, 1997 valued at $10,205 . . . . . . . 10,000
----------
TOTAL REPURCHASE AGREEMENTS (cost $10,000) . . . . . . . . . . . . . 10,000
----------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS
(cost $1,405,106)(b) - 99.9% . . . . . . . . . . . . . . . . . . . . 1,405,106
OTHER ASSETS AND LIABILITIES - 0.1%. . . . . . . . . . . . . . . . . 1,157
----------
NET ASSETS - 100.0%. . . . . . . . . . . . . . . . . . . . . . . . . $1,406,263
----------
----------
</TABLE>
(a) Adjustable or floating rate security.
(b) The identified cost for federal income tax purposes is the same as shown
above.
ABBREVIATIONS:
MTN - Medium Term Note
The accompanying notes are an integral part of the financial statements.
Annual Report 11
<PAGE>
SSgA
PRIME MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1997
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at amortized cost which approximates market (Note 2) . . . . . . . . . . . . . . . . . . . . $ 1,405,106
Interest receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,889
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
--------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,414,004
LIABILITIES
Payables:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,263
Accrued fees to affiliates and trustees (Note 4) . . . . . . . . . . . . . . . . . 360
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
--------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,741
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,406,263
--------------
--------------
NET ASSETS CONSIST OF:
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (45)
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,406
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,404,902
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,406,263
--------------
--------------
NET ASSET VALUE, offering and redemption price per share:
($1,406,263,191 divided by 1,406,319,710 shares of $.001 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.00
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 Annual Report
<PAGE>
SSgA
PRIME MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Fiscal Year Ended August 31, 1997
Amounts in
thousands
<S> <C> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 71,675
EXPENSES (Notes 2 and 4):
Advisory fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,920
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 290
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 365
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Amortization of deferred organization expenses . . . . . . . . . . . . . . . . . . 6
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
---------------
Expenses before reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,546
Expense reductions (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . (986)
---------------
Total Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,560
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,115
--------------
REALIZED GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
--------------
Net increase in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . . . . . . . $ 69,153
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 13
<PAGE>
SSgA
PRIME MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Fiscal Years Ended August 31,
Amounts in thousands
1997 1996
----------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 69,115 $ 80,535
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 (124)
---------------- ----------------
Net increase in net assets resulting from operations. . . . . . . . . . . . . . 69,153 80,411
---------------- ----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (69,115) (80,546)
---------------- ----------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions . . . . . . . . 310,594 19,136
---------------- ----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . 310,632 19,001
NET ASSETS
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,095,631 1,076,630
---------------- ----------------
End of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,406,263 $ 1,095,631
---------------- ----------------
---------------- ----------------
FUND SHARE TRANSACTIONS
(ON A CONSTANT DOLLAR BASIS):
Proceeds from shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,602,335 9,851,518
Proceeds from reinvestment
of distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,659 15,478
Payments for shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,320,400) (9,847,860)
---------------- ----------------
Total net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . 310,594 19,136
---------------- ----------------
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 Annual Report
<PAGE>
SSgA
PRIME MONEY MARKET FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each fiscal
year or period and other performance information derived from the financial statements.
1997 1996 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . . . . . $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . .0528 .0546 .0567 .0207
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . . . (.0528) (.0546) (.0567) (.0207)
----------- ----------- ----------- -----------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . . . . . $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . 5.52 5.60 5.82 2.09
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of year ($000 omitted) . . . . . . . . . 1,406,263 1,095,631 1,076,630 432,224
Ratios to average net assets (%)(b):
Operating expenses, net (c). . . . . . . . . . . . .20 .20 .14 .16
Operating expenses, gross (c). . . . . . . . . . . .28 .25 .27 .32
Net investment income . . . . . . . . . . . . . . 5.40 5.44 5.76 4.00
Per share amount of expense reductions
($ omitted)(c) . . . . . . . . . . . . . . . . . . .0008 .0006 .0013 .0008
</TABLE>
* For the period February 22, 1994 (commencement of operations) to
August 31, 1994.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended August 31, 1994 are annualized.
(c) See Note 4 for current period amounts.
Annual Report 15
<PAGE>
SSgA
PRIME MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1997
1. ORGANIZATION
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 17 investment portfolios which are in operation as
of August 31, 1997. In December 1996, the Investment Company changed its
name from "The Seven Seas Series Fund" to the "SSgA Funds." These financial
statements report on one portfolio, the SSgA Prime Money Market Fund (the
"Fund"). The Investment Company is a registered and diversified open-end
investment company, as defined in the Investment Company Act of 1940, as
amended (the "1940 Act"), that was organized as a Massachusetts business
trust on October 3, 1987 and operates under a First Amended and Restated
Master Trust Agreement, dated October 13, 1993, as amended (the
"Agreement"). The Investment Company's Agreement permits the Board of
Trustees to issue an unlimited number of full and fractional shares of
beneficial interest at a $.001 par value.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
SECURITY VALUATION: The Fund's portfolio investments are valued on the
basis of amortized cost, a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed. The Fund utilizes the
amortized cost valuation method in accordance with Rule 2a-7 of the 1940
Act.
SECURITIES TRANSACTIONS: Securities transactions are recorded on the trade
date, which in most instances is the same as the settlement date. Realized
gains and losses from the securities transactions, if any, are recorded on
the basis of identified cost.
INVESTMENT INCOME: Interest income is recorded daily on the accrual basis.
FEDERAL INCOME TAXES: Since the Investment Company is a Massachusetts
business trust, each sub-trust is a separate corporate taxpayer and
determines its net investment income and capital gains (or losses) and the
amounts to be distributed to each funds' shareholders without regard to the
income and capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company, as
defined by the Internal Revenue Code of 1986, as amended. This requires the
Fund to distribute all of its taxable income. Therefore, the Fund paid no
federal income taxes and no federal income tax provision was required. At
August 31, 1997, the Fund had a net tax basis capital loss carryover of
$89,293, which may be applied against any realized net taxable gains in
each succeeding year or until its expiration date of August 31, 2005.
16 Annual Report
<PAGE>
SSgA
PRIME MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Fund declares and records
dividends on net investment income daily and pays them monthly. Capital
gain distributions, if any, are generally declared and paid annually. An
additional distribution may be paid by the Fund to avoid imposition of
federal income tax on any remaining undistributed net investment income and
capital gains. The Fund may periodically make reclassifications among
certain of its capital accounts without impacting net asset value for
differences between federal tax regulations and generally accepted
accounting principles.
EXPENSES: Most expenses can be directly attributed to the Fund. Expenses
which cannot be directly attributed are allocated among all funds based
principally on their relative net assets.
DEFERRED ORGANIZATION EXPENSES: The Fund has incurred expenses in
connection with its organization and initial registration. These costs have
been deferred and are being amortized over 60 months on a straight-line
basis.
REPURCHASE AGREEMENTS: The Fund may engage in repurchase and tri-party
repurchase agreements with several financial institutions whereby the Fund,
through its custodian or third-party custodian, receives delivery of the
underlying securities. The market value of these securities (including
accrued interest) on acquisition date is required to be an amount equal to
at least 102% of the repurchase price. The Fund's Adviser will monitor
repurchase agreements daily to determine that the market value (including
accrued interest) of the underlying securities remains equal to at least
102% of the repurchase price at Fedwire closing time. The Adviser or
third-party custodian will notify the seller to immediately increase the
collateral on the repurchase agreement to 102% of the repurchase price if
collateral falls below 102%.
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the year ended August 31, 1997, purchases,
sales, and maturities of investment securities, excluding US Government and
Agency obligations and repurchase agreements, for the Fund aggregated to
$56,654,150,456, $256,242,526, and $56,020,338,000, respectively.
For the year ended August 31, 1997, purchases, sales and maturities of US
Government and Agency obligations, excluding repurchase agreements
aggregated to $204,442,316, $110,920,181, and $138,000,000, respectively.
4. RELATED PARTIES
ADVISER: The Investment Company has investment advisory agreements with
State Street Bank and Trust Company (the "Adviser") under which the Adviser
directs the investments of the Fund in accordance with its investment
objectives, policies, and limitations. For these services, the Fund pays a
fee to the Adviser, calculated daily and paid monthly, at the annual rates
of .15%, of its average daily net assets. The Adviser voluntarily agreed to
reimburse the Fund for all expenses in excess of .20% of its average daily
net
Annual Report 17
<PAGE>
SSgA
PRIME MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
assets on an annual basis. As of August 31, 1997, the receivables due from
the Adviser for expenses in excess of the expense caps have been netted
against the Adviser fee payable. The Investment Company also has contracts
with the Adviser to provide custody, shareholder servicing and transfer
agent services to the Fund. These amounts are presented in the accompanying
Statement of Operations.
ADMINISTRATOR: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator") under
which the Administrator supervises all non-portfolio investment aspects of
the Investment Company's operations and provides adequate office space and
all necessary office equipment and services, including telephone service,
utilities, stationery supplies, and similar items. The Investment Company
pays the Administrator the following fees for services supplied by the
Administrator pursuant to the Administration Agreement: (i) an annual fee,
payable monthly on a pro rata basis, based on the following percentages of
the average daily net assets of all domestic funds: $0 up to and including
$500 million - .06%; over $500 million to and including $1 billion - .05%;
over $1 billion - .03%; (ii) less an amount equal to the sum of certain
distribution-related expenses incurred by the Investment Company's
Distributor on behalf of the Fund (up to a maximum of 10% of the
asset-based fee determined in (i)); (iii) out-of-pocket expenses; and (iv)
start-up costs for new funds.
DISTRIBUTOR AND SHAREHOLDER SERVICING: The Investment Company has entered
into a Distribution Agreement with Russell Fund Distributors (the
"Distributor") which is a wholly-owned subsidiary of the Administrator to
promote and offer shares of the Investment Company. The Distributor may
have entered into sub-distribution agreements with other non-related
parties. The amounts paid to the Distributor are included in the
accompanying Statement of Operations.
The Investment Company has also adopted a Distribution Plan pursuant to
Rule 12b-1 (the "Plan") under the 1940 Act. Under this Plan, the Investment
Company is authorized to make payments to the Distributor, or any
Shareholder Servicing Agent, as defined in the Plan, for providing
distribution and marketing services, for furnishing assistance to investors
on an ongoing basis, and for the reimbursement of direct out-of-pocket
expenses incurred by the Distributor in connection with the distribution
and marketing of shares of the Investment Company and the servicing of
investor accounts.
The Fund has entered into service agreements with the Adviser. For these
services, the Fund pays .025% to the Adviser, based upon the average daily
value of all Fund shares held. For the year ended August 31, 1997, the Fund
incurred shareholder servicing expenses of $319,995, from the Adviser.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The
18 Annual Report
<PAGE>
SSgA
PRIME MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
Trustees or a majority of the Fund's shareholders have the right, however,
to terminate the Distribution Plan and all payments thereunder at any time.
The Fund will not be obligated to reimburse the Distributor for carryover
expenses subsequent to the Distribution Plan's termination or
noncontinuance. There were no carryover expenses as of August 31, 1997.
BOARD OF TRUSTEES: The Investment Company pays each Trustee not affiliated
with the Investment Company a retainer of $44,000 annually, $1,000 for each
board meeting attended, an additional $1,000 for attending the annual audit
committee meeting, and reimbursement for out-of-pocket expenses. These
expenses are allocated among all of the Funds based upon their relative net
assets.
ACCRUED FEES PAYABLE TO AFFILIATES AND TRUSTEES AS OF AUGUST 31, 1997 WERE
AS FOLLOWS:
Advisory fees $ 186,496
Administration fees 42,462
Custodian fees 60,711
Distribution fees 32,289
Shareholder servicing fees 33,738
Transfer agent fees 4,184
----------
$ 359,880
----------
----------
BENEFICIAL INTEREST: As of August 31, 1997, three shareholders were record
owners of approximately 32%, 10% and 10%, respectively, of the total
outstanding shares of the Fund.
Annual Report 19
<PAGE>
SSgA PRIME MONEY MARKET FUND
Two International Place, 35th Floor
Boston, Massachusetts 02110
(800) 997-7327
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
George W. Weber, Senior Vice President and Treasurer
J. David Griswold, Vice President and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND OFFICE OF SHAREHOLDER INQUIRIES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 647-7327
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(800) 997-7327
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
20 Annual Report
<PAGE>
SSgA-SM- FUNDS
TAX FREE MONEY MARKET FUND
Annual Report
August 31, 1997
Table of Contents
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion. . . . . . . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . 20
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . 21
Tax Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Fund Management and Service Providers. . . . . . . . . . . . . . . . . 26
"SSgA-SM-" IS A SERVICE MARK OF STATE STREET CORPORATION AND IS LICENSED FOR USE
BY THE SSgA FUNDS.
THIS REPORT IS PREPARED FROM THE BOOKS AND RECORDS OF THE FUND AND IT IS
SUBMITTED FOR THE GENERAL INFORMATION OF SHAREHOLDERS. THIS INFORMATION IS FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR ACCOMPANIED BY A
SSgA FUNDS PROSPECTUS CONTAINING MORE COMPLETE INFORMATION CONCERNING THE
INVESTMENT OBJECTIVE AND OPERATIONS OF THE FUND, CHARGES AND EXPENSES. THE
PROSPECTUS SHOULD BE READ CAREFULLY BEFORE AN INVESTMENT IS MADE.
PERFORMANCE IS HISTORICAL AND ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL
GAINS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN WHEN PURCHASED.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. AN INVESTMENT IN A MONEY
MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY THE US GOVERNMENT. THERE CAN BE
NO ASSURANCE THAT A MONEY MARKET FUND WILL BE ABLE TO MAINTAIN A STABLE NET
ASSET VALUE OF $1.00 PER SHARE. INCOME FROM TAX-FREE FUNDS MAY BE SUBJECT TO AN
ALTERNATIVE MINIMUM TAX, OR STATE AND LOCAL TAXES. RUSSELL FUND DISTRIBUTORS,
INC., IS THE DISTRIBUTOR OF THE SSgA FUNDS.
<PAGE>
SSgA TAX FREE MONEY MARKET FUND
LETTER FROM THE CHAIRMAN OF STATE STREET GLOBAL ADVISORS
DEAR SHAREHOLDERS,
I am pleased to provide you with the SSgA Funds annual report for the fiscal
year ended August 31, 1997. Over the past year, the Funds have grown to include
seventeen portfolios covering a broad range of investment strategies from the
far corners of the emerging markets countries to the domestic stock and bond
markets. This report contains summaries on the market environment, performance
and financial statements for the Tax Free Money Market Fund. I hope you find
this information a useful tool as you review your overall investment strategy.
The SSgA Funds opened three additional funds in fiscal 1997. These three asset
allocation funds, called Life Solutions Funds, were opened on July 1, 1997. Each
Life Solutions Fund seeks to achieve its investment objective by diversifying
its assets in shares of certain Funds of the Investment Company, referred to as
Underlying Funds.
The Life Solutions Income and Growth Fund seeks income and, secondarily,
long-term growth of capital.
The Life Solutions Balanced Fund seeks a balance of growth of capital and
income.
The Life Solutions Growth Fund seeks long-term growth of capital.
During the past fiscal year, the SSgA Funds were proud to announce that the SSgA
Matrix Fund and the SSgA Small Cap Fund achieved five year track records. We are
proud of our long-term record and look forward to having additional funds
complete their five year anniversary.
SSGA is strategically growing by continuing to build an organization that
delivers comprehensive services striving to meet your investment requirements.
In an effort to compete in this ever-changing complex world, we focus on our
expertise, our knowledge and our commitment to better serve your investment
needs.
As Chairman and Chief Executive Officer of State Street Global Advisors, which
serves as the investment adviser to the SSgA Funds, I would like to thank you
for choosing the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
SSgA TAX FREE MONEY MARKET FUND
MANAGEMENT OF THE FUNDS
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A TEAM APPROACH TO INVESTMENT MANAGEMENT
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio managers work together to develop and enhance the
techniques that drive our investment processes. The result is that the
portfolios we manage benefit from the knowledge of the entire team.
Mr. James Donahue, Vice President, has been the portfolio manager primarily
responsible for investment decisions regarding the SSgA Tax Free Money Market
Fund since its inception in December 1994. Prior to that he was a municipal bond
trader with the investment firm of Jesup Josephthal. He is a graduate of Belknap
College with a BS in economics. There are two other portfolio managers who work
with Mr. Donahue.
Annual Report 5
<PAGE>
SSgA TAX FREE MONEY MARKET FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
OBJECTIVE: Maximize current income exempt from federal income taxes;
preservation of capital and liquidity.
INVESTS IN: High quality, short-term municipal securities.
STRATEGY: Fund Managers base their decisions on the relative attractiveness
of different tax-exempt money market investments which can vary depending on
the general level of interest rates as well as supply/demand imbalances in the
market.
[GRAPH]
DATES TAX FREE MONEY MARKET FUND
Inception* $10,000
1995 $10,254
1996 $10,568
1997 $10,884
- --------------------------------------------
Total $41,706
- --------------------------------------------
- --------------------------------------------
SSgA
TAX FREE MONEY MARKET FUND
Period Ended Growth of Total
08/31/97 $10,000 Return
- ------------ --------- ------
1 Year $10,299 2.99%
Inception $10,884 3.13%+
* The Fund commenced operations on December 1, 1994.
+ Annualized.
PERFORMANCE REVIEW
The one year return of the SSgA Tax Free Money Market Fund at August 31, 1997
was 2.99%. The annualized return was 3.13% since its inception in December 1994.
The Fund received an AAm rating from the Standards & Poor's Corporation.
Standard & Poor's assigns a AAm rating to funds where safety of principal value
is high and exposure to loss is limited. This rating corresponds with the
underlying investments and the management style of the Funds. From the Fund's
inception, the investment objective has been preservation of principal and a
stable net asset value of $1.00 per share, with a competitive rate of return.
The rating of mutual funds are opinions of the investment quality of shares of
the mutual fund which invest in short-term fixed income obligations. The
Standard & Poor's Corporation assigns ratings across a wide spectrum of
comparable funds. In order to maintain the Fund's rating, S&P requires
investment guidelines that may, in certain instances, be more conservative than
otherwise allowed a fund under applicable law.
6 Annual Report
<PAGE>
SSgA TAX FREE MONEY MARKET FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
PORTFOLIO HIGHLIGHTS
For fiscal year 1997, the tax-exempt segment of the market can be summed up in
one word, "stable". Except for predictable periods during the year, (i.e.: tax
payment days and maturity dates) the tax-exempt short-term market traded in a
very narrow range. The inaction by the Federal Reserve on interest rates greatly
assisted market stability. The government did its part by working out a balanced
budget. The state and local governments maintained their austere financing
programs.
During the past two years, because of the fallout from the Orange County,
California debacle, issuers and investors have been keenly aware of potential
risks. Due diligence is paramount, not that this year has gone without problems.
Middlesex County, Massachusetts was the most high profile bankruptcy in the
municipal market.
The Commonwealth of Massachusetts intervened and helped the county out of its
fiscal problems.
In the 1996 national elections the voters seemed to be satisfied with the
economy and the way it was being handled. The proposed overhaul of the tax
system, i.e., the flat tax, got minimal support. Unemployment was at a 30-year
low (4.9%), and the expansion period for the economy has had an unprecedented 7
years.
The yield curve for the past year has remained relatively flat. Because of this,
the Fund remained mostly in short-term variable rate demand notes. This gives
the Fund flexibility to switch with ease to longer-term fixed notes if
conditions warrant. The Fund will continue to invest in only the highest quality
investments.
TOP TEN ISSUERS
(AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31, 1997
Georgia Municipal Electric Authority Revenue 4.3%
Idaho Health Facilities Hospital Authority Revenue 4.3
Houston, Texas, Tax & Revenue Anticipation Notes 3.7
San Diego, California Area Local Government
Tax & Revenue Anticipation Notes 3.7
New York State Environment Facilities
Revenue Series A 3.7
Lorain County, Ohio Hospital Series 1997A 3.7
Memphis, Tennessee Series B 3.4
De Kalb County, Georgia Housing Authority
Multifamily Housing Revenue 3.4
Franklin County, Ohio Hospital Revenue 3.4
University of Illinois, University Revenue Series B 3.1
--------------------
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
An investment in a money market fund is neither insured nor guaranteed by the US
Government. There can be no assurance that a money market fund will be able to
maintain a stable net asset value of $1.00 per share.
Annual Report 7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of the SSgA Funds:
We have audited the accompanying statement of assets and liabilities and
statement of net assets of SSgA Tax Free Money Market Fund (formerly The Seven
Seas Series Tax Free Money Market Fund)(the "Fund"), as of August 31, 1997, and
the related statement of operations for the fiscal year then ended, the
statements of changes in net assets for each of the two fiscal years in the
period then ended, and the financial highlights for each of the two fiscal years
in the period then ended, and for the period December 1, 1994 (commencement of
operations) to August 31, 1995. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
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 free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1997 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We 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 of the
Fund as of August 31, 1997, the results of its operations for the fiscal year
then ended, the changes in its net assets for each of the two fiscal years in
the period then ended, and the financial highlights for each of the two fiscal
years in the period then ended, and for the period December 1, 1994
(commencement of operations) to August 31, 1995 in conformity with generally
accepted accounting principles.
Boston, Massachusetts /s/ COOPERS & LYBRAND L.L.P.
October 7, 1997
8 Annual Report
<PAGE>
SSgA
TAX FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
August 31, 1997
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY* (000)
-------------------------------------------------------
<S> <C> <C> <C> <C>
ARIZONA - 3.3%
Maricopa County, Arizona Pollution Control Revenue
Series C, daily demand . . . . . . . . . . . . . . . . . . . . . . $ 700 3.700%(1) 05/01/29 $ 700
Maricopa County, Arizona Pollution Control Revenue
Series F, daily demand . . . . . . . . . . . . . . . . . . . . . . 300 3.700(1) 05/01/29 300
Salt River Project, Arizona Agriculture Improvement & Power District
Electrical Systems Revenue Series A (pre-refunded 01/01/98)(b) . . 1,250 7.625 01/01/08 1,290
Salt River Project, Arizona Agriculture Improvement & Power District
Electrical Systems Revenue Series A (pre-refunded 01/01/98)(b) . . 3,000 7.875 01/01/28 3,099
----------
5,389
----------
ARKANSAS - 1.2%
Arkansas, State of, Development Financial Authority
Health Care Facilities Revenue Series B, weekly demand . . . . . . 2,000 3.300(2) 06/01/12 2,000
----------
2,000
----------
CALIFORNIA - 6.1%
San Bernardino County, California Tax & Revenue
Anticipation Notes Series A. . . . . . . . . . . . . . . . . . . . 4,000 4.500 06/30/98 4,021
San Diego, California Area Local Goverment Tax & Revenue
Anticipation Notes . . . . . . . . . . . . . . . . . . . . . . . . 6,000 4.750 10/01/97 6,006
----------
10,027
----------
COLORADO - 2.5%
Colorado, State of, State General Fund Tax & Revenue
Anticipation Notes Series A. . . . . . . . . . . . . . . . . . . . 4,000 4.500 06/26/98 4,021
----------
4,021
----------
FLORIDA - 4.7%
Dade County, Florida Industrial Development Authority Revenue
Series A, weekly demand. . . . . . . . . . . . . . . . . . . . . . 500 3.350(2) 01/01/16 500
Dade County, Florida Industrial Development Authority Revenue
Series B, weekly demand. . . . . . . . . . . . . . . . . . . . . . 900 3.350(2) 01/01/16 900
Dade County, Florida Industrial Development Authority Revenue
Series C, weekly demand. . . . . . . . . . . . . . . . . . . . . . 500 3.350(2) 01/01/16 500
</TABLE>
Annual Report 9
<PAGE>
SSgA
TAX FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY* (000)
-------------------------------------------------------
<S> <C> <C> <C> <C>
Dade County, Florida Industrial Development Authority Revenue
Series D, weekly demand. . . . . . . . . . . . . . . . . . . . . . $ 1,900 3.350%(2) 01/01/16 $ 1,900
Manatee County, Florida Pollution Control Revenue, daily demand. . . 1,000 3.700(1) 09/01/24 1,000
Martin County, Florida Pollution Control Revenue, daily demand . . . 2,900 3.700(1) 09/01/24 2,900
----------
7,700
----------
GEORGIA - 10.1%
Albany-Dougherty County, Georgia Hospital Authority Revenue,
weekly demand (a). . . . . . . . . . . . . . . . . . . . . . . . . 4,000 3.400(2) 09/01/26 4,000
De Kalb County, Georgia Housing Authority Multifamily
Housing Revenue, weekly demand . . . . . . . . . . . . . . . . . . 5,500 3.350(2) 06/15/25 5,500
Georgia Municipal Electric Authority Revenue, weekly demand. . . . . 7,000 3.350(2) 01/01/22 7,000
----------
16,500
----------
IDAHO - 4.3%
Idaho Health Facilities Hospital Authority Revenue, weekly demand. . 7,000 3.350(2) 12/01/23 7,000
----------
7,000
----------
ILLINOIS - 3.1%
University of Illinois, Health Services Facilities Revenue
Series B, weekly demand. . . . . . . . . . . . . . . . . . . . . . 5,000 3.300(2) 10/01/26 5,000
----------
5,000
----------
KANSAS - 0.6%
Wyandotte County, Kansas Capital Improvement Corporate
Certificate Participation (pre-refunded 09/01/97)(a)(b). . . . . . 1,000 7.875 09/01/07 1,020
----------
1,020
----------
KENTUCKY - 0.3%
Daviess County, Kentucky Solid Waste Disposal Facilities Revenue
Series B, daily demand . . . . . . . . . . . . . . . . . . . . . . 500 3.750(1) 12/01/23 500
----------
500
----------
</TABLE>
10 Annual Report
<PAGE>
SSgA
TAX FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY* (000)
-------------------------------------------------------
<S> <C> <C> <C> <C>
LOUISIANA - 3.9%
Ascension Parish, Louisiana Pollution Control Revenue, daily demand. $ 300 3.700%(1) 09/01/23 $ 300
Ascension Parish, Louisiana Pollution Control Revenue, weekly demand 700 3.300(2) 12/01/09 700
East Baton Rouge Parish, Lousiana Pollution Control Revenue,
daily demand . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,300 3.700(1) 03/01/22 4,300
West Feliciana Parish, Louisiana Pollution Control Revenue,
daily demand . . . . . . . . . . . . . . . . . . . . . . . . . . . 600 3.800(1) 04/01/16 600
West Feliciana Parish, Louisiana Pollution Control Revenue
Series D, daily demand . . . . . . . . . . . . . . . . . . . . . . 500 3.800(1) 12/01/15 500
----------
6,400
----------
MASSACHUSETTS - 0.6%
Massachusetts, State of, Health & Educational Facilities
Authority Revenue Series G-1, weekly demand (a). . . . . . . . . . 1,000 3.100(2) 01/01/19 1,000
----------
1,000
----------
MICHIGAN - 2.5%
Michigan Municipal Board Authority Revenue Notes Series B. . . . . . 4,000 4.500 07/02/98 4,022
----------
4,022
----------
MISSOURI - 5.2%
Missouri, State of, Health & Educational Facilities
Authority Revenue Series A, weekly demand. . . . . . . . . . . . . 2,000 3.350(2) 09/01/10 2,000
Missouri, State of, Health & Educational Facilities
Authority Revenue Series A, weekly demand. . . . . . . . . . . . . 3,200 3.300(2) 06/01/19 3,200
Missouri, State of, Health & Educational Facilities
Authority Revenue Series B, weekly demand. . . . . . . . . . . . . 1,000 3.300(2) 06/01/14 1,000
Missouri, State of, Health & Educational Facilities
Authority Revenue Series C, weekly demand. . . . . . . . . . . . . 1,000 3.300(2) 06/01/19 1,000
Missouri, State of, Health & Educational Facilities
Authority Revenue Series C, weekly demand. . . . . . . . . . . . . 300 3.300(2) 12/01/19 300
Missouri, State of, Health & Educational Facilities
Authority Revenue Series D, weekly demand. . . . . . . . . . . . . 1,000 3.300(2) 12/01/19 1,000
----------
8,500
----------
</TABLE>
Annual Report 11
<PAGE>
SSgA
TAX FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY* (000)
-------------------------------------------------------
<S> <C> <C> <C> <C>
NEW MEXICO - 1.0%
Farmington, New Mexico, Municipal School District No. 5
General Obligation (a) . . . . . . . . . . . . . . . . . . . . . . $ 1,625 6.250% 09/01/97 $ 1,625
----------
1,625
----------
NEW YORK - 7.3%
New York, New York General Obligation Series A
(pre-refunded 11/01/97)(b) . . . . . . . . . . . . . . . . . . . . 1,000 8.500 11/01/08 1,023
New York, New York General Obligation Series A-4,
daily demand . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,700 3.700(1) 08/01/23 2,700
New York, New York General Obligation Series B-2,
daily demand (a) . . . . . . . . . . . . . . . . . . . . . . . . . 600 3.700(1) 08/15/03 600
New York, New York General Obligation Series B-8,
weekly demand. . . . . . . . . . . . . . . . . . . . . . . . . . . 500 3.300(2) 08/15/24 500
New York State Environmental Quality General Obligation
Series 1997A . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000 3.600 10/10/97 6,000
New York State Power Authority Revenue Series V
(pre-refunded 01/01/98)(a)(b). . . . . . . . . . . . . . . . . . . 1,000 7.875 01/01/13 1,033
----------
11,856
----------
NORTH CAROLINA - 0.5%
Charlotte, North Carolina Airport Revenue Series A, weekly
demand (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800 3.250(2) 07/01/16 800
----------
800
----------
OHIO - 7.6%
Clermont County, Ohio Hospital Facilities Revenue Series B,
weekly demand. . . . . . . . . . . . . . . . . . . . . . . . . . . 980 3.300(2) 09/01/21 980
Franklin County, Ohio Hospital Revenue, weekly demand. . . . . . . . 5,500 3.350(2) 06/01/16 5,500
Lorain County, Ohio Hospital Facilities Revenue Series 1997A . . . . 6,000 3.550 09/05/97 6,000
----------
12,480
----------
OKLAHOMA - 3.1%
Muskogee, Oklahoma Industrial Trust Pollution Control Revenue
Series A, weekly demand. . . . . . . . . . . . . . . . . . . . . . 5,000 3.350(2) 01/01/25 5,000
----------
5,000
----------
</TABLE>
12 Annual Report
<PAGE>
SSgA
TAX FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY* (000)
-------------------------------------------------------
<S> <C> <C> <C> <C>
PENNSYLVANIA - 4.3%
Pennsylvania, State of, General Obligation Series A
(pre-refunded 05/15/98)(b) . . . . . . . . . . . . . . . . . . . . $ 1,000 7.300% 05/15/03 $ 1,039
Pennsylvania, State of, Higher Educational Facilities Authority
Revenue Series C, daily demand . . . . . . . . . . . . . . . . . . 400 3.700(1) 11/01/29 400
Pennsylvania, State of, Higher Educational Facilities Authority
Revenue Series D, daily demand . . . . . . . . . . . . . . . . . . 1,000 3.700(1) 11/01/30 1,000
Philadelphia, Pennsylvania Tax & Revenue Anticipation Notes
Series A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000 4.500 06/30/98 4,016
Philadelphia, Pennsylvania Water & Sewer Revenue (a) . . . . . . . . 500 6.800 10/01/97 501
----------
6,956
----------
RHODE ISLAND - 0.6%
Rhode Island, State of, General Obligation Series A
(pre-refunded 12/15/97)(b) . . . . . . . . . . . . . . . . . . . . 1,000 7.100 12/15/01 1,029
----------
1,029
----------
SOUTH CAROLINA - 2.8%
Piedmont, South Carolina Municipal Power Agency Revenue
Series D, weekly demand (a). . . . . . . . . . . . . . . . . . . . 4,600 3.300(2) 01/01/25 4,600
----------
4,600
----------
TENNESSEE - 5.2%
Knox County, Tennessee Health Education & Housing
Facilities Board Revenue Series B, weekly demand . . . . . . . . . 2,900 3.300(2) 09/01/14 2,900
Memphis, Tennessee General Obligation Series B, weekly demand. . . . 5,600 3.450(2) 08/01/02 5,600
----------
8,500
----------
TEXAS - 15.5%
Brazos River Authority, Texas Pollution Control Revenue Series B,
daily demand (a) . . . . . . . . . . . . . . . . . . . . . . . . . 1,400 3.750(1) 02/01/32 1,400
Harris County, Texas Health Facilities Development Corp.
Hospital Revenue Series A (pre-refunded 09/15/97)(b) . . . . . . . 800 3.700 02/15/21 800
</TABLE>
Annual Report 13
<PAGE>
SSgA
TAX FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY* (000)
-------------------------------------------------------
<S> <C> <C> <C> <C>
Harris County, Texas Industrial Development Corp. Pollution
Control Revenue, daily demand. . . . . . . . . . . . . . . . . . . $ 700 3.700%(1) 03/01/24 $ 700
Harris County, Texas Industrial Development Corp. Pollution
Control Revenue, daily demand. . . . . . . . . . . . . . . . . . . 800 3.700(1) 03/01/24 800
Harris County, Texas Industrial Development Corp. Pollution
Control Revenue, daily demand. . . . . . . . . . . . . . . . . . . 400 3.650(1) 04/01/27 400
Houston, Texas Water Conveyance Systems Contract
Certificates Participation Series I (a). . . . . . . . . . . . . . 1,000 7.250 12/15/97 1,010
Houston, Texas Tax & Revenue Anticipation Notes. . . . . . . . . . . 6,000 4.500 06/30/98 6,031
Houston, Texas Water Systems Revenue (pre-refunded 12/01/97)(b). . . 2,500 7.400 12/01/17 2,573
Lower Neches Valley, Texas Authority Revenue, semiannual demand. . . 1,000 3.650(3) 02/15/17 1,000
Matagorda County, Texas Navigation District No. 1 Revenue,
daily demand (a) . . . . . . . . . . . . . . . . . . . . . . . . . 200 3.750(1) 10/01/28 200
Matagorda County, Texas Navigation District No. 1 Revenue,
daily demand (a) . . . . . . . . . . . . . . . . . . . . . . . . . 4,000 3.750(1) 11/01/28 4,000
Panhandle Plains, Texas Higher Education Authority Revenue
Series A, weekly demand. . . . . . . . . . . . . . . . . . . . . . 1,500 3.350(2) 06/01/21 1,500
San Antonio, Texas Electric & Gas Systems Commercial Paper
Series A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000 3.550 09/11/97 5,000
----------
25,414
----------
VIRGINIA - 0.5%
Alexandria, Virginia Industrial Development Authority Revenue,
daily demand . . . . . . . . . . . . . . . . . . . . . . . . . . . 900 3.800(1) 12/01/16 900
----------
900
----------
WASHINGTON - 0.6%
King County, Washington General Obligation Series A. . . . . . . . . 1,000 9.000 12/01/97 1,013
----------
1,013
----------
WEST VIRGINIA - 0.6%
Marshall County, West Virginia Pollution Control Revenue,
daily demand . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000 3.700(1) 12/01/20 1,000
----------
1,000
----------
</TABLE>
14 Annual Report
<PAGE>
SSgA
TAX FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY* (000)
-------------------------------------------------------
<S> <C> <C> <C> <C>
WYOMING - 1.5%
Converse County, Wyoming Pollution Control Revenue,
daily demand (a) . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,600 3.700%(1) 11/01/24 $ 1,600
Lincoln County, Wyoming Pollution Control Revenue Series B,
daily demand . . . . . . . . . . . . . . . . . . . . . . . . . . . 900 3.800(1) 07/01/17 900
----------
2,500
----------
TOTAL INVESTMENTS (amortized cost $162,752)(c) - 99.5% . . . . . . . 162,752
OTHER ASSETS AND LIABILITIES, NET - 0.5% . . . . . . . . . . . . . . 750
NET ASSETS - 100.0%. . . . . . . . . . . . . . . . . . . . . . . . . $ 163,502
----------
----------
</TABLE>
(a) Bond is insured by AMBAC, FGIC, or MBIA.
(b) Pre-refunded: These bonds are collateralized by U.S. Treasury securities,
which are held in escrow by a trustee and used to pay principal and
interest in the tax-exempt issue and to retire the bonds in full at the
earliest refunding date. The rate noted is for descriptive purposes;
effective yield may vary.
(c) The identified cost for federal income tax purposes is the same as shown
above.
* All securities with a maturity greater than 13 months have a demand
feature, or an optional or mandatory put, resulting in an effective
maturity of 13 months or less. Additionally, all daily and weekly demand
securities are backed by direct payment letters of credit.
Variable Rate:
(1) Daily
(2) Weekly
(3) Semiannual
The accompanying notes are an integral part of the financial statements.
Annual Report 15
<PAGE>
SSgA
TAX FREE MONEY MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
QUALITY RATINGS AS A % OF MARKET VALUE (Unaudited)
VMIG1, SP-1 or equivalent ++ 100%
ECONOMIC SECTOR EMPHASIS AS A % OF MARKET VALUE (Unaudited)
Healthcare Revenue 25%
General Obligation 21
Pollution Control Revenue 13
Electricity & Power Revenue 9
Pre-refunded 7
Education Revenue 6
Utility Revenue 6
Airport Revenue 4
Industrial Revenue 3
Housing Revenue 3
Commercial Paper 2
Stadium Revenue 1
--------
100%
--------
--------
++ VMIG1: The highest short-term municipal note credit rating given by
Moody's Investors Services to notes with a demand feature which
are of the "best quality."
SP-1: The highest short-term municipal note credit rating given by
Standard & Poor's Corporation to notes with a "very strong or
strong capacity to pay principal & interest."
The accompanying notes are an integral part of the financial statements.
16 Annual Report
<PAGE>
SSgA
TAX FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1997
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at amortized cost which approximates market (Note 2) . . . . . . . . . . . . . . . . . . . . $ 162,752
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227
Receivables:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 863
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
--------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164,085
LIABILITIES
Payables (Note 4):
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 411
Accrued fees to affiliates and trustees. . . . . . . . . . . . . . . . . . . . . . 132
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
--------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 583
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 163,502
--------------
--------------
NET ASSETS CONSIST OF:
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (36)
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163,374
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 163,502
--------------
--------------
NET ASSET VALUE, offering and redemption price per share:
($163,502,383 divided by 163,543,215 shares of $.001
par value shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.00
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 17
<PAGE>
SSgA
TAX FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OPERATIONS
For the Fiscal Year Ended August 31, 1997
Amounts in
thousands
<S> <C> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,236
EXPENSES (Notes 2 and 4):
Advisory fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 298
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Amortization of deferred organization expenses . . . . . . . . . . . . . . . . . . 10
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
--------------
Total Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 688
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,548
--------------
REALIZED GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (19)
--------------
Net increase in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,529
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18 Annual Report
<PAGE>
SSgA
TAX FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Fiscal Years Ended August 31,
Amounts in thousands
1997 1996
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,548 $ 1,483
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . (19) (13)
-------------- --------------
Net increase in net assets resulting from operations. . . . . . . . . . . . . . 3,529 1,470
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,548) (1,488)
-------------- --------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions . . . . . . . . 118,460 2,472
-------------- --------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . 118,441 2,454
NET ASSETS
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,061 42,607
-------------- --------------
End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 163,502 $ 45,061
-------------- --------------
-------------- --------------
FUND SHARE TRANSACTIONS
(ON A CONSTANT DOLLAR BASIS):
Proceeds from shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 607,205 231,934
Proceeds from reinvestment of distributions. . . . . . . . . . . . . . . . . . . . . 1,735 574
Payments for shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . (490,480) (230,036)
-------------- --------------
Total net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,460 2,472
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 19
<PAGE>
SSgA
TAX FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each fiscal
year or period and other performance information derived from the financial statements.
1997 1996 1995*
---------- ---------- ----------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . . . . . . . . . . . . . . $ 1.0000 $ 1.0000 $ 1.0000
---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . .0295 .0302 .0251
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . (.0295) (.0302) (.0251)
---------- ---------- ----------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.0000 $ 1.0000 $ 1.0000
---------- ---------- ----------
---------- ---------- ----------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.99 3.07 2.54
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of year ($000 omitted) . . . . . . . . . . . . . . . . . . 163,502 45,061 42,607
Ratios to average net assets (%)(b):
Operating expenses, net . . . . . . . . . . . . . . . . . . . . . . . . . . .58 .57 .59
Operating expenses, gross . . . . . . . . . . . . . . . . . . . . . . . . . .58 .57 .60
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.98 3.01 3.40
Per share amount of expense reductions ($ omitted). . . . . . . . . . . . . -- -- .0001
</TABLE>
* For the period December 1, 1994 (commencement of operations) to
August 31, 1995.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended August 31, 1995 are annualized.
20 Annual Report
<PAGE>
SSgA
TAX FREE MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1997
1. ORGANIZATION
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 17 investment portfolios which are in operation as
of August 31, 1997. In December 1996, the Investment Company changed its
name from "The Seven Seas Series Fund" to the "SSgA Funds." These financial
statements report on one portfolio, the SSgA Tax Free Money Market Fund
(the "Fund"). The Investment Company is a registered and diversified
open-end investment company, as defined in the Investment Company Act of
1940, as amended (the "1940 Act"), that was organized as a Massachusetts
business trust on October 3, 1987 and operates under a First Amended and
Restated Master Trust Agreement, dated October 13, 1993, as amended (the
"Agreement"). The Investment Company's Agreement permits the Board of
Trustees to issue an unlimited number of full and fractional Class A shares
of beneficial interest at a $.001 par value. The Investment Company has
available Class B and Class C shares of the Fund as of September 22, 1994;
however, shares have not been offered on these classes as of the date of
these financial statements.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
SECURITY VALUATION: The Fund's portfolio investments are valued on the
basis of amortized cost, a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed. The Fund utilizes the
amortized cost valuation method in accordance with Rule 2a-7 of the 1940
Act.
SECURITIES TRANSACTIONS: Securities transactions are recorded daily on the
trade date, which in most instances is the same as the settlement date.
Realized gains and losses from the securities transactions, if any, are
recorded on the basis of identified cost.
INVESTMENT INCOME: Interest income is recorded daily on the accrual basis.
FEDERAL INCOME TAXES: Since the Investment Company is a Massachusetts
business trust, each sub-trust is a separate corporate taxpayer and
determines its net investment income and capital gains (or losses) and the
amounts to be distributed to each fund's shareholders without regard to the
income and capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company, as
defined by the Internal Revenue Code of 1986, as amended. This requires the
Fund to distribute all of its taxable income. Therefore, the Fund paid no
federal income tax and no federal income tax provision was required. At
August 31, 1997, the Fund had a net tax basis capital loss carryovers of
$5,580 and $10,856, which may be applied against any realized net taxable
gains in each succeeding year or until its expiration dates of
21 Annual Report
<PAGE>
SSgA
TAX FREE MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
August 31, 2004 and August 31, 2005, respectively, whichever occurs first.
As permitted by tax regulations, the Fund intends to defer a net realized
capital loss of $19,504, incurred from November 1, 1996 to August 31, 1997
and treat it as arising in fiscal year 1998.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Fund declares and records
dividends on net investment income daily and pays them monthly. Capital
gain distributions, if any, are generally declared and paid annually. An
additional distribution may be paid by the Fund to avoid imposition of
federal income tax on any remaining undistributed net investment income and
capital gains. The Fund may periodically make reclassifications among
certain of its capital accounts without impacting net asset value for
differences between federal tax regulations and generally accepted
accounting principles.
EXPENSES: Most expenses can be directly attributed to the Fund. Expenses
which cannot be directly attributed are allocated among all funds based
principally on their relative net assets.
DEFERRED ORGANIZATION EXPENSES: The Fund has incurred expenses in
connection with its organization and initial registration. These costs have
been deferred and are being amortized over 60 months on a straight-line
basis.
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the year ended August 31, 1997, purchases,
sales and maturities of tax-exempt obligations were $871,785,252,
$581,876,363, and $170,530,000, respectively.
4. RELATED PARTIES
ADVISER: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company (the "Adviser") under which the Adviser
directs the investments of the Fund in accordance with its investment
objectives, policies, and limitations. For these services, the Fund pays a
fee to the Adviser, calculated daily and paid monthly, at the annual rate
of .25% of its average daily net assets. The Investment Company also has
contracts with the Adviser to provide custody, shareholder servicing and
transfer agent services to the Fund. These amounts are presented in the
accompanying Statement of Operations.
ADMINISTRATOR: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator") under
which the Administrator supervises all non-portfolio investment aspects of
the Investment Company's operations and provides adequate office space and
all necessary office equipment and services, including telephone service,
utilities, stationery supplies, and similar items. The Investment Company
pays the Administrator the following fees for services supplied by the
Administrator pursuant to the Administration Agreement: (i) an annual fee,
payable monthly on a pro rata basis, based on the following percentages of
the average daily net assets of all domestic funds: $0 up to and including
$500 million - .06%; over $500 million to and including $1 billion - .05%;
over $1 billion - .03%; (ii) less an amount equal to the sum of certain
distribution-related expenses incurred by the Investment
Annual Report 22
<PAGE>
SSgA
TAX FREE MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
Company's Distributor on behalf of the Fund (up to a maximum of 10% of the
asset-based fee determined in (i)); (iii) out-of-pocket expenses; and (iv)
start-up costs for new funds.
DISTRIBUTOR AND SHAREHOLDER SERVICING: The Investment Company has entered
into a Distribution Agreement with Russell Fund Distributors (the
"Distributor") which is a wholly-owned subsidiary of the Administrator to
promote and offer shares of the Investment Company. The Distributor may
have entered into sub-distribution agreements with other non-related
parties. The amounts paid to the Distributor are included in the
accompanying Statement of Operations.
The Investment Company has also adopted a Distribution Plan pursuant to
Rule 12b-1 (the "Plan") under the 1940 Act. Under this Plan, the Investment
Company is authorized to make payments to the Distributor, or any
Shareholder Servicing Agent, as defined in the Plan, for providing
distribution and marketing services, for furnishing assistance to investors
on an ongoing basis, and for the reimbursement of direct out-of-pocket
expenses incurred by the Distributor in connection with the distribution
and marketing of shares of the Investment Company and the servicing of
investor accounts.
The Fund has entered into service agreements with the Adviser, State Street
Brokerage Services, Inc. ("SSBSI"), a wholly-owned subsidiary of the
Adviser, the Adviser's Retirement Investment Services Division ("RIS"), and
the Adviser's Metropolitan Division of Commercial Banking ("Commercial
Banking")(collectively the "Agents"), as well as other non-related party
service providers. For these services, the Fund pays .025%, .175%, .175%,
and .050% to the Adviser, SSBSI, RIS, and Commercial Banking, respectively,
based upon the average daily value of all Fund shares held by or for
customers of these Agents. For the year ended August 31, 1997, the Fund
incurred expenses of $30,204 and $15,499, or a total of $45,703, from the
Adviser and Commercial Banking, respectively. The Fund did not incur any
expenses from SSBSI or RIS during this period.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The Trustees or a majority of the
Fund's shareholders have the right, however, to terminate the Distribution
Plan and all payments thereunder at any time. The Fund will not be
obligated to reimburse the Distributor for carryover expenses subsequent to
the Distribution Plan's termination or noncontinuance. There were no
carryover expenses as of August 31, 1997.
Annual Report 23
<PAGE>
SSgA
TAX FREE MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
BOARD OF TRUSTEES: The Investment Company pays each Trustee not affiliated
with the Investment Company a retainer of $44,000 annually, $1,000 for each
board meeting attended, an additional $1,000 for attending the annual audit
committee meeting, and reimbursement for out-of-pocket expenses. These
expenses are allocated among all of the Funds based upon their relative net
assets.
ACCRUED FEES PAYABLE TO AFFILIATES AND TRUSTEES AS OF AUGUST 31, 1997 WERE
AS FOLLOWS:
Advisory fees $ 72,213
Administration fees 4,206
Custodian fees 5,640
Distribution fees 44,103
Shareholder servicing fees 5,244
Transfer agent fees 635
-----------
$ 132,041
-----------
-----------
BENEFICIAL INTEREST: As of August 31, 1997, three shareholders (two were
also affiliates of the Investment Company) were record owners of
approximately 57%, 19% and 14%, respectively, of the total outstanding
shares of the Fund.
24 Annual Report
<PAGE>
SSgA
TAX FREE MONEY MARKET FUND
TAX INFORMATION
August 31, 1997 (Unaudited)
Of the dividends paid by the Tax Free Money Market Fund from net investment
income for the taxable year ended August 31, 1997, 100% were exempt interest
dividends which are tax exempt for purposes of regular federal income tax, and
for purposes of the federal alternative minimum tax.
Please consult a tax advisor for any questions about federal or state income tax
laws.
Annual Report 25
<PAGE>
SSgA TAX FREE MONEY MARKET FUND
Two International Place, 35th Floor
Boston, Massachusetts 02110
(800) 997-7327
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
George W. Weber, Senior Vice President and Treasurer
J. David Griswold, Vice President and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND OFFICE OF SHAREHOLDER INQUIRIES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 647-7327
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(800) 997-7327
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
26 Annual Report
<PAGE>
SSgA-SM- LIFE SOLUTIONS-SM- FUNDS
INCOME AND GROWTH FUND
BALANCED FUND
GROWTH FUND
Annual Report
August 31, 1997
Table of Contents
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion. . . . . . . . . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . . 10
INCOME AND GROWTH Fund Financial Statements. . . . . . . . . . . . . . . . 12
Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . 16
BALANCED FUND Financial Statements . . . . . . . . . . . . . . . . . . . . 18
Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . 22
GROWTH FUND Financial Statements . . . . . . . . . . . . . . . . . . . . . 24
Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . 28
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . 29
Fund Management and Service Providers. . . . . . . . . . . . . . . . . . . 34
"SSgA-SM- LIFE SOLUTIONS-SM-" IS A SERVICE MARK OF STATE STREET CORPORATION
AND IS LICENSED FOR USE BY THE SSgA FUNDS.
THIS REPORT IS PREPARED FROM THE BOOKS AND RECORDS OF THE FUND AND IT IS
SUBMITTED FOR THE GENERAL INFORMATION OF SHAREHOLDERS. THIS INFORMATION IS FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR ACCOMPANIED BY A
SSgA FUNDS PROSPECTUS CONTAINING MORE COMPLETE INFORMATION CONCERNING THE
INVESTMENT OBJECTIVE AND OPERATIONS OF THE FUND, CHARGES AND EXPENSES. THE
PROSPECTUS SHOULD BE READ CAREFULLY BEFORE AN INVESTMENT IS MADE.
PERFORMANCE IS HISTORICAL AND ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL
GAINS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN WHEN PURCHASED.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. INTERNATIONAL MARKETS
ENTAIL DIFFERENT RISKS THAN THOSE TYPICALLY ASSOCIATED WITH DOMESTIC MARKETS,
INCLUDING CURRENCY FLUCTUATIONS, POLITICAL AND ECONOMIC INSTABILITY, ACCOUNTING
CHANGES AND FOREIGN TAXATION. SECURITIES MAY BE LESS LIQUID AND MORE VOLATILE.
PLEASE SEE THE PROSPECTUS FOR FURTHER DETAILS. RUSSELL FUND DISTRIBUTORS, INC.,
IS THE DISTRIBUTOR OF THE SSgA FUNDS.
<PAGE>
SSgA LIFE SOLUTIONS FUNDS
LETTER FROM THE CHAIRMAN OF STATE STREET GLOBAL ADVISORS
DEAR SHAREHOLDERS,
I am pleased to provide you with the SSgA Funds annual report for the fiscal
year ended August 31, 1997. Over the past year, the Funds have grown to include
seventeen portfolios covering a broad range of investment strategies from the
far corners of the emerging markets countries to the domestic stock and bond
markets. This report contains summaries on the market environment, performance
and financial statements for the three new Life Solutions Funds; Income and
Growth Fund, Balanced Fund and Growth Fund. I hope you find this information a
useful tool as you review your overall investment strategy.
The SSgA Funds opened these three asset allocation funds on July 1, 1997. Each
Life Solutions Fund seeks to achieve its investment objective by diversifying
its assets in shares of certain Funds of the Investment Company, referred to as
Underlying Funds.
The Life Solutions Income and Growth Fund seeks income and, secondarily,
long-term growth of capital.
The Life Solutions Balanced Fund seeks a balance of growth of capital and
income.
The Life Solutions Growth Fund seeks long-term growth of capital.
During the past fiscal year, the SSgA Funds were proud to announce that the SSgA
Matrix Fund and the SSgA Small Cap Fund achieved five year track records. We are
proud of our long-term record and look forward to having additional funds
complete their five year anniversary.
SSGA is strategically growing by continuing to build an organization that
delivers comprehensive services striving to meet your investment requirements.
In an effort to compete in this ever-changing complex world, we focus on our
expertise, our knowledge and our commitment to better serve your investment
needs.
As Chairman and Chief Executive Officer of State Street Global Advisors, which
serves as the investment adviser to the SSgA Funds, I would like to thank you
for choosing the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
SSgA LIFE SOLUTIONS FUNDS
MANAGEMENT OF THE FUNDS
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A TEAM APPROACH TO INVESTMENT MANAGEMENT
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio managers work together to develop and enhance the
techniques that drive our investment processes. The result is that the
portfolios we manage benefit from the knowledge of the entire team.
Mr. Gus Fleites, Principal, has been the portfolio manager primarily responsible
for investment decisions regarding the SSgA Life Solutions Funds since their
inception in July 1997. Mr. Fleites joined State Street in 1987 and is presently
head of the Boston Asset Allocation group with responsibilities for portfolio
management, research and product development. He is a graduate of the Wharton
School of the University of Pennsylvania with a concentration in finance and
multinational management and received his MBA in Finance from Babson College.
There are two other portfolio managers working with Mr. Fleites.
Annual Report 5
<PAGE>
SSgA LIFE SOLUTIONS FUNDS
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
STRATEGY: Each Life Solutions Fund allocates its assets by investing in shares
of a combination of the Underlying Funds. By investing in the Underlying Funds,
the Life Solutions Funds seek to maintain different allocations between classes
of equity, international equity, fixed income and short-term assets funds
(including money market funds) depending on the Life Solutions Fund's investment
objective and risk profile. Allocating investments this way permits each Life
Solutions Fund to attempt to optimize performance consistent with its investment
objective.
OBJECTIVE: LIFE SOLUTIONS INCOME and GROWTH FUND seeks income and, secondarily,
long-term growth of capital.
[GRAPH]
DATES LIFE SOLUTIONS INCOME & GROWTH FUND COMPOSITE MARKET INDEX **
Inception* $10,000 $10,000
1997 $10,165 $10,204
SSGA
LIFE SOLUTIONS INCOME & GROWTH FUND
Period Ended Growth of Total
08/31/97 $10,000 Return
- ------------ --------- ------
Inception $10,165 1.65%+
COMPOSITE MARKET INDEX **
Period Ended Growth of Total
08/31/97 $10,000 Return
- ------------ --------- ------
Inception $10,204 2.04%+
** 35% RUSSELL 3000 INDEX
5% MSCI EAFE INDEX
60% LEHMAN BROTHERS AGGREGATE BOND INDEX
SEE RELATED NOTES FOR INDEX DEFINITIONS.
PERFORMANCE REVIEW
The SSgA Series Life Solutions Funds, launched on July 1, 1997, is a family of
balanced funds targeted to meet the investment objectives of investors with
varying degrees of risk tolerance. The family consists of, in ascending order of
aggressiveness, the Income and Growth Fund, the Balanced Growth Fund, and the
Growth Fund. The Funds have as an objective to outperform a composite benchmark,
reflecting the performance of broadly based indices of US and international
equities and US fixed income securities.
For the fiscal year ended August 31, 1997, the Life Solutions Funds had the
following closing NAVs: Income and Growth Fund $12.93, Balanced Growth Fund
$13.98, and Growth Fund $14.79. Since inception on July 1, 1997 through August
31, 1997 the three Funds returned 1.65%, 1.82%, and 2.07%, respectively.
The composite benchmarks over the same period for the three Funds returned
2.04%, 1.89%, and 1.73%, respectively.
6 Annual Report
<PAGE>
SSgA LIFE SOLUTIONS FUNDS
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
OBJECTIVE: LIFE SOLUTIONS BALANCED FUND seeks a balance of growth of capital
and income.
[GRAPH]
DATES LIFE SOLUTIONS BALANCED FUND COMPOSITE MARKET INDEX **
Inception* $10,000 $10,000
1997 $10,182 $10,189
SSGA
LIFE SOLUTIONS BALANCED FUND
Period Ended Growth of Total
08/31/97 $10,000 Return
- ------------ --------- ------
Inception $10,182 1.82%+
COMPOSITE MARKET INDEX **
Period Ended Growth of Total
08/31/97 $10,000 Return
- ------------ --------- ------
Inception $10,189 1.89%+
** 50% RUSSELL 3000 INDEX
10% MSCI EAFE INDEX
40% LEHMAN BROTHERS AGGREGATE BOND INDEX
SEE RELATED NOTES FOR INDEX DEFINITIONS.
PERFORMANCE REVIEW, CONTINUED
The US equity component of the benchmark is the Russell 3000 Index; an unmanaged
index of US equities representing approximately 98% of traded equity securities
in the US. The international component is made up of the Morgan Stanley/Capital
International Europe, Australia, Far East ("MSCI EAFE") Index, an unmanaged
index reflecting the performance of international markets around the globe. The
fixed income component of the benchmark is the Lehman Brothers Aggregate Bond
Index, an unmanaged index capturing the performance of the broad US bond
markets, including government, investment grade corporate, and mortgage
securities.
Since inception of the Funds, equity and fixed income markets have experienced
significant volatility. In July, US stocks and bonds experienced strong gains
with renewed confidence that strong, sustainable economic growth would continue
to fuel corporate earnings growth without exerting pressure on inflation and
interest rates. US stocks and bonds, as proxied by the Russell 3000 and Lehman
Brothers Aggregate Bond Market indices, appreciated by 7.84% and
Annual Report 7
<PAGE>
SSgA LIFE SOLUTIONS FUNDS
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
OBJECTIVE: LIFE SOLUTIONS GROWTH FUND seeks long-term growth of capital.
[GRAPH]
DATES LIFE SOLUTIONS GROWTH FUND COMPOSITE MARKET INDEX **
Inception* $10,000 $10,000
1997 $10,207 $10,173
SSGA
LIFE SOLUTIONS GROWTH FUND
Period Ended Growth of Total
08/31/97 $10,000 Return
- ------------ --------- ------
Inception $10,207 2.07%+
COMPOSITE MARKET INDEX **
Period Ended Growth of Total
08/31/97 $10,000 Return
- ------------ --------- ------
Inception $10,173 1.73%+
** 65% RUSSELL 3000 INDEX
15% MSCI EAFE INDEX
20% LEHMAN BROTHERS AGGREGATE BOND INDEX
SEE RELATED NOTES FOR INDEX DEFINITIONS.
PERFORMANCE REVIEW, CONTINUED
2.70% respectively. International markets posted positive performance, but
lagged their US counterparts with the MSCI EAFE Index returning 1.62%.
In August, US inflationary fears were revived with long term interest rates
rising to a high of 6.67% from 6.30% at the end of July. Both bond and equity
markets reacted strongly with bonds depreciating 0.85% and US stocks falling
4.06%. International markets followed the US lead but losses were compounded
with the strong selloff of Southeast Asian equities as exchange rates in the
region came under significant pressure. The MSCI EAFE Index fell 7.47% for the
month.
For the two months, US equities appreciated by 3.46%, international equities
were off 5.97%, and US bonds returned 1.83%.
While the three Life Solutions Funds were close to neutral equity weights over
the last two months relative to their composite benchmarks, relative performance
suffered as a result of a strong preference for international equities relative
8 Annual Report
<PAGE>
SSgA LIFE SOLUTIONS FUNDS
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
PERFORMANCE REVIEW, CONTINUED
to US stocks. Within US equities, the Funds benefited from strong stock
selection in the Underlying Funds. Relative to their composite benchmarks, the
Funds were underweigh to bonds preferring allocations to cash to protect against
the impact of renewed inflationary fears on interest rates and to provide
liquidity to the Funds as necessary.
PORTFOLIO HIGHLIGHTS
Looking forward, allocations to domestic equities have been reduced from levels
in July and August, primarily to reflect increasing concerns over rich market
valuations in the US in a period of declining earnings growth expectations and
greater volatility in interest rates. The Funds continue to have significant
allocations to international equities as market valuations, continued strength
in earnings prospects, and an attractive interest rate environment all point to
strong prospects going forward. As a result of the increasing yield spread
between longer term bonds and cash, cash allocations have been reduced somewhat
in favor of intermediate and longer-term Underlying Bond Funds.
PORTFOLIO ALLOCATION BY ASSET CLASS
AS OF 08/31/97
INCOME &
GROWTH BALANCED GROWTH
FUND FUND FUND
-------- -------- --------
Equities:
Domestic 31.9% 47.2% 62.4%
International 9.0 14.0 18.3
-------- -------- --------
40.9 61.2 80.7
Bonds 49.6 32.3 11.9
Cash 9.5 6.5 7.4
-------- -------- --------
100.0% 100.0% 100.0%
-------- -------- --------
-------- -------- --------
-------------------------
NOTES: THE FOLLOWING NOTES RELATE TO THE GROWTH OF $10,000 GRAPHS AND TABLES ON
PRECEDING PAGES.
* The Life Solutions Funds commenced operations on July 1, 1997. Index
comparisons also began on July 1, 1997.
+ Total return reflects performance for the period July 1, 1997 to
August 31, 1997.
INDEX DEFINITIONS:
The Russell 3000 Index is comprised of the 3,000 largest US companies based on
total market capitalization, representing approximately 98% of the investable US
equity market.
The Morgan Stanley Capital International Europe, Australia, Far East Index is an
index composed of an arithmetic, market value-weighted average of the
performance of over 1,100 securities listed on the stock exchanges of the
countries of Europe, Australia, and the Far East. The Index is calculated on a
total-return basis, which includes reinvestment of net dividends after deduction
of withholding taxes.
The Lehman Brothers Aggregate Bond Index is composed of all bonds covered by the
Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed Securities
Index, and the Asset-Backed Securities Index. Total returns comprises price
appreciation/depreciation and income as a percentage of the original investment.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Annual Report 9
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of the SSgA Funds:
We have audited the accompanying statements of net assets of SSgA Funds Life
Solutions Income and Growth Fund, Balanced Fund and Growth Fund (the "Funds"),
as of August 31, 1997, and the related statements of operations, the statements
of changes in net assets and the financial highlights for the period July 1,
1997 (commencement of operations) to August 31, 1997. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit 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
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of August 31, 1997 by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides 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 of the
Funds as of August 31, 1997, the results of its operations, the changes in its
net assets, and the financial highlights for the period July 1, 1997
(commencement of operations) to August 31, 1997 in conformity with generally
accepted accounting principles.
Boston, Massachusetts /s/ COOPERS & LYBRAND L.L.P.
October 7, 1997
10 Annual Report
<PAGE>
SSGA LIFE SOLUTIONS
INCOME AND GROWTH FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
August 31, 1997
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
INVESTMENTS - 100.2%
DOMESTIC EQUITIES
SSgA S&P 500 Index Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,300 $ 821
SSgA Matrix Equity Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157,753 2,904
SSgA Small Cap Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,395 739
----------
4,464
----------
INTERNATIONAL EQUITIES
SSgA Active International Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93,140 1,011
SSgA Emerging Markets Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,219 249
----------
1,260
----------
BONDS
SSgA Bond Market Fund (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 490,226 4,888
SSgA Intermediate Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210,785 2,057
----------
6,945
----------
SHORT-TERM ASETS
SSgA Yield Plus Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133,701 1,338
----------
1,338
----------
TOTAL INVESTMENTS (identified cost $13,784)(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,007
----------
OTHER ASSETS AND LIABILITIES (Note 4) - (0.2%)
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (34)
----------
TOTAL OTHER ASSETS AND LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (28)
----------
NET ASSETS - 100.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,979
----------
----------
</TABLE>
12 Annual Report
<PAGE>
SSGA LIFE SOLUTIONS
INCOME AND GROWTH FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1997
MARKET
VALUE
(000)
----------
<S> <C>
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4
Unrealized appreciation (depreciation) on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 223
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,751
----------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,979
----------
----------
NET ASSET VALUE, offering and redemption price per share
($13,978,644 divided by 1,081,153 shares of $.001 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12.93
----------
----------
</TABLE>
(a) See Note 2 for federal tax information
The accompanying notes are an integral part of the financial statements.
Annual Report 13
<PAGE>
<TABLE>
<CAPTION>
SSgA LIFE SOLUTIONS
INCOME AND GROWTH FUND
STATEMENT OF OPERATIONS
For the Period July 1, 1997
(Commencement of Operations) to August 31, 1997
Amounts
in thousands
<S> <C> <C>
INVESTMENT INCOME:
Income distributions from Underlying Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11
EXPENSES (Notes 2 and 4):
Fund accounting fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Professional Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Registration Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
--------------
Expenses before reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Expense reductions (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . (17)
--------------
Total Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
--------------
REALIZED AND UNREALIZED. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net change in unrealized appreciation or depreciation of investments . . . . . . . . . . . . . . . . . . 223
--------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . . . $ 227
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 Annual Report
<PAGE>
SSgA LIFE SOLUTIONS
INCOME AND GROWTH FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the Period July 1, 1997
(Commencement of Operations) to August 31, 1997
Amounts
in thousands
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . . . . . . . . . . . . . . 223
--------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . 227
--------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions . . . . . . . . . . . . . . . . . . 13,752
--------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,979
NET ASSETS
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --
--------------
End of period (including undistributed net investment income of $4). . . . . . . . . . . . . . . . . . $ 13,979
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
FUND SHARE TRANSACTIONS
SHARES DOLLARS
-------------- --------------
<S> <C> <C>
Proceeds from shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,104 $ 14,055
Payments for shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . (23) (303)
-------------- --------------
Total net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,081 $ 13,752
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 15
<PAGE>
SSgA LIFE SOLUTIONS
INCOME AND GROWTH FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout the
period and other performance information derived from the financial statements.
1997*
----------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12.68
----------
INCOME FROM INVESTMENT OPERATIONS:
Net realized and unrealized gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . .25
----------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12.93
----------
----------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.97
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,979
Ratios to average net assets (%)(b):
Operating expenses, net (c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
Operating expenses, gross (c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.14
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Portfolio turnover rate (%)(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106.68
Per share amount of expense reductions ($ omitted)(c). . . . . . . . . . . . . . . . . . . . . . . . . . . .0161
</TABLE>
* For the period July 1, 1997 (commencement of operations) to
August 31, 1997.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended August 31, 1997 are annualized.
(c) See Note 4 for current period amounts.
16 Annual Report
<PAGE>
SSGA LIFE SOLUTIONS
BALANCED FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
August 31, 1997
NUMBER MARKET
OF VALUE
SHARES (000)
------------ ----------
<S> <C> <C>
INVESTMENTS - 106.6%
DOMESTIC EQUITIES
SSgA S&P 500 Index Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213,518 $ 4,048
SSgA Matrix Equity Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 860,836 15,848
SSgA Small Cap Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168,921 3,735
----------
23,631
----------
INTERNATIONAL EQUITIES
SSgA Active International Fund (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 514,678 5,584
SSgA Emerging Markets Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113,382 1,398
----------
6,982
----------
BONDS
SSgA Bond Market Fund (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,219,781 12,161
SSgA Intermediate Fund (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 413,561 4,037
----------
16,198
----------
SHORT-TERM ASSETS
SSgA Yield Plus Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327,083 3,274
----------
3,274
----------
TOTAL INVESTMENTS (identified cost $49,093)(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,085
----------
OTHER ASSETS AND LIABILITIES (Note 4) - (6.6%)
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,098)
----------
TOTAL OTHER ASSETS AND LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,082)
----------
NET ASSETS - 100.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 47,003
----------
----------
</TABLE>
18 Annual Report
<PAGE>
SSGA LIFE SOLUTIONS
BALANCED FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
August 31, 1997
MARKET
VALUE
(000)
----------
<S> <C>
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6
Unrealized appreciation (depreciation) on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 992
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,002
----------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 47,003
----------
----------
NET ASSET VALUE, offering and redemption price per share
($47,002,758 divided by 3,362,357 shares of $.001 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13.98
----------
----------
</TABLE>
(a) See Note 2 for federal income tax information.
The accompanying notes are an integral part of the financial statements.
Annual Report 19
<PAGE>
SSgA LIFE SOLUTIONS
BALANCED FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Period July 1, 1997
(Commencement of Operations) to August 31, 1997
Amount
in thousands
<S> <C> <C>
INVESTMENT INCOME:
Income distributions from Underlying Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 35
EXPENSES (Notes 2 and 4):
Fund accounting fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
--------------
Expenses before reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Expense reductions (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . (12)
--------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
--------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net change in unrealized appreciation or depreciation of investments . . . . . . . . . . . . . . . . . . 992
--------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . . . $ 998
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20 Annual Report
<PAGE>
SSgA LIFE SOLUTIONS
BALANCED FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the Period July 1, 1997
(Commencement of Operations) to August 31, 1997
Amounts
in thousands
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . . . . . . . . . . . . . . 992
--------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . 998
--------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions . . . . . . . . . . . . . . . . . . 46,005
--------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,003
NET ASSETS
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --
--------------
End of period (including undistributed net investment income of $6). . . . . . . . . . . . . . . . . . $ 47,003
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
FUND SHARE TRANSACTIONS
SHARES DOLLARS
-------------- --------------
<S> <C> <C>
Proceeds from shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,654 $ 50,095
Payments for shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . (292) (4,090)
-------------- --------------
Total net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,362 $ 46,005
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 21
<PAGE>
SSgA LIFE SOLUTIONS
BALANCED FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout the
period and other performance information derived from the financial statements.
1997*
----------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13.69
----------
INCOME FROM INVESTMENT OPERATIONS:
Net realized and unrealized gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . .29
----------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13.98
----------
----------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.12
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,003
Ratios to average net assets (%)(b):
Operating expenses, net (c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
Operating expenses, gross (c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .07
Portfolio turnover rate (%)(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51.61
Per share amount of expense reductions ($ omitted)(c). . . . . . . . . . . . . . . . . . . . . . . . . . . .0035
</TABLE>
* For the period July 1, 1997 (commencement of operations) to August 31, 1997.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended August 31, 1997 are annualized.
(c) See Note 4 for current period amounts.
22 Annual Report
<PAGE>
SSgA LIFE SOLUTIONS
GROWTH FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
August 31, 1997
NUMBER MARKET
OF VALUE
SHARES (000)
----------- ----------
<S> <C> <C>
INVESTMENTS - 100.8%
DOMESTIC EQUITIES
SSgA S&P 500 Index Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231,132 $ 4,382
SSgA Matrix Equity Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 999,308 18,397
SSgA Small Cap Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210,439 4,653
----------
27,432
----------
INTERNATIONAL EQUITIES
SSgA Active International Fund (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 557,744 6,052
SSgA Emerging Markets Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160,773 1,982
----------
8,034
----------
BONDS
SSgA Bond Market Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 395,649 3,945
SSgA Intermediate Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131,956 1,288
----------
5,233
----------
SHORT-TERM ASSETS
SSgA Yield Plus Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325,307 3,256
----------
3,256
----------
TOTAL INVESTMENTS (identified cost $42,971)(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,955
----------
OTHER ASSETS AND LIABILITIES (Note 4) - (0.8%)
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (368)
----------
TOTAL OTHER ASSETS AND LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (352)
----------
NET ASSETS - 100.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 43,603
----------
----------
</TABLE>
24 Annual Report
<PAGE>
SSgA LIFE SOLUTIONS
GROWTH FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
August 31, 1997
MARKET
VALUE
(000)
----------
<S> <C>
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7
Unrealized appreciation (depreciation) on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 984
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,609
----------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 43,603
----------
----------
NET ASSET VALUE, offering and redemption price per share
($43,603,123 divided by 2,948,808 shares of $.001 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14.79
----------
----------
</TABLE>
(a) See Note 2 for federal income tax information.
The accompanying notes are an integral part of the financial statements.
Annual Report 25
<PAGE>
SSgA LIFE SOLUTIONS
GROWTH FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Period July 1, 1997
(Commencement of Operations) to August 31, 1997
Amounts
in thousands
<S> <C> <C>
INVESTMENT INCOME:
Income distributions from Underlying Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 33
EXPENSES (Notes 2 and 4):
Fund accounting fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
--------------
Expenses before reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Expense reductions (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . (14)
--------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
--------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net change in unrealized appreciation or depreciation of investments . . . . . . . . . . . . . . . . . . 984
--------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . . . $ 991
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
26 Annual Report
<PAGE>
SSgA LIFE SOLUTIONS
GROWTH FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the Period July 1, 1997
(Commencement of Operations) to August 31, 1997
Amounts
in thousands
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . . . . . . . . . . . . . . 984
--------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . 991
--------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions . . . . . . . . . . . . . . . . . . 42,612
--------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,603
NET ASSETS
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --
--------------
End of period (including undistributed net investment income of $7). . . . . . . . . . . . . . . . . . $ 43,603
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
FUND SHARE TRANSACTIONS
SHARES DOLLARS
-------------- --------------
<S> <C> <C>
Proceeds from shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000 $ 43,384
Payments for shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . (51) (772)
-------------- --------------
Total net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,949 $ 42,612
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 27
<PAGE>
SSgA LIFE SOLUTIONS
GROWTH FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout the
period and other performance information derived from the financial statements.
1997*
----------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14.44
----------
INCOME FROM INVESTMENT OPERATIONS:
Net realized and unrealized gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . .35
----------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14.79
----------
----------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.42
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,603
Ratios to average net assets (%)(b):
Operating expenses, net (c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
Operating expenses, gross (c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .09
Portfolio turnover rate (%)(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39.49
Per share amount of expense reductions ($ omitted)(c). . . . . . . . . . . . . . . . . . . . . . . . . . . .0048
</TABLE>
* For the period July 1, 1997 (commencement of operations) to August 31, 1997.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended August 31, 1997 are annualized.
(c) See Note 4 for current period amounts.
28 Annual Report
<PAGE>
SSgA
LIFE SOLUTIONS FUNDS
NOTES TO FINANCIAL STATEMENTS
August 31, 1997
1. ORGANIZATION
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 17 investment portfolios which are in operation as
of August 31, 1997. In December 1996, the Investment Company changed its
name from "The Seven Seas Series Fund" to the "SSgA Funds." These financial
statements report on three portfolios, the SSgA Life Solutions Income and
Growth Fund, Balanced Fund and Growth Fund (the "Funds"). The Investment
Company is a registered and diversified open-end investment company, as
defined in the Investment Company Act of 1940, as amended (the "1940 Act"),
that was organized as a Massachusetts business trust on October 3, 1987 and
operates under a First Amended and Restated Master Trust Agreement, dated
October 13, 1993, as amended (the "Agreement"). The Investment Company's
Agreement permits the Board of Trustees to issue an unlimited number of
full and fractional shares of beneficial interest at a $.001 par value. The
Funds are designed primarily for tax-advantaged retirement accounts and
other long-term investment strategies. Each Fund allocates its assets by
investing in shares of a combination of the Investment Company's portfolios
(the "Underlying Funds"). The table below illustrates the equity, bond and
short-term fund asset allocation ranges for each Fund.
<TABLE>
<CAPTION>
ASSET ALLOCATION RANGES
---------------------------------------------
INCOME AND
ASSET CLASS/UNDERLYING FUND GROWTH FUND BALANCED FUND GROWTH FUND
--------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
EQUITIES 20 - 60% 40 - 80% 60 - 100%
US Equities
SSgA S&P 500 Index Fund
SSgA Matrix Equity Fund
SSgA Small Cap Fund
SSgA Growth and Income Fund
International Equities* 15%* 20%* 25%*
SSgA Active International Fund
SSgA Emerging Markets Fund
BONDS 40 - 80% 20 - 60% 0 - 40%
SSgA Bond Market Fund
SSgA Intermediate Fund
SHORT TERM ASSETS 0 - 20% 0 - 20% 0 - 20%
SSgA Yield Plus Fund
SSgA Money Market Fund
SSgA US Government Money Market
</TABLE>
* International equities are included in the total equity exposure indicated
above and will not exceed the listed percentages.
Annual Report 29
<PAGE>
SSgA
LIFE SOLUTIONS FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds' financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies followed by the Funds in the preparation of their financial
statements.
SECURITY VALUATION: Investments in Underlying Funds are valued at the net
asset value per share of each Underlying Fund as of the close of regular
trading on the New York Stock Exchange. Short-term investments having a
maturity of sixty days or less are valued at amortized cost.
SECURITIES TRANSACTIONS: Securities transactions of the Underlying Funds
are recorded on a trade date basis. Realized gains and losses from
securities transactions are recorded on the basis of identified cost.
INVESTMENT INCOME: Dividend income is recorded on the ex-dividend date and
interest income is recorded daily on the accrual basis.
AMORTIZATION AND ACCRETION: All zero-coupon bond discounts and original
issue discounts are accreted for both tax and financial reporting purposes.
All short- and long-term market premiums/discounts are amortized/accreted
for both tax and financial reporting purposes.
FEDERAL INCOME TAXES: Since the Investment Company is a Massachusetts
business trust, the sub-trust is a separate corporate taxpayer and
determines its net investment income and capital gains (or losses) and the
amounts to be distributed to each fund's shareholders without regard to the
income and capital gains (or losses) of the other funds.
It is each Funds' intention to qualify as a regulated investment company,
as defined by the Internal Revenue Code of 1986, as amended. This requires
the Fund to distribute all of its taxable income. Therefore, the Funds paid
no federal income taxes and no federal income tax provision was required.
The Funds' aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of August 31, 1997 are as follows:
<TABLE>
<CAPTION>
NET
UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Income and Growth Fund $ 13,784,433 $ 313,241 $ (90,674) $ 222,567
Balanced Fund 49,093,138 1,472,320 (480,458) 991,862
Growth Fund 42,971,234 1,529,855 (546,089) 983,766
</TABLE>
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date. Dividends
are generally declared and paid quarterly. Capital gain distributions are
generally declared and paid annually. An additional distribution may be
paid by the Funds to avoid imposition of federal income tax on any
remaining undistributed net investment income and capital gains.
30 Annual Report
<PAGE>
SSgA
LIFE SOLUTIONS FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP"). As
a result, net investment income and net realized gain (or loss) from
investment transactions for a reporting period may differ significantly
from distributions during such period. The differences between tax
regulations and GAAP relate primarily to investments in foreign-denominated
investments and certain securities sold at a loss. Accordingly, the Funds
may periodically make reclassifications among certain of their capital
accounts without impacting their net asset value.
EXPENSES: The Funds will pay all of their expenses other than those
expressly assumed by the Adviser and the Administrator. Certain expenses
not directly attributable to any one Fund but applicable to all Funds, such
as Trustee fees, insurance, legal and other expenses will be allocated to
each Fund based on each Fund's net assets. Expenses included in the
accompanying financial statements reflect the expenses of each Fund and do
not include any expenses associated with the Underlying Funds.
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the two months ended August 31, 1997,
purchases and sales of investment securities aggregated to the following:
PURCHASES SALES
------------ ------------
Income and Growth Fund $ 16,100,848 $ 2,316,829
Balanced Fund 53,404,352 4,311,133
Growth Fund 45,830,632 2,859,401
4. RELATED PARTIES
ADVISER: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company (the "Adviser") under which the Adviser
directs the investments of the Fund in accordance with its investment
objectives, policies, and limitations. The Funds will not be charged a fee
by the Adviser. However, each Fund, as a shareholder in the Underlying
Funds, will bear its proportionate share of any investment advisory fees
and other expenses paid by the Underlying Funds. Each Underlying Fund pays
the Adviser a fee, calculated daily and paid monthly, that on an annual
basis is equal to a certain percentage of each Underlying Fund's average
daily net assets. For the two month period ended August 31, 1997, the
Adviser voluntarily agreed to reimburse the Funds for all expenses (except
12b-1 distribution expenses) in excess of .30% of average daily net assets
on an annual basis.
ADMINISTRATOR: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator") under
which the Administrator supervises all non-portfolio investment aspects of
the Investment Company's operations and provides adequate office space and
all necessary office equipment and services, including telephone service,
utilities, stationery supplies, and similar
Annual Report 31
<PAGE>
SSgA
LIFE SOLUTIONS FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
items. For these services, the Underlying Funds pay the Administrator a
combined fee that on an annual basis is equal to the percentages, stated
below, of their average aggregate daily net assets. The Funds will not be
charged a fee by the Administrator. Instead, the Administrator will assess
administration fees on the Underlying Funds. Each Fund will pay indirectly
its proportionate share of the following: All Underlying Funds (except
Active International and Emerging Markets) to and including $500 million -
.06%; over $500 million to and including $1 billion - .05%; and over $1
billion - .03%. Active International and Emerging Markets to and including
$500 million - .07%; over $500 million to and including $1 billion - .06%;
over $1 billion to and including $1.5 billion - .04%; and over
$1.5 billion - .03%.
The percentage of the fee paid by the each Underlying Fund is equal to the
percentage of average aggregate daily net assets that are attributable to
that Underlying Fund. Administrator will also receive reimbursement of
expenses it incurs in connection with establishing new investment
portfolios, including the Funds. Further, the administration fee paid by
the Underlying Funds will be reduced by the sum of certain distribution
related expenses (up to a maximum of 10% of the asset-based administration
fee listed above).
DISTRIBUTOR AND SHAREHOLDER SERVICING: Pursuant to the Distribution
Agreement with Investment Company, Russell Fund Distributors, Inc.
("Distributor"), a wholly owned subsidiary of the Administrator, serves as
distributor for all Investment Company portfolio shares, including the
Funds.
The Funds and Underlying Funds have also adopted a distribution plan
pursuant to Rule 12b-1 (the "Plan") under the 1940 Act. The purpose of the
Plan is to provide for the payment of certain Investment Company
distribution and shareholder servicing expenses. Under the Plan,
Distributor will be reimbursed in an amount up to .25% of the Funds and
Underlying Funds' average annual net assets for distribution-related and
shareholder servicing expenses. Payments under the Plan will be made to
Distributor to finance activity that is intended to result in the sale and
retention of the Funds and Underlying Fund shares including: (1) payments
made to certain broker-dealers, investments advisors and other third party
intermediaries; (2) the costs of prospectuses, reports to shareholders and
sales literature; (3) advertising; and (4) expenses incurred in connection
with the promotion and sale of shares, including Distributor's overhead
expenses for rent, office supplies, equipment, travel, communication,
compensation and benefits of sales personnel.
Payments to Distributor, as well as payments to Service Organizations from
a Fund, are not permitted by the Plan to exceed .25% of a Fund's average
net asset value per year. Any payments that are required to be made by the
Distribution Agreement and any Service Agreement but could not be made
because of the .25% limitation may be carried forward and paid in
subsequent years so long as the Plan is in effect. A Fund's liability for
any such expenses carried forward shall terminate at the end of two years
following the year in which the expenditure was incurred. The Trustees or a
majority of the Fund's shareholders have the right, however, to terminate
the Plan and all payments thereunder at anytime. The Fund will not be
obligated to reimburse the Distributor for carryover expenses subsequent to
the Plan's termination or noncontinuance. There were not carryover expenses
as of August 31, 1997. Service Organizations will be responsible for prompt
transmission of purchase and redemption orders and may charge fees for
their services.
32 Annual Report
<PAGE>
SSgA
LIFE SOLUTIONS FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1997
BOARD OF TRUSTEES: The Investment Company pays each Trustee not affiliated
with the Investment Company a retainer of $44,000 annually, $1,000 for each
board meeting attended, an additional $1,000 for attending the annual audit
committee meeting, and reimbursement for out-of-pocket expenses. These
expenses are allocated among all the Funds based upon their relative net
assets.
ACCRUED FEES PAYABLE TO AFFILIATES AS OF AUGUST 31, 1997 WERE AS FOLLOWS:
INCOME AND BALANCED GROWTH
GROWTH FUND FUND FUND
----------- ----------- -----------
Fund accounting fees $ 3,000 $ 3,000 $ 3,000
Distribution fees 1,126 4,243 3,775
Transfer agent fees 2,548 3,822 5,096
----------- ----------- -----------
$ 6,674 $ 11,065 $ 11,871
----------- ----------- -----------
----------- ----------- -----------
BENEFICIAL INTEREST: In the Income and Growth Fund, Balanced Fund and
Growth Fund as of August 31, 1997, one shareholder (who was also an
affiliate of the Investment Company) was a record owner of approximately
91%, 97% and 100%, respectively, of the total outstanding shares of the
Funds.
TRANSACTIONS WITH AFFILIATED COMPANIES: An affiliated company is a company
in which a fund has ownership of at least 5% of voting securities.
Transactions during the period with companies which are or were affiliates
are as follows:
PURCHASE
AFFILIATE COST
------------------------------------ ------------
INCOME AND GROWTH FUND
SSgA Bond Market Fund $ 4,812,500
------------
------------
BALANCED FUND
SSgA Active International Fund $ 5,959,517
SSgA Bond Market Fund 11,962,500
SSgA Intermediate Fund 3,985,000
------------
$ 21,907,017
------------
------------
GROWTH FUND
SSgA Active International Fund $ 6,459,424
------------
------------
The market values of the above transactions are shown on the accompanying
Statements of Net Assets. There were no sales or dividend income from the above
affiliates during the two months ended August 31, 1997.
Annual Report 33
<PAGE>
SSgA LIFE SOLUTIONS FUNDS
Two International Place, 35th Floor
Boston, Massachusetts 02110
(800) 997-7327
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
OFFICERS
Lynn L. Anderson, President
George W. Weber, Senior Vice President and Treasurer
J. David Griswold, Vice President and Secretary
INVESTMENT ADVISER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
CUSTODIAN, TRANSFER AGENT AND OFFICE OF SHAREHOLDER INQUIRIES
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 647-7327
DISTRIBUTOR
Russell Fund Distributors, Inc.
Two International Place, 35th Floor
Boston, Massachusetts 02110
(800) 997-7327
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
34 Annual Report
