<PAGE>
N-30D TABLE OF CONTENTS
SSgA Fund Name N-30D Page
- -------------- ----------
SSgA-SM-Life Solutions-SM- Funds . . . . . . . . . . . . . . .
Income and Growth Fund . . . . . . . . . . . . . . . . . .
Balanced Fund. . . . . . . . . . . . . . . . . . . . . . .
Growth Fund. . . . . . . . . . . . . . . . . . . . . . . .
Money Market Fund. . . . . . . . . . . . . . . . . . . . . . .
Matrix Equity Fund . . . . . . . . . . . . . . . . . . . . . .
Prime Money Market Fund. . . . . . . . . . . . . . . . . . . .
Small Cap Fund . . . . . . . . . . . . . . . . . . . . . . . .
US Treasury Money Market Fund. . . . . . . . . . . . . . . . .
Yield Plus Fund. . . . . . . . . . . . . . . . . . . . . . . .
Bond Market Fund . . . . . . . . . . . . . . . . . . . . . . .
S&P 500 Index Fund . . . . . . . . . . . . . . . . . . . . . .
Active International Fund. . . . . . . . . . . . . . . . . . .
Tax Free Money Market Fund . . . . . . . . . . . . . . . . . .
US Government Money Market Fund. . . . . . . . . . . . . . . .
Growth and Income Fund . . . . . . . . . . . . . . . . . . . .
Intermediate Fund. . . . . . . . . . . . . . . . . . . . . . .
Emerging Markets Fund. . . . . . . . . . . . . . . . . . . . .
Real Estate Equity . . . . . . . . . . . . . . . . . . . . . .
International Growth Opportunities . . . . . . . . . . . . . .
High Yield Bond. . . . . . . . . . . . . . . . . . . . . . . .
Special Equity . . . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
SSgA-Registered Trademark- LIFE SOLUTIONS-SM- FUNDS
INCOME AND GROWTH FUND
BALANCED FUND
GROWTH FUND
Annual Report
August 31, 1998
Table of Contents
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion and Analysis . . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . . 11
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
Tax Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Fund Management and Service Providers. . . . . . . . . . . . . . . . . . . 38
"SSgA-Registered Trademark-" IS A REGISTERED TRADEMARK AND "LIFE SOLUTIONS-SM-"
IS A REGISTERED 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 FUNDS 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 FUNDS, 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, 1998. Over the past year, the Funds have grown to include
twenty-one 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 SSgA Life Solutions Funds. I hope you find this
information a useful tool as you review your overall investment strategy.
The SSgA Funds have also opened four additional funds in fiscal 1998. The
investment objectives for these four new funds are as follows:
The SSgA Special Equity Fund seeks to maximize total return through investment
in mid- and small capitalization US equity securities. This Fund was opened as
an alternative investment strategy for the SSgA Small Cap Fund that closed to
new investors on August 31, 1998.
The SSgA International Growth Opportunities Fund seeks to provide long-term
capital growth by investing primarily in securities of foreign issuers.
The SSgA High Yield Bond Fund seeks to maximize total return by investing
primarily in non investment-grade bonds, including, but not limited to, those
represented by the Lehman Brothers High Yield Bond Index.
The SSgA Real Estate Equity Fund seeks to provide income and capital growth by
investing primarily in publicly traded securities of real estate companies.
During the past fiscal year, the SSgA Funds were proud to announce that the SSgA
S&P 500 Index Fund and the SSgA Yield Plus Fund each achieved five years of
operational history. We are proud of our long term record and look forward to
having additional funds reach their five year anniversary.
SSgA intends to proceed with the evolution of new products and services while
committing to your investment needs. We will continue to develop our
professional expertise by focusing on the expansion of both our global resources
and our diversified product lines.
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 certain SSgA Funds (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]
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
DATES LIFE SOLUTIONS RUSSELL 3000-Registered LEHMAN BROTHERS COMPOSITE MARKET
INCOME & GROWTH FUND Trademark- INDEX++ AGGREGATE BOND INDEX+++ INDEX**
<S> <C> <C> <C> <C>
Inception* $10,000 $10,000 $10,000 $10,000
1997 $10,197 $10,351 $11,057 $10,204
1998 $10,558 $10,709 $11,258 $11,032
</TABLE>
YEARLY PERIODS ENDED AUGUST 31
SSgA
LIFE SOLUTIONS INCOME & GROWTH FUND
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ------------ ------------ ------------
<S> <C> <C>
1 Year $ 10,353 3.53%
Inception $ 10,558 4.76%+
</TABLE>
COMPOSITE MARKET INDEX **
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ------------ ------------ ------------
<S> <C> <C>
1 Year $ 10,812 8.12%
Inception $ 11,032 8.78%+
</TABLE>
** 35% Russell 3000-Registered Trademark- Index
5% MSCI EAFE Index
60% Lehman Brothers Aggregate Bond Index
RUSSELL 3000 -Registered Trademark- INDEX ++
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ------------ ------------ ------------
<S> <C> <C>
1 Year $ 10,351 3.51%
Inception $ 10,709 6.05%+
</TABLE>
LEHMAN BROTHERS
AGGREGATE BOND INDEX +++
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ------------ ------------ ------------
<S> <C> <C>
1 Year $ 11,057 10.57%
Inception $ 11,258 10.69%+
</TABLE>
SEE RELATED NOTES FOR INDEX DEFINITIONS.
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]
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
DATES LIFE SOLUTIONS RUSSELL 3000-Registered LEHMAN BROTHERS COMPOSITE MARKET
BALANCED FUND Trademark- Index AGGREGATE BOND INDEX INDEX**
<S> <C> <C> <C> <C>
Inception* $10,000 $10,000 $10,000 $10,000
1997 $10,212 $10,351 $11,057 $10,189
1998 $10,246 $10,709 $11,258 $10,855
</TABLE>
YEARLY PERIODS ENDED AUGUST 31
SSgA
LIFE SOLUTIONS BALANCED FUND
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ------------ ------------ ------------
<S> <C> <C>
1 Year $ 10,033 0.33%
Inception $ 10,246 2.10%+
</TABLE>
COMPOSITE MARKET INDEX **
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ------------ ------------ ------------
<S> <C> <C>
1 Year $ 10,654 6.54%
Inception $ 10,855 7.29%+
</TABLE>
** 50% Russell 3000-Registered Trademark- Index
10% MSCI EAFE Index
40% Lehman Brothers Aggregate Bond Index
RUSSELL 3000-Registered Trademark- INDEX ++
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ------------ ------------ ------------
<S> <C> <C>
1 Year $ 10,351 3.51%
Inception $ 10,709 6.05%+
</TABLE>
LEHMAN BROTHERS
AGGREGATE BOND INDEX +++
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ------------ ------------ ------------
<S> <C> <C>
1 Year $ 11,057 10.57%
Inception $ 11,258 10.69%+
</TABLE>
SEE RELATED NOTES FOR INDEX DEFINITIONS.
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]
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
LIFE SOLUTIONS RUSSELL 3000-Registered LEHMAN BROTHERS COMPOSITE MARKET
DATES GROWTH FUND Trademark- INDEX AGGREGATE BOND INDEX INDEX**
<S> <C> <C> <C> <C>
Inception* $10,000 $10,000 $10,000 $10,000
1997 $10,242 $10,351 $11,057 $10,173
1998 $9,968 $10,709 $11,258 $10,661
</TABLE>
YEARLY PERIODS ENDED AUGUST 31
SSgA
LIFE SOLUTIONS GROWTH FUND
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ------------ ------------ ------------
<S> <C> <C>
1 Year $ 9,732 (2.68)%
Inception $ 9,968 (0.28)%+
</TABLE>
COMPOSITE MARKET INDEX **
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ------------ ------------ ------------
<S> <C> <C>
1 Year $ 10,480 4.80%
Inception $ 10,661 5.64%+
</TABLE>
** 65% Russell 3000-Registered Trademark- Index
15% MSCI EAFE Index
20% Lehman Brothers Aggregate Bond Index
RUSSELL 3000-Registered Trademark- INDEX ++
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ------------ ------------ ------------
<S> <C> <C>
1 Year $ 10,351 3.51%
Inception $ 10,709 6.05%+
</TABLE>
LEHMAN BROTHERS
AGGREGATE BOND INDEX +++
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ------------ ------------ ------------
<S> <C> <C>
1 Year $ 11,057 10.57%
Inception $ 11,258 10.69%+
</TABLE>
SEE RELATED NOTES FOR INDEX DEFINITIONS.
8 Annual Report
<PAGE>
SSgA LIFE SOLUTIONS FUNDS
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
PERFORMANCE REVIEW
The SSgA Life Solutions Funds are a set of balanced funds targeted to meet the
investment objectives of investors with varying degrees of risk tolerance. The
set consists of three funds with distinct risk/return profiles. The most
conservative fund, the Life Solutions Income and Growth Fund, is targeted to
conservative investors with limited tolerance for equity market volatility. The
Life Solutions Balanced Fund is targeted at those individuals willing to
undertake greater equity exposure, but who are also looking for fixed income
exposure to balance return patterns. The Life Solutions Growth Fund is designed
for those investors aggressively seeking return. The Fund is designed to provide
broadly diversified equity exposure with the ability to have limited exposure to
fixed income and cash securities.
For the fiscal year ended August 31, 1998, the Life Solutions Funds had the
following closing NAVs: Income and Growth Fund $12.65, Balanced Fund $12.95, and
Growth Fund $13.02. Performance for the twelve months ended August 31, 1998 was
3.53%, 0.33%, and -2.68% for the Life Solutions Income and Growth, Balanced
Growth, and Growth Funds, respectively. Since inception on July 1, 1997 through
August 31, 1998 the three Funds returned 4.76%, 2.10%, and -0.28%, respectively.
The composite benchmarks over the last twelve months for the three Funds
returned 8.12%, 6.54%, and 4.80%, respectively. Since inception, the composite
benchmarks returned 8.78%, 7.29%, and 5.64%.
Performance relative to the composite benchmarks was adversely impacted
throughout the year by three primary factors: a continued defensive position in
US equities, highly concentrated performance within the US equity market, and
continued weak performance of international equity markets.
MARKET AND PORTFOLIO HIGHLIGHTS
While US equity markets benefited from strong performance last year and for most
of 1998, concerns about the economic situations in Japan and the emerging
markets, and its impact on the US economy, coupled with persistent high
valuations in the US market led to significant market falls. Performance within
the US market has also been highly concentrated. Small capitalization securities
continued to trail larger companies, with the Russell 2000 Index, a proxy for
the performance of smaller companies, losing 22.29% over the year compared to
the S&P 500 Index which was off 0.38%. Persistent rich valuations for US
companies and slowing expectations for corporate earnings growth resulted in
underweight allocations to US equities throughout the year for the three Life
Solutions Funds. While the underweight adversely impacted performance earlier in
the year, the positioning paid off in the latter part of the year, as the market
sold off.
Performance of US stocks throughout the year painted a misleading picture. Most
of the strong returns experienced earlier in the year were attributable to a few
of the larger capitalization companies comprising the S&P 500 Index. It was
these same companies that continued to reach record valuation levels as internal
liquidity and foreign investors sought to invest in well known blue chip
companies. Most equity managers experienced significant difficulties throughout
the year, as they sought to invest in companies with stronger growth prospects
and more reasonable valuation levels. Unfortunately any moves out of the largest
companies contributed adversely to performance relative to the S&P 500 Index.
Even over the last three months, smaller issues were more severely punished,
with the Russell 2000 Index losing 25.79% versus losses of 11.93% for the S&P
500 Index.
Exposure to US equities within the three Life Solutions Funds was achieved
through investments in three underlying mutual funds. Large capitalization
exposure was achieved through allocations to the SSgA Matrix Equity Fund and the
SSgA S&P 500 Index Fund. For the fiscal year ended August 31, 1998, the Matrix
Equity Fund gained 2.09%, but failed to keep pace with the S&P 500 Index, which
posted a return of 8.09% for the same period. Underperformance was largely
attributable to positioning the portfolio away from the richly priced
mega-capitalization companies in favor of more reasonably priced large
capitalization companies. The Funds had limited exposure to small capitalization
securities through investments in the SSgA Small Cap Fund. Investments in the
small cap market provide important diversification benefits and offer more
attractive valuations, however, this was not reflected in the markets over the
last twelve months, as small cap issues significantly underperformed the S&P 500
Index.
Reflecting significant overvaluation in the US equity market, the three Funds
maintained overweight exposures to the SSgA Active International Fund. European
equity markets offered more attractive fundamental valuations and stronger
Annual Report 9
<PAGE>
SSgA LIFE SOLUTIONS FUNDS
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
earnings growth prospects than their American counterparts. Economic growth in
Europe was expected to accelerate as growth in the US began to show signs of
maturing. Within the international allocation, exposure to Japanese companies
was also maintained as it was felt that valuations had reached historic lows.
The expectation was, and continues to be, that once the government took decisive
action in addressing the financial crisis facing the country, markets could
return to more normal trading patterns.
From a diversification perspective and as a means to participate in the
long-term growth opportunities of the lesser developed nations, the three
portfolios maintained small allocations to emerging equity markets through an
allocation to the SSgA Emerging Markets Fund. At August 31, 1998, allocations to
emerging markets stood at 1.51%, 2.86%, and 3.86% for the Income and Growth,
Balanced, and Growth Funds, respectively. While allocations to this segment
benefited from broadly diversified exposure to the Latin American, European, and
Asian developing economies, all these markets were strongly impacted by investor
concerns for the potential of the financial crisis in Russia and the Far East to
spread to other economies. Over the last twelve months this sector has fallen by
36.97% as captured by the IFCI Index of emerging equity markets.
Within the fixed income markets, the three portfolios benefited from allocations
to the SSgA Bond Market and Intermediate Funds. Both funds benefited from the
fall of interest rates in the US markets, returning 9.86% and 8.64%,
respectively.
- -----------------------------------------------------
PORTFOLIO ALLOCATION BY ASSET CLASS
AS OF 08/31/98
<TABLE>
<CAPTION>
Income &
Growth Balanced Growth
Fund Fund Fund
-------- -------- --------
<S> <C> <C> <C>
Equities:
Domestic 25.2% 39.0% 54.3%
International 8.2 15.4 20.9
-------- -------- --------
33.4 54.4 75.2
Bonds 62.3 42.9 21.7
Cash 4.3 2.7 3.1
-------- -------- --------
100.0% 100.0% 100.0%
-------- -------- --------
-------- -------- --------
</TABLE>
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.
+ Annualized.
INDEX DEFINITIONS:
++ The Russell 3000-Registered Trademark- 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.
10 Annual Report
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of the SSgA Funds:
In our opinion, the accompanying statements of assets and liabilities and
statements of net assets, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of SSgA Life Solutions Funds (in
this report, comprised of SSgA Life Solutions Income and Growth Fund, SSgA
Life Solutions Balanced Fund, and SSgA Life Solutions Growth Fund)(the
"Funds") at August 31, 1998, the results of their operations for the fiscal
year then ended and the changes in their net assets and the financial
highlights for the fiscal year then ended and for the period July 1, 1997
(commencement of operations) to August 31, 1997, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at August
31, 1998 by correspondence with the custodian, provide a reasonable basis for
the opinion expressed above.
Boston, Massachusetts
/s/ PricewaterhouseCoopers LLP
October 8, 1998
Annual Report 11
<PAGE>
SSgA LIFE SOLUTIONS
INCOME AND GROWTH FUND
STATEMENT OF NET ASSETS
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
INVESTMENTS
DOMESTIC EQUITIES - 25.2%
SSgA Matrix Equity Fund . . . . . . . . . . . . . 246,241 $ 3,861
SSgA S&P 500 Index Fund . . . . . . . . . . . . . 66,262 1,287
SSgA Small Cap Fund . . . . . . . . . . . . . . . 52,259 834
----------
5,982
----------
INTERNATIONAL EQUITIES - 8.2%
SSgA Active International Fund. . . . . . . . . . 171,160 1,581
SSgA Emerging Markets Fund. . . . . . . . . . . . 55,035 359
----------
1,940
----------
BONDS - 62.3%
SSgA Bond Market Fund (Note 4). . . . . . . . . . 1,143,984 11,840
SSgA Intermediate Fund. . . . . . . . . . . . . . 296,440 2,976
----------
14,816
----------
SHORT-TERM ASSETS - 4.2%
SSgA Money Market Fund (a). . . . . . . . . . . . 1,006,742 1,007
----------
TOTAL INVESTMENTS - 99.9%
(identified cost $24,478)(b). . . . . . . . . . . . . . . . . . 23,745
----------
OTHER ASSETS AND LIABILITIES
Deferred organization expenses (Note 2) . . . . . . . . . . . . 18
Receivable from Adviser (Note 4). . . . . . . . . . . . . . . . 53
Receivable for investments sold . . . . . . . . . . . . . . . . 42
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . 4
Liabilities (Note 4) . . . . . . . . . . . . . . . . . . . . . (91)
----------
TOTAL OTHER ASSETS AND LIABILITIES,
NET - 0.1%. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
----------
NET ASSETS - 100.0% . . . . . . . . . . . . . . . . . . . . . . $ 23,771
----------
----------
</TABLE>
12 Annual Report
<PAGE>
SSgA LIFE SOLUTIONS
INCOME AND GROWTH FUND
STATEMENT OF NET ASSETS, CONTINUED
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
MARKET
VALUE
(000)
----------
<S> <C>
NET ASSETS CONSIST OF:
Undistributed net investment income . . . . . . . . . . . . . . $ 414
Accumulated net realized gain (loss). . . . . . . . . . . . . . 75
Unrealized appreciation (depreciation) on investments . . . . . (733)
Shares of beneficial interest . . . . . . . . . . . . . . . . . 2
Additional paid-in capital. . . . . . . . . . . . . . . . . . . 24,013
----------
NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23,771
----------
----------
NET ASSET VALUE, offering and redemption price per share
($23,771,131 divided by 1,878,669 shares of $.001 par value
shares of beneficial interest outstanding) . . . . . . . . . $ 12.65
----------
----------
</TABLE>
(a) At cost, which approximates market.
(b) See Note 2 for federal income tax information.
The accompanying notes are an integral part of the financial statements.
Annual Reports 13
<PAGE>
SSgA LIFE SOLUTIONS
INCOME AND GROWTH FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Fiscal Year Ended August 31, 1998
Amounts
in thousands
<S> <C> <C>
INVESTMENT INCOME:
Income distributions from Underlying Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 672
EXPENSES (Notes 2 and 4):
Distribution fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10
Fund accounting fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Amortization of deferred organization expenses . . . . . . . . . . . . . . . . . . 6
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
--------------
Expenses before reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
Expense reductions (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . (53)
--------------
Expenses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 585
--------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152
Capital gain distributions from Underlying Funds . . . . . . . . . . . . . . . . . 600 752
-------------- --------------
Net change in unrealized appreciation or depreciation of investments . . . . . . . . . . . . . . . . . . (956)
--------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (204)
--------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . $ 381
--------------
--------------
</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>
STATEMENTS OF CHANGES IN NET ASSETS
For the Fiscal Years Ended August 31,
Amounts in thousands
1998 1997*
---------- ----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 585 $ 4
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 752 --
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . . . . (956) 223
---------- ----------
Net increase (decrease) in net assets resulting from operations . . . . . . . . 381 227
---------- ----------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (483) --
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . (376) --
---------- ----------
Total Distributions to Shareholders . . . . . . . . . . . . . . . . . . . . . . (859) --
---------- ----------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from
Fund share transactions (Note 5). . . . . . . . . . . . . . . . . . . . . . . . 10,270 13,752
---------- ----------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . 9,792 13,979
NET ASSETS
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,979 --
---------- ----------
End of period (including undistributed net investment income of
of $414 and $4, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . $ 23,771 $ 13,979
---------- ----------
---------- ----------
</TABLE>
* For the period July 1, 1997 (commencement of operations) to August 31, 1997.
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 each
period and other performance information derived from the financial statements.
1998 1997*
---------- ----------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . $ 12.93 $ 12.68
---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46 --
Capital gain distributions from Underlying Funds . . . . . . . . . . . . . . . . . .40(d) --
Net realized and unrealized gain (loss) on investments . . . . . . . . . . . . . . (.41) .25
---------- ----------
Total Income From Investment Operations . . . . . . . . . . . . . . . . . . . . .45 .25
---------- ----------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.41) --
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . (.32) --
---------- ----------
Total Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.73) --
---------- ----------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12.65 $ 12.93
---------- ----------
---------- ----------
TOTAL RETURN (%)(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.53 1.97
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . . . . . . . . . . . . . . . . . . . . 23,771 13,979
Ratios to average net assets (%)(b):
Operating expenses, net (c) . . . . . . . . . . . . . . . . . . . . . . . . . . .45 .35
Operating expenses, gross (c) . . . . . . . . . . . . . . . . . . . . . . . . . .72 1.14
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.00 .16
Portfolio turnover rate (%)(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 93.28 106.68
</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.
(d) Calculation is based on average month-end shares outstanding.
16 Annual Report
<PAGE>
SSgA LIFE SOLUTIONS
BALANCED FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
August 31, 1998
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
INVESTMENTS
DOMESTIC EQUITIES - 39.0%
SSgA Matrix Equity Fund (Note 4). . . . . . . . . 1,449,096 $ 22,722
SSgA S&P 500 Index Fund . . . . . . . . . . . . . 396,702 7,704
SSgA Small Cap Fund . . . . . . . . . . . . . . . 312,879 4,994
----------
35,420
----------
INTERNATIONAL EQUITIES - 15.4%
SSgA Active International Fund (Note 4) . . . . . 1,235,620 11,417
SSgA Emerging Markets Fund. . . . . . . . . . . . 397,990 2,595
----------
14,012
----------
BONDS - 42.9%
SSgA Bond Market Fund (Note 4). . . . . . . . . . 3,007,473 31,127
SSgA Intermediate Fund (Note 4) . . . . . . . . . 777,060 7,802
----------
38,929
----------
SHORT-TERM ASSETS - 2.7%
SSgA Money Market Fund (a). . . . . . . . . . . . 2,488,469 2,488
----------
TOTAL INVESTMENTS - 100.0%
(identified cost $96,271)(b). . . . . . . . . . . . . . . . . . 90,849
----------
OTHER ASSETS AND LIABILITIES
Deferred organization expenses (Note 2) . . . . . . . . . . . . 18
Receivable for investments sold . . . . . . . . . . . . . . . . 56
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . 11
Liabilities (Note 4) . . . . . . . . . . . . . . . . . . . . . (130)
----------
TOTAL OTHER ASSETS AND LIABILITIES,
NET - 0.0% . . . . . . . . . . . . . . . . . . . . . . . . . . (45)
----------
NET ASSETS - 100.0% . . . . . . . . . . . . . . . . . . . . . . $ 90,804
----------
----------
</TABLE>
18 Annual Report
<PAGE>
SSgA LIFE SOLUTIONS
BALANCED FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
MARKET
VALUE
(000)
----------
<S> <C>
NET ASSETS CONSIST OF:
Undistributed net investment income . . . . . . . . . . . . . . $ 1,206
Accumulated net realized gain (loss). . . . . . . . . . . . . . 353
Unrealized appreciation (depreciation) on investments . . . . . (5,422)
Shares of beneficial interest . . . . . . . . . . . . . . . . . 7
Additional paid-in capital. . . . . . . . . . . . . . . . . . . 94,660
----------
NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 90,804
----------
----------
NET ASSET VALUE, offering and redemption price per share:
($90,803,920 divided by 7,010,274 shares of $.001 par value
shares of beneficial interest outstanding). . . . . . . . . . $ 12.95
----------
----------
</TABLE>
(a) At cost, which approximates market.
(b) 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 Fiscal Year Ended August 31, 1998
Amounts
in thousands
<S> <C> <C>
INVESTMENT INCOME:
Income distributions from Underlying Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,980
EXPENSES (Notes 2 and 4):
Distribution fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 41
Fund accounting fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Amortization of deferred organization expenses . . . . . . . . . . . . . . . . . . 6
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
--------------
Total Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 296
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,684
--------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 668
Capital gain distributions from Underlying Funds . . . . . . . . . . . . . . . . . 3,159 3,827
--------------
Net change in unrealized appreciation or depreciation of investments . . . . . . . . . . . . . . . . . . (6,414)
--------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,587)
--------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . . . $ (903)
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20 Annual Report
<PAGE>
SSgA LIFE SOLUTIONS
BALANCED FUND
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Fiscal Years Ended August 31,
Amounts in thousands
1998 1997*
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,684 $ 6
Net realized gain (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . 3,827 --
Net change in unrealized appreciation or depreciation . . . . . . . . . . . . (6,414) 992
---------- ----------
Net increase (decrease) in net assets resulting from operations. . . . . . (903) 998
---------- ----------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,063) --
Net realized gain on investments. . . . . . . . . . . . . . . . . . . . . . . (1,900) --
---------- ----------
Total Distributions to Shareholders. . . . . . . . . . . . . . . . . . . . (3,963) --
---------- ----------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from
Fund share transactions (Note 5) . . . . . . . . . . . . . . . . . . . . 48,667 46,005
---------- ----------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . 43,801 47,003
NET ASSETS
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,003 --
---------- ----------
End of period (including undistributed net investment income of
$1,206 and $6, respectively) . . . . . . . . . . . . . . . . . . . . . . . $ 90,804 $ 47,003
---------- ----------
---------- ----------
</TABLE>
* For the period July 1, 1997 (commencement of operations) to August 31, 1997.
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 each
period and other performance information derived from the financial statements.
1998 1997*
---------- ----------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . $ 13.98 $ 13.69
---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . .50 --
Capital gain distributions from Underlying Funds. . . . . . . . . . . . . . .56(d) --
Net realized and unrealized gain (loss) on investments. . . . . . . . . . . (1.01) .29
---------- ----------
Total Income From Investment Operations. . . . . . . . . . . . . . . . . .05 .29
---------- ----------
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . (.56) --
Net realized gain on investments. . . . . . . . . . . . . . . . . . . . . . (.52) --
---------- ----------
Total Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . (1.08) --
---------- ----------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . $ 12.95 $ 13.98
---------- ----------
---------- ----------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33 2.12
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted). . . . . . . . . . . . . . . . . . 90,804 47,003
Ratios to average net assets (%)(b):
Operating expenses, net (c). . . . . . . . . . . . . . . . . . . . . . . .36 .35
Operating expenses, gross (c). . . . . . . . . . . . . . . . . . . . . . .36 .49
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . 2.07 .07
Portfolio turnover rate (%)(b). . . . . . . . . . . . . . . . . . . . . . . 101.40 51.61
</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.
(d) Calculation is based on average month-end shares outstanding.
22 Annual Report
<PAGE>
SSgA LIFE SOLUTIONS
GROWTH FUND
STATEMENT OF NET ASSETS
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
INVESTMENTS
DOMESTIC EQUITIES - 54.3%
SSgA Matrix Equity Fund . . . . . . . . . . . . . 1,184,449 $ 18,572
SSgA S&P 500 Index Fund . . . . . . . . . . . . . 324,992 6,311
SSgA Small Cap Fund . . . . . . . . . . . . . . . 256,368 4,092
----------
28,975
----------
INTERNATIONAL EQUITIES - 20.9%
SSgA Active International Fund (Note 4) . . . . . 986,491 9,115
SSgA Emerging Markets Fund. . . . . . . . . . . . 316,747 2,065
----------
11,180
----------
BONDS - 21.7%
SSgA Bond Market Fund . . . . . . . . . . . . . . 897,340 9,288
SSgA Intermediate Fund. . . . . . . . . . . . . . 230,840 2,318
----------
11,606
----------
SHORT-TERM ASSETS - 3.2%
SSgA Money Market Fund (a). . . . . . . . . . . . 1,721,024 1,721
----------
TOTAL INVESTMENTS - 100.1%
(identified cost $59,387)(b). . . . . . . . . . . . . . . . . . 53,482
----------
OTHER ASSETS AND LIABILITIES
Deferred organization expenses (Note 2) . . . . . . . . . . . . 18
Receivable for investments sold . . . . . . . . . . . . . . . . 26
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . 9
Liabilities (Note 4). . . . . . . . . . . . . . . . . . . . . . (103)
----------
TOTAL OTHER ASSETS AND LIABILITIES,
NET - (0.1%) . . . . . . . . . . . . . . . . . . . . . . . . . (50)
----------
NET ASSETS - 100.0% . . . . . . . . . . . . . . . . . . . . . . $ 53,432
----------
----------
</TABLE>
24 Annual Report
<PAGE>
SSgA LIFE SOLUTIONS
GROWTH FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
MARKET
VALUE
(000)
----------
<S> <C>
NET ASSETS CONSIST OF:
Undistributed net investment income . . . . . . . . . . . . . . $ 478
Accumulated net realized gain (loss). . . . . . . . . . . . . . 59
Unrealized appreciation (depreciation) on investments . . . . . (5,905)
Shares of beneficial interest . . . . . . . . . . . . . . . . . 4
Additional paid-in capital. . . . . . . . . . . . . . . . . . . 58,796
----------
NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 53,432
----------
----------
NET ASSET VALUE, offering and redemption price per share:
($ 53,431,736 divided by 4,103,027 shares of $.001 par
value shares of beneficial interest outstanding) . . . . . . $ 13.02
----------
----------
</TABLE>
(a) At cost, which approximates market.
(b) 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 Fiscal Year Ended August 31, 1998
Amounts
in thousands
<S> <C> <C>
INVESTMENT INCOME:
Income distributions from Underlying Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,036
EXPENSES (Notes 2 and 4):
Distribution fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27
Fund accounting fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Amortization of deferred organization expenses . . . . . . . . . . . . . . . . . . 6
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
--------------
Total Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 818
--------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286
Capital gain distributions from Underlying Funds . . . . . . . . . . . . . . . . . 3,706 3,992
--------------
Net change in unrealized appreciation or depreciation of investments . . . . . . . . . . . . . . . . . . (6,889)
--------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,897)
--------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . . . $ (2,079)
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
26 Annual Report
<PAGE>
SSgA LIFE SOLUTIONS
GROWTH FUND
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Fiscal Years Ended August 31,
Amounts in thousands
1998 1997*
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 818 $ 7
Net realized gain (loss). . . . . . . . . . . . . . . . . . . . . . . . . . 3,992 --
Net change in unrealized appreciation or depreciation . . . . . . . . . . . (6,889) 984
------------ ------------
Net increase (decrease) in net assets resulting from operations. . . . . (2,079) 991
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . (825) --
In excess of net investment income. . . . . . . . . . . . . . . . . . . . . (1,350) --
Net realized gain on investments. . . . . . . . . . . . . . . . . . . . . . (2,112) --
------------ ------------
Total Distributions to Shareholders. . . . . . . . . . . . . . . . . . . (4,287) --
------------ ------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from
Fund share transactions (Note 5) . . . . . . . . . . . . . . . . . . . . 16,195 42,612
------------ ------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . 9,829 43,603
NET ASSETS
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,603 --
------------ ------------
End of period (including undistributed net investment income of
$478 and $7, respectively) . . . . . . . . . . . . . . . . . . . . . . . . $ 53,432 $ 43,603
------------ ------------
------------ ------------
</TABLE>
* For the period July 1, 1997 (commencement of operations) to August 31, 1997.
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 each
period and other performance information derived from the financial statements.
1998 1997*
---------- ----------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . $ 14.79 $ 14.44
---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38 --
Capital gain distributions from Underlying Funds. . . . . . . . . . . . . . . 1.02(d) --
Net realized and unrealized gain (loss) on investments. . . . . . . . . . . . (1.77) .35
---------- ----------
Total Income From Investment Operations. . . . . . . . . . . . . . . . . . (.37) .35
---------- ----------
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.27) --
In excess of net investment income. . . . . . . . . . . . . . . . . . . . . . (.44) --
Net realized gain on investments. . . . . . . . . . . . . . . . . . . . . . . (.69) --
---------- ----------
Total Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.40) --
---------- ----------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . $ 13.02 $ 14.79
---------- ----------
---------- ----------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2.68) 2.42
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted). . . . . . . . . . . . . . . . . . . 53,432 43,603
Ratios to average net assets (%)(b):
Operating expenses, net (c) . . . . . . . . . . . . . . . . . . . . . . . .41 .35
Operating expenses, gross (c) . . . . . . . . . . . . . . . . . . . . . . .41 .54
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . 1.52 .09
Portfolio turnover rate (%)(b). . . . . . . . . . . . . . . . . . . . . . . . 67.66 39.49
</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.
(d) Calculation is based on average month-end shares outstanding.
28 Annual Report
<PAGE>
SSgA
LIFE SOLUTIONS FUNDS
NOTES TO FINANCIAL STATEMENTS
August 31, 1998
1. ORGANIZATION
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 21 investment portfolios which are in operation as
of August 31, 1998. 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, 1998
OBJECTIVES OF THE UNDERLYING FUNDS:
The Life Solutions Funds are comprised of various combinations of the
Underlying Funds. Each of the Life Solutions Funds will invest in at least
six of the Underlying Funds. The Board of Trustees has approved investment
in all of the Underlying Funds (except Tax Free Money Market). The
fundamental investment objectives of the Underlying Funds utilized by the
Life Solutions Funds are listed below.
SSgA S&P 500 INDEX FUND: To seek to replicate the total return of the S&P
500 Index.
SSgA MATRIX EQUITY FUND: To provide total returns that exceed over time the
S&P 500 Index through investment in equity securities.
SSgA SMALL CAP FUND: To maximize total return through investment in equity
securities; under normal market conditions, at least 65% of total assets
will be invested in securities of smaller capitalized issuers.
SSgA GROWTH AND INCOME FUND: To achieve long-term capital growth, current
income and growth of income primarily through investments in equity
securities.
SSgA ACTIVE INTERNATIONAL FUND: To provide long-term capital growth by
investing primarily in securities of foreign issuers.
SSgA EMERGING MARKETS FUND: To provide maximum total return, primarily
through capital appreciation, by investing in securities of foreign
issuers.
SSgA BOND MARKET FUND: To maximize total return by investing in fixed
income securities, including, but not limited to, those represented by the
Lehman Brothers Aggregate Bond Index (the "LBAB" Index").
SSgA INTERMEDIATE FUND: To seek a high level of current income while
preserving principal by investing primarily in a diversified portfolio of
debt securities with a dollar-weighted average maturity between three and
ten years.
SSgA YIELD PLUS FUND: To seek high current income and liquidity by
investing primarily in a diversified portfolio of high-quality debt
securities and by maintaining a portfolio duration of one year or less.
SSgA MONEY MARKET FUND: To maximize current income, to the extent
consistent with the preservation of capital and liquidity and the
maintenance of a stable $1.00 per share net asset value, by investing in
dollar dominated securities with remaining maturities of one year or less.
SSgA US GOVERNMENT MONEY MARKET FUND: To maximize current income to the
extent consistent with the preservation of capital and liquidity and the
maintenance of a stable $1.00 per share net asset value, by investing in
obligations of the US Government or its agencies or instrumentalities with
remaining maturities of one year or less.
30 Annual Report
<PAGE>
SSgA
LIFE SOLUTIONS FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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 consistently 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, each fund 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 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 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, 1998 are as follows:
<TABLE>
<CAPTION>
NET
UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
-------------- -------------- -------------- --------------
<S> <C> <C> <C>
Income and Growth Fund $ 24,501,916 $ 480,440 $ (1,237,356) $ (756,916)
Balanced Fund 96,623,697 1,283,474 (7,058,171) (5,774,697)
Growth Fund 59,576,711 357,803 (6,452,514) (6,094,711)
</TABLE>
Annual Report 31
<PAGE>
SSgA
LIFE SOLUTIONS FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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.
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 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.
The following reclassifications have been made at August 31, 1998:
<TABLE>
<CAPTION>
UNDISTRIBUTED ACCUMULATED ADDITIONAL
NET INVESTMENT NET REALIZED PAID-IN
INCOME GAIN (LOSS) CAPITAL
-------------- ------------ ------------
<S> <C> <C> <C>
Income and Growth Fund $ 307,706 $ (301,691) $ (6,015)
Balanced Fund 1,579,716 (1,573,701) (6,015)
Growth Fund 1,827,571 (1,821,556) (6,015)
</TABLE>
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.
DEFERRED ORGANIZATION EXPENSES: The Funds have incurred expenses in
connection with their organization and initial registration. These costs
have been deferred and are being amortized over sixty months on a
straight-line basis.
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the year ended August 31, 1998, purchases and
sales of investment securities aggregated to the following:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
Income and Growth Fund $ 28,196,818 $ 17,653,615
Balanced Fund 124,925,736 78,416,218
Growth Fund 51,266,576 35,137,325
</TABLE>
32 Annual Report
<PAGE>
SSgA
LIFE SOLUTIONS FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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 year ended August 31, 1998, the Adviser
voluntarily agreed to reimburse the Funds for all expenses (except 12b-1
distribution and shareholder servicing 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 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) up 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%.
On August 10, 1998, Frank Russell Company entered into an agreement with
The Northwestern Mutual Life Insurance Co., an insurance organization,
pursuant to which Northwestern Mutual Life will acquire all of the
outstanding common stock of Frank Russell Company.
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%, for the period September 1, 1997
to December 31, 1997, and up to a maximum of 5%, for the period January 1,
1998 to August 31, 1998 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.
Annual Report 33
<PAGE>
SSgA
LIFE SOLUTIONS FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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 no carryover expenses
as of August 31, 1998. Service Organizations will be responsible for prompt
transmission of purchase and redemption orders and may charge fees for
their services.
The Funds have entered into service agreements with State Street Solutions
("Solutions"), State Street Brokerage Services, Inc. ("SSBSI"), the State
Street Retirement Investment Division ("RIS"), (collectively the "Agents"),
as well as other non-related party service providers. For these services,
the Fund pays .13%, .13%, and .13%, respectively, based upon the average
daily value of all Fund shares held by or for customers of these Agents.
The Funds were charged shareholder servicing expenses by Solutions, SSBSI
and RIS as follows:
<TABLE>
<CAPTION>
STATE STREET STATE STREET
STATE STREET BROKERAGE RETIREMENT
SOLUTIONS SERVICES, INC. INVESTMENT DIVISION
-------------- --------------- -------------------
<S> <C> <C> <C>
Income and Growth Fund $15,640 $4,056 $ 2,008
Balanced Fund 59,676 2,293 30,747
Growth Fund 55,672 573 3,390
</TABLE>
BOARD OF TRUSTEES: The Investment Company pays each Trustee not affiliated
with the Investment Company a retainer of $48,000 annually, $1,500 for each
board meeting attended, an additional $1,500 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.
34 Annual Report
<PAGE>
SSgA
LIFE SOLUTIONS FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
ACCRUED FEES PAYABLE TO AFFILIATES AS OF AUGUST 31, 1998 WERE AS FOLLOWS:
<TABLE>
<CAPTION>
INCOME AND BALANCED GROWTH
GROWTH FUND FUND FUND
----------- ----------- -----------
<S> <C> <C> <C>
Fund accounting fees $ 5,448 $ 5,722 $ 5,779
Distribution fees 8,696 38,470 23,176
Shareholder servicing fees 2,791 11,089 10,546
----------- ----------- -----------
$ 16,935 $ 55,281 $ 39,501
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
BENEFICIAL INTEREST: In the Income and Growth Fund, as of August 31, 1998,
three shareholders (two who were also affiliates of the Investment Company)
were record owners of approximately 64%, 23% and 13%, respectively, of the
total outstanding shares of the Fund. In the Balanced Fund, as of August
31, 1998, two shareholders (who were also affiliates of the Investment
Company) were record owners of approximately 59% and 38%, respectively, of
the total outstanding shares of the Fund. In the Growth Fund, as of August
31, 1998, one shareholder (who was also an affiliate of the Investment
Company) was a record owner of approximately 91% of the total outstanding
shares of the Fund.
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 Funds which are or were affiliates are
as follows:
<TABLE>
<CAPTION>
PURCHASE SALES DIVIDEND
AFFILIATE COST COST INCOME
------------ ------------ ------------
<S> <C> <C> <C>
INCOME AND GROWTH FUND
SSgA Bond Market Fund $ 11,441,404 $ 690,775 $ 421,300
------------ ------------ ------------
------------ ------------ ------------
BALANCED FUND
SSgA Matrix Equity Fund $ 24,741,679 $ 5,865,132 $ 2,614,065
SSgA Active International Fund 12,729,884 2,223,686 364,421
SSgA Bond Market Fund 30,117,899 4,048,089 1,128,153
SSgA Intermediate Fund 7,606,063 3,550,660 341,723
------------ ------------ ------------
$ 75,195,525 $ 15,687,567 $ 4,448,362
------------ ------------ ------------
------------ ------------ ------------
GROWTH FUND
SSgA Active International Fund $ 10,735,631 $ 13,902,066 $ 397,586
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The market values of the above transactions are shown on the accompanying
Statements of Net Assets.
Annual Report 35
<PAGE>
SSgA
LIFE SOLUTIONS FUNDS
<TABLE>
<CAPTION>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
5. FUND SHARE TRANSACTIONS
(AMOUNTS IN THOUSANDS)
FOR THE YEAR ENDED AUGUST 31,
--------------------------------------------------------
1998 1997*
-------------------------- --------------------------
INCOME AND GROWTH FUND SHARES DOLLARS SHARES DOLLARS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Proceeds from shares sold 1,006 $13,056 1,104 $14,055
Proceeds from reinvestment
of distributions 69 858 -- --
Payments for shares redeemed (278) (3,644) (23) (303)
----------- ----------- ----------- -----------
Total net increase (decrease) 797 $10,270 1,081 $13,752
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
BALANCE FUND
Proceeds from shares sold 4,038 $54,512 3,654 $50,095
Proceeds from reinvestment
of distributions 306 3,963 -- --
Payments for shares redeemed (697) (9,808) (292) (4,090)
----------- ----------- ----------- -----------
Total net increase (decrease) 3,647 $48,667 3,362 $46,005
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
GROWTH FUND
Proceeds from shares sold 1,118 $16,120 3,000 $43,384
Proceeds from reinvestment
of distributions 323 4,287 -- --
Payments for shares redeemed (287) (4,212) (51) (772)
----------- ----------- ----------- -----------
Total net increase (decrease) 1,154 $16,195 2,949 $42,612
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
* For the period July 1, 1997 (Commencement of operations) to
August 31, 1997.
36 Annual Report
<PAGE>
SSgA
LIFE SOLUTIONS FUNDS
TAX INFORMATION
August 31, 1998 (Unaudited)
The Funds paid the following distributions from net long-term capital gains
during its taxable year ended August 31, 1998. Pursuant to Section 852 of the
Internal Revenue Code, the Funds designate the following amounts as 20% capital
gain dividends for their taxable year ended August 31, 1998.
<TABLE>
<CAPTION>
20%
TOTAL DESIGNATION
------------ ------------
<S> <C> <C>
Income and Growth Fund $ 298,274 $ 104,135
Balanced Fund 1,585,713 551,297
Growth Fund 1,884,160 657,999
</TABLE>
Please consult a tax advisor for questions about federal or state income tax
laws.
Annual Report 37
<PAGE>
SSgA LIFE SOLUTIONS FUNDS
One International Place, 27th 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
Mark E. Swanson, Assistant Secretary and Principal Accounting Officer
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.
One International Place, 27th 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
PricewaterhouseCoopers LLP
One Post Office Square
Boston, Massachusetts 02109
38 Annual Report
<PAGE>
SSgA-Registered Trademark- Funds
MONEY MARKET FUND
Annual Report
August 31, 1998
Table of Contents
Page
Chairman's Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion and Analysis . . . . . . . . . . . . . . . 6
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 19
Fund Management and Service Providers . . . . . . . . . . . . . . . . . . . 23
"SSgA-Registered Trademark- " IS A REGISTERED TRADEMARK 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, 1998. Over the past year, the Funds have grown to include
twenty-one 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 SSgA Money Market Fund. I hope you find this
information a useful tool as you review your overall investment strategy.
The SSgA Funds have also opened four additional funds in fiscal 1998. The
investment objectives for these four new funds are as follows:
The SSgA Special Equity Fund seeks to maximize total return through investment
in mid- and small capitalization US equity securities. This Fund was opened as
an alternative investment strategy for the SSgA Small Cap Fund that closed to
new investors on August 31, 1998.
The SSgA International Growth Opportunities Fund seeks to provide long-term
capital growth by investing primarily in securities of foreign issuers.
The SSgA High Yield Bond Fund seeks to maximize total return by investing
primarily in non investment-grade bonds, including, but not limited to, those
represented by the Lehman Brothers High Yield Bond Index.
The SSgA Real Estate Equity Fund seeks to provide income and capital growth by
investing primarily in publicly traded securities of real estate companies.
During the past fiscal year, the SSgA Funds were proud to announce that the SSgA
S&P 500 Index Fund and the SSgA Yield Plus Fund each achieved five years of
operational history. We are proud of our long term record and look forward to
having additional funds reach their five year anniversary.
SSgA intends to proceed with the evolution of new products and services while
committing to your investment needs. We will continue to develop our
professional expertise by focusing on the expansion of both our global resources
and our diversified product lines.
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. As a result, the portfolios we
manage benefit from the knowledge of the entire team.
Ms. Lisa Hatfield, Principal, has been the portfolio manager primarily
responsible for investment decisions regarding the SSgA Money Market Fund since
January 1998. 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 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]
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
DATES MONEY MARKET SALOMON BROTHERS 3-MONTH TREASURY BILL INDEX**
<S> <C> <C>
$10,000 $10,000
1989 $10,919 $10,848
1990 $11,846 $11,732
1991 $12,685 $12,501
1992 $13,278 $13,033
1993 $13,709 $13,434
1994 $14,168 $13,911
1995 $14,950 $14,687
1996 $15,752 $15,473
1997 $16,583 $16,285
1998 $17,480 $17,136
</TABLE>
YEARLY PERIODS ENDED AUGUST 31
SSgA
MONEY MARKET FUND
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ------------ ------------ ------------
<S> <C> <C>
1 Year $ 10,541 5.41%
5 Years $ 12,751 4.98%+
10 Years $ 17,474 5.74%+
</TABLE>
SALOMON BROTHERS
3-MONTH TREASURY BILL INDEX
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ------------ ------------ ------------
<S> <C> <C>
1 Year $ 10,522 5.22%
5 Years $ 12,757 4.99%+
10 Years $ 17,130 5.53%+
</TABLE>
SEE RELATED NOTES ON THE FOLLOWING PAGE.
PERFORMANCE REVIEW
The Fund had a one-year total return of 5.41% for the fiscal year ended August
31, 1998. This compares favorably to the return of 5.22% 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.
Effects of the Asian crisis, which began in October 1997, had many economists
predicting a global slowdown in growth and increased deflationary pressures.
Viewed as a "safe haven", yields on US Treasury securities flattened, with the
two-year, 10-year and 30-year falling 13, 36, and 48 basis points, respectively,
during the fourth quarter. Although the Federal Reserve Open Market Committee
(FOMC) maintained a "tightening bias" throughout the second half of 1997,
turmoil in the Asian region reduced the need to
6 Annual Report
<PAGE>
SSgA MONEY MARKET FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
raise the Federal Funds rate in response to strong domestic growth. Market
participants, as well as the Federal Reserve, were forced to take a wait-and-see
approach on the economic situation. As year end approached, signs were already
appearing that some slowdown in growth would reach American soil.
In the first quarter of 1998, GDP advanced at an annualized rate of 5.4% while
the unemployment rate stood at 4.6%. Domestic economic releases confirmed
strong growth and a non-inflationary environment. Although the domestic backdrop
showed signs of an overheating economy, rising uncertainty of the Asian epidemic
served to keep the Fed on hold. Chairman Greenspan confirmed this dichotomy in
testimonies before Congress, praising the economy's performance but warned
against impending fallout from Asia. These comments made by the Federal Reserve
set the markets in a trading range which has persisted throughout the rest of
the fiscal year. For the year, one- and 30-year Treasuries fell 29 and 115 basis
points, respectively. During the second quarter of 1998, impact from Asian trade
drag came full force as GDP advanced only 1.6%. Underlying fundamentals for
domestic growth persisted. High levels of consumer confidence and strong
consumer and capital spending, combined with unemployment of 4.3% inspired a
tightening bias.
MARKET AND 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's net assets
have trended higher, increasing by 27% over the past year, with new cash flows
invested in a combination of fixed and floating rate securities. During this
period, the Manager felt the Fed was on hold and that the flatness of the yield
curve would persist, making floating rate securities more attractive. The Fund's
investment strategy concentrated primarily on indices such as one- and
three-month LIBOR (London Interbank Offering Rate), with a small allocation
based on Fed Funds and Prime rates. The average maturity of the Fund ranged from
56 to 63 days over the last year, as the Fund selectively purchased one-year
securities to extend its average days to maturity.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS (BY INVESTMENT TYPE,
AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31, 1998
<S> <C>
Corporate Bonds and Notes 32.5%
Domestic Commercial Paper 22.4
Yankee Certificates of Deposit 21.2
Repurchase Agreements 5.9
Eurodollar Time Deposits 5.5
</TABLE>
- --------------------------------------------------------------------------------
NOTES: THE FOLLOWING NOTES RELATE TO THE GROWTH OF $10,000 GRAPH AND TABLE ON
THE PRECEDING PAGE.
* Assumes initial investment on September 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:
In our opinion, the accompanying statement of assets and liabilities and
statement of net assets, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of SSgA Money Market Fund (the "Fund") at
August 31, 1998, the results of its operations for the fiscal year then ended
and 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. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at August 31, 1998 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
Boston, Massachusetts
October 8, 1998
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
MONEY MARKET FUND
STATEMENT OF NET ASSETS
August 31, 1998
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
August 31, 1998
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY (000)
-------------------------------------------------------
<S> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES - 32.4%
Abbey National Treasury Services PLC (a) . . . . . . . . . . . . . . $ 25,000 5.535% 07/26/99 $ 24,981
AVCO Financial Services (MTN)(a) . . . . . . . . . . . . . . . . . . 25,000 5.628 11/17/98 25,000
Bank of America, National (MTN). . . . . . . . . . . . . . . . . . . 75,000 5.570 09/21/98 75,000
Bank of Boston (MTN) . . . . . . . . . . . . . . . . . . . . . . . . 25,000 5.600 11/03/98 25,000
Bank of Scotland (MTN)(a). . . . . . . . . . . . . . . . . . . . . . 40,000 5.588 09/22/98 39,999
Bank One Milwaukee N.A.. . . . . . . . . . . . . . . . . . . . . . . 25,000 5.550 01/29/99 24,992
Bayerische Vereinsbank (MTN) . . . . . . . . . . . . . . . . . . . . 2,953 5.250 02/01/99 2,947
Comerica Bank (a). . . . . . . . . . . . . . . . . . . . . . . . . . 100,000 5.558 11/09/98 99,989
Comerica Bank (MTN)(a) . . . . . . . . . . . . . . . . . . . . . . . 50,000 5.552 02/09/99 49,989
Comerica Bank (a). . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 5.553 06/10/99 24,987
Deutsche Bank AG (a) . . . . . . . . . . . . . . . . . . . . . . . . 50,000 5.516 08/16/99 49,967
General Electric Capital Corp. (MTN) (a) . . . . . . . . . . . . . . 25,000 5.610 05/04/99 25,000
General Motors Acceptance Corp. (MTN)(a) . . . . . . . . . . . . . . 25,000 5.568 09/21/98 24,998
Goldman Sachs Group (MTN)(a) . . . . . . . . . . . . . . . . . . . . 50,000 5.688 03/26/99 50,000
IBM Credit Corp. (MTN)(a). . . . . . . . . . . . . . . . . . . . . . 25,000 5.518 07/06/99 24,980
JP Morgan & Co. (MTN). . . . . . . . . . . . . . . . . . . . . . . . 50,000 5.750 03/10/99 50,000
JP Morgan & Co. (a). . . . . . . . . . . . . . . . . . . . . . . . . 50,000 5.619 04/05/99 49,991
JP Morgan & Co. (MTN)(a) . . . . . . . . . . . . . . . . . . . . . . 30,000 5.542 07/07/99 29,983
Key Bank N.A. (a). . . . . . . . . . . . . . . . . . . . . . . . . . 75,000 5.550 02/24/99 74,968
Liquid Asset Backed Securities Trust (a) . . . . . . . . . . . . . . 38,391 5.656 02/26/99 38,391
Merrill Lynch & Co. (MTN)(a) . . . . . . . . . . . . . . . . . . . . 60,000 5.608 10/19/98 59,999
Merrill Lynch & Co. (MTN)(a) . . . . . . . . . . . . . . . . . . . . 50,000 5.618 04/06/99 49,997
Merrill Lynch & Co. (MTN)(a) . . . . . . . . . . . . . . . . . . . . 25,000 5.608 08/13/99 24,998
Morgan Stanley Dean Witter (a) . . . . . . . . . . . . . . . . . . . 50,000 5.608 10/26/98 50,000
Morgan Stanley Dean Witter (a) . . . . . . . . . . . . . . . . . . . 40,000 5.612 11/06/98 40,000
National Australia Bank, Ltd. (MTN). . . . . . . . . . . . . . . . . 40,000 5.735 10/13/98 39,997
National City Bank, Indianapolis (MTN) . . . . . . . . . . . . . . . 25,000 5.725 04/19/99 24,992
National City Bank, Indiana (a). . . . . . . . . . . . . . . . . . . 25,000 5.546 03/08/99 24,992
National City Bank, Kentucky (a) . . . . . . . . . . . . . . . . . . 25,000 5.542 03/08/99 24,992
Nationsbank Corp. (MTN). . . . . . . . . . . . . . . . . . . . . . . 23,000 5.120 10/05/98 22,991
Nationsbank Corp. (MTN)(a) . . . . . . . . . . . . . . . . . . . . . 20,000 5.638 12/01/98 20,000
Nationsbank Corp. (MTN)(a) . . . . . . . . . . . . . . . . . . . . . 30,000 6.150 12/14/98 30,000
Nationsbank Corp. (MTN)(a) . . . . . . . . . . . . . . . . . . . . . 75,000 5.638 01/05/99 75,000
Nationsbank N.A. (a) . . . . . . . . . . . . . . . . . . . . . . . . 28,000 5.563 12/21/98 27,994
Old Kent Bank & Trust Co. (a). . . . . . . . . . . . . . . . . . . . 25,000 5.650 11/19/98 24,998
Ontario, Province of (MTN) . . . . . . . . . . . . . . . . . . . . . 6,457 7.000 01/27/99 6,491
</TABLE>
Annual Report 9
<PAGE>
SSgA
MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY (000)
-------------------------------------------------------
<S> <C> <C> <C> <C>
PepsiCo (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 50,000 5.498% 08/19/99 $ 49,946
PNC Bank, Pittsburgh (a) . . . . . . . . . . . . . . . . . . . . . . 50,000 5.600 09/02/98 50,000
PNC Bank, Pittsburgh (a) . . . . . . . . . . . . . . . . . . . . . . 25,000 5.526 07/02/99 24,984
PNC Bank, Pittsburgh (a) . . . . . . . . . . . . . . . . . . . . . . 40,000 5.516 08/16/99 39,972
STEERS-A37 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,793 5.648 10/25/11 48,793
Trust Investment Enhanced Return Securities (a). . . . . . . . . . . 50,000 5.671 10/15/03 50,000
Walt Disney Co. (MTN)(a) . . . . . . . . . . . . . . . . . . . . . . 25,000 5.615 02/10/99 24,997
Wells Fargo & Company (MTN)(a) . . . . . . . . . . . . . . . . . . . 25,000 5.543 10/20/98 24,998
Wells Fargo & Company (MTN)(a) . . . . . . . . . . . . . . . . . . . 75,000 5.543 10/26/98 74,992
Westpac Banking (MTN). . . . . . . . . . . . . . . . . . . . . . . . 30,000 5.535 01/22/99 29,995
----------
TOTAL CORPORATE BONDS AND NOTES (cost $1,777,280) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,777,280
----------
DOMESTIC CERTIFICATES OF DEPOSIT - 2.2%
Fleet National Bank. . . . . . . . . . . . . . . . . . . . . . . . . 50,000 5.600 11/18/98 50,000
Harris Trust & Savings Bank. . . . . . . . . . . . . . . . . . . . . 70,500 5.560 09/15/98 70,500
----------
TOTAL DOMESTIC CERTIFICATES OF DEPOSIT (cost $120,500). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,500
----------
EURODOLLAR CERTIFICATES OF DEPOSIT - 1.8%
Abbey National PLC . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 5.600 12/09/98 50,000
Nationsbank Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 5.600 09/08/98 50,000
----------
TOTAL EURODOLLAR CERTIFICATES OF DEPOSIT (cost $100,000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
----------
EURODOLLAR TIME DEPOSITS - 5.5%
Canadian Imperial Bank . . . . . . . . . . . . . . . . . . . . . . . 175,000 6.000 09/01/98 175,000
Societe Generale . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 5.875 09/01/98 50,000
Societe Generale . . . . . . . . . . . . . . . . . . . . . . . . . . 75,000 5.600 10/06/98 75,000
----------
TOTAL EURODOLLAR TIME DEPOSITS (cost $300,000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300,000
----------
FOREIGN COMMERCIAL PAPER - 4.8%
Abbey National PLC . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 5.480 02/04/99 24,406
Commerzbank. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 5.460 02/12/99 48,756
</TABLE>
10 Annual Report
<PAGE>
SSgA
MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY (000)
-------------------------------------------------------
<S> <C> <C> <C> <C>
Commonwealth Bank of Australia . . . . . . . . . . . . . . . . . . . $ 55,000 5.510% 09/17/98 $ 54,865
Cregem North American, Inc.. . . . . . . . . . . . . . . . . . . . . 50,000 5.510 09/11/98 49,923
Nordbanken NA, Inc. (MTN). . . . . . . . . . . . . . . . . . . . . . 58,000 5.530 10/19/98 57,572
Unifunding Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 5.510 10/15/98 24,833
----------
TOTAL FOREIGN COMMERCIAL PAPER (cost $260,355). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260,355
----------
DOMESTIC COMMERCIAL PAPER - 22.3%
Asset Securitization Cooperative Corp. . . . . . . . . . . . . . . . 75,000 5.540 09/02/98 74,988
Asset Securitization Cooperative Corp. . . . . . . . . . . . . . . . 50,000 5.520 09/24/98 49,824
Asset Securitization Cooperative Corp. . . . . . . . . . . . . . . . 55,000 5.520 10/23/98 54,561
Delaware Funding Corp. . . . . . . . . . . . . . . . . . . . . . . . 40,000 5.530 09/10/98 39,945
Delaware Funding Corp. . . . . . . . . . . . . . . . . . . . . . . . 30,000 5.530 10/09/98 29,825
Diageo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,000 5.510 09/11/98 34,946
du Pont (E.I.) de Nemours & Co.. . . . . . . . . . . . . . . . . . . 25,000 5.500 09/03/98 24,992
du Pont (E.I.) de Nemours & Co.. . . . . . . . . . . . . . . . . . . 55,000 5.510 09/22/98 54,823
du Pont (E.I.) de Nemours & Co.. . . . . . . . . . . . . . . . . . . 100,000 5.505 09/25/98 99,633
du Pont (E.I.) de Nemours & Co.. . . . . . . . . . . . . . . . . . . 25,000 5.510 10/08/98 24,858
Falcon Asset Securitization. . . . . . . . . . . . . . . . . . . . . 20,000 5.530 09/08/98 19,978
Falcon Asset Securitization. . . . . . . . . . . . . . . . . . . . . 29,395 5.520 09/10/98 29,354
Falcon Asset Securitization. . . . . . . . . . . . . . . . . . . . . 50,000 5.530 10/15/98 49,662
General Electric Capital Corp. . . . . . . . . . . . . . . . . . . . 25,000 5.540 10/13/98 24,838
General Electric Capital Corp. . . . . . . . . . . . . . . . . . . . 30,000 5.540 10/20/98 29,774
General Electric Capital Corp. . . . . . . . . . . . . . . . . . . . 30,000 5.500 10/28/98 29,739
General Electric Capital Corp. . . . . . . . . . . . . . . . . . . . 25,000 5.500 11/02/98 24,763
General Electric Capital Corp. . . . . . . . . . . . . . . . . . . . 30,000 5.510 11/10/98 29,679
General Electric Capital Corp. . . . . . . . . . . . . . . . . . . . 30,000 5.470 12/09/98 29,549
Goldman Sachs Group L.P. . . . . . . . . . . . . . . . . . . . . . . 50,000 5.510 11/04/98 49,510
Goldman Sachs Group L.P. . . . . . . . . . . . . . . . . . . . . . . 75,000 5.490 11/19/98 74,096
KFW International, Inc.. . . . . . . . . . . . . . . . . . . . . . . 30,000 5.500 09/11/98 29,954
KFW International, Inc.. . . . . . . . . . . . . . . . . . . . . . . 46,000 5.500 09/14/98 45,909
KFW International, Inc.. . . . . . . . . . . . . . . . . . . . . . . 45,000 5.510 09/17/98 44,890
Merrill Lynch & Co., Inc.. . . . . . . . . . . . . . . . . . . . . . 35,000 5.500 12/02/98 34,508
JP Morgan & Co.. . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 5.510 09/14/98 24,950
New Center Asset Trust . . . . . . . . . . . . . . . . . . . . . . . 25,000 5.520 09/22/98 24,920
</TABLE>
Annual Report 11
<PAGE>
SSgA
MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY (000)
-------------------------------------------------------
<S> <C> <C> <C> <C>
Preferred Receivables Funding Corp.. . . . . . . . . . . . . . . . . $ 20,000 5.540% 09/08/98 $ 19,978
Preferred Receivables Funding Corp.. . . . . . . . . . . . . . . . . 23,575 5.530 09/17/98 23,517
Preferred Receivables Funding Corp.. . . . . . . . . . . . . . . . . 20,235 5.530 09/24/98 20,164
Prudential Funding Corp. . . . . . . . . . . . . . . . . . . . . . . 25,000 5.520 09/11/98 24,962
Prudential Funding Corp. . . . . . . . . . . . . . . . . . . . . . . 50,000 5.480 12/09/98 49,248
----------
TOTAL DOMESTIC COMMERCIAL PAPER (cost $1,222,337) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,222,337
----------
TIME DEPOSITS - 2.0%
Chase Manhattan Bank . . . . . . . . . . . . . . . . . . . . . . . . 107,919 6.000 09/01/98 107,919
----------
TOTAL TIME DEPOSITS (cost $107,919) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107,919
----------
UNITED STATES GOVERNMENT AGENCIES - 1.7%
Federal Farm Credit Bank (MTN) . . . . . . . . . . . . . . . . . . . 10,750 5.650 10/01/98 10,749
Federal Home Loan Mortgage Corp. . . . . . . . . . . . . . . . . . . 60,000 5.420 10/08/98 59,666
Federal Home Loan Mortgage Corp. (a) . . . . . . . . . . . . . . . . 25,000 5.448 01/26/99 24,992
----------
TOTAL UNITED STATES GOVERNMENT AGENCIES (cost $95,407). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,407
----------
YANKEE CERTIFICATES OF DEPOSIT - 21.2%
Abbey National PLC (MTN) . . . . . . . . . . . . . . . . . . . . . . 35,000 5.540 01/20/99 34,997
Abbey National PLC (MTN) . . . . . . . . . . . . . . . . . . . . . . 30,000 5.550 01/26/99 29,994
Abbey National Treasury Services PLC (MTN) . . . . . . . . . . . . . 15,000 5.580 08/19/99 14,988
Bank of Nova Scotia. . . . . . . . . . . . . . . . . . . . . . . . . 35,000 5.730 10/29/98 35,006
Bank of Nova Scotia. . . . . . . . . . . . . . . . . . . . . . . . . 11,000 5.715 10/30/98 10,996
Bank of Scotland (a) . . . . . . . . . . . . . . . . . . . . . . . . 50,000 5.532 08/31/99 49,966
Barclays Bank PLC (a). . . . . . . . . . . . . . . . . . . . . . . . 100,000 5.670 12/16/98 99,985
Barclays Bank PLC. . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 5.560 02/25/99 24,993
Barclays Bank PLC. . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 5.645 03/02/99 24,993
Barclays Bank PLC (a). . . . . . . . . . . . . . . . . . . . . . . . 50,000 5.516 06/01/99 49,972
Barclays Bank PLC (a). . . . . . . . . . . . . . . . . . . . . . . . 40,000 5.521 06/02/99 39,976
Bayerische Hypotheken. . . . . . . . . . . . . . . . . . . . . . . . 20,000 5.940 10/22/98 19,998
Bayerische Landesbank (a). . . . . . . . . . . . . . . . . . . . . . 70,000 5.516 05/10/99 69,962
Bayerische Landesbank (a). . . . . . . . . . . . . . . . . . . . . . 100,000 5.521 06/29/99 99,935
</TABLE>
12 Annual Report
<PAGE>
SSgA
MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY (000)
-------------------------------------------------------
<S> <C> <C> <C> <C>
Canadian Imperial Bank . . . . . . . . . . . . . . . . . . . . . . . $ 50,000 5.550% 02/10/99 $ 49,989
Canadian Imperial Bank . . . . . . . . . . . . . . . . . . . . . . . 25,000 5.730 04/27/99 24,989
Deutsche Bank. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 5.670 01/08/99 24,997
Deutsche Bank. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 5.730 04/16/99 24,993
Dresdner Bank AG . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000 5.510 01/15/99 39,994
Morgan Guaranty Trust Co.. . . . . . . . . . . . . . . . . . . . . . 16,000 5.710 01/08/99 16,001
National Westminster Bank PLC. . . . . . . . . . . . . . . . . . . . 40,000 5.700 03/31/99 39,978
Royal Bank of Canada . . . . . . . . . . . . . . . . . . . . . . . . 25,000 5.600 08/23/99 24,984
Svenska Handelsbanken. . . . . . . . . . . . . . . . . . . . . . . . 25,000 5.820 04/30/99 24,989
Svenska Handelsbanken. . . . . . . . . . . . . . . . . . . . . . . . 25,000 5.790 05/07/99 24,990
Svenska Handelsbanken (a). . . . . . . . . . . . . . . . . . . . . . 50,000 5.536 06/01/99 49,970
Svenska Handelsbanken. . . . . . . . . . . . . . . . . . . . . . . . 35,000 5.685 07/23/99 34,981
Svenska Handelsbanken. . . . . . . . . . . . . . . . . . . . . . . . 50,000 5.610 08/17/99 49,972
Toronto Dominion . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 5.600 08/17/99 24,984
Westpac Banking (MTN). . . . . . . . . . . . . . . . . . . . . . . . 15,000 5.680 03/04/99 14,996
Westpac Banking. . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000 5.670 03/26/99 14,996
Westpac Banking. . . . . . . . . . . . . . . . . . . . . . . . . . . 17,000 5.730 06/09/99 16,992
Westpac Banking (MTN). . . . . . . . . . . . . . . . . . . . . . . . 50,000 5.610 08/17/99 49,973
----------
TOTAL YANKEE CERTIFICATES OF DEPOSIT (cost $1,158,529). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,158,529
----------
TOTAL INVESTMENTS (amortized cost $5,142,327) - 93.9% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,142,327
----------
REPURCHASE AGREEMENTS - 5.9%
Agreement with Deutsche Bank of $50,000
acquired August 31, 1998 at 5.950% to be repurchased at $50,008
on September 1, 1998, collateralized by:
$49,580 United States Treasury Notes
5.875% due 03/31/99 valued at $51,055 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000
Agreement with Lehman Brothers of $275,000
acquired August 31, 1998 at 5.850% to be repurchased at $275,045
on September 1,1998, collateralized by:
$270,960 United States Treasury Notes
5.625% due 05/15/01 valued at $280,513 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 275,000
----------
TOTAL REPURCHASE AGREEMENTS (identified cost $325,000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325,000
----------
</TABLE>
Annual Report 13
<PAGE>
SSgA
MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
VALUE
(000)
----------
<S> <C>
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS
(cost $5,467,327)(b) - 99.8% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,467,327
OTHER ASSETS AND LIABILITIES, NET - 0.2% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,999
----------
NET ASSETS - 100.0% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,477,326
----------
----------
</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.
14 Annual Report
<PAGE>
SSgA
MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1998
Amounts in
thousands (except
per share amount)
<S> <C>
ASSETS
Investments at amortized cost which approximates market (Note 2) . . . . . . . . . . . . . . . . . . . . $ 5,142,327
Repurchase agreements (identified cost $325,000)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . 325,000
Interest receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,779
--------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,505,106
LIABILITIES
Payables:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24,310
Accrued fees to affiliates and trustees (Note 4) . . . . . . . . . . . . . . . . . 3,164
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 306
--------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,780
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,477,326
--------------
--------------
NET ASSETS CONSIST OF:
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,918)
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,479
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,473,765
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,477,326
--------------
--------------
NET ASSET VALUE, offering and redemption price per share:
($5,477,325,654 divided by 5,479,243,313 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 15
<PAGE>
SSgA
MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Fiscal Year Ended August 31, 1998
Amounts
in thousands
<S> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 289,579
EXPENSES (Notes 2 and 4):
Advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,731
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,533
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 985
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,328
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 377
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,028
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 394
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
--------------
Total Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,698
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 268,881
--------------
REALIZED GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 796
--------------
Net increase in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . . . . . . . $ 269,677
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 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
1998 1997
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 268,881 $ 219,867
Net realized gain (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . 796 697
------------ ------------
Net increase in net assets resulting from operations . . . . . . . . . . . 269,677 220,564
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . (268,881) (219,867)
------------ ------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from
Fund share transactions (Note 5) . . . . . . . . . . . . . . . . . . . . . 1,198,365 802,059
------------ ------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . 1,199,161 802,756
NET ASSETS
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,278,165 3,475,409
------------ ------------
End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,477,326 $ 4,278,165
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 17
<PAGE>
SSgA
MONEY MARKET FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each
period and other performance information derived from the financial statements.
YEAR ENDED AUGUST 31,
----------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . .0528 .0516 .0524 .0538 .0330
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . (.0528) (.0516) (.0524) (.0538) (.0330)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
TOTAL RETURN (%) . . . . . . . . . . . . . . . . . . . . . . . . 5.41 5.28 5.36 5.52 3.35
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted). . . . . . . . . . . 5,477,326 4,278,165 3,475,409 2,752,895 3,020,796
Ratios to average net assets (%):
Operating expenses . . . . . . . . . . . . . . . . . . . . .41 .39 .39 .39 .36
Net investment income. . . . . . . . . . . . . . . . . . . 5.28 5.17 5.20 5.37 3.33
</TABLE>
18 Annual Report
<PAGE>
SSgA
MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1998
1. ORGANIZATION
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 21 investment portfolios which are in operation as
of August 31, 1998. 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 fund 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, 1998, the Fund had a net tax basis capital loss carryover of
$1,917,639, which may be applied against any realized net taxable gains in
each succeeding year or until its expiration date of August 31, 2003,
whichever occurs first.
Annual Report 19
<PAGE>
SSgA
MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 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.
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, 1998, purchases,
sales, and maturities of investment securities, excluding US Government and
Agency obligations and repurchase agreements, for the Fund aggregated to
$164,813,179,201, $477,139,451, and $163,276,786,000, respectively.
For the year ended August 31, 1998, purchases, sales, and maturities of US
Government and Agency obligations, excluding repurchase agreements
aggregated to $730,643,096, $290,388,516, and $801,000,000, 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
20 Annual Report
<PAGE>
SSgA
MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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%, for the period September 1, 1997 to December 31, 1997, and up to a
maximum of 5%, for the period January 1, 1998 to August 31, 1998 of the
asset-based fee determined in (i)); (iii) out-of-pocket expenses; and (iv)
start-up costs for new funds.
On August 10, 1998, Frank Russell Company entered into an agreement with
The Northwestern Mutual Life Insurance Co., an insurance organization,
pursuant to which Northwestern Mutual Life will acquire all of the
outstanding common stock of Frank Russell Company.
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 charged 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"), the
Adviser's Metropolitan Division of Commercial Banking ("Commercial
Banking") and State Street Solutions ("Solutions")(collectively the
"Agents"), as well as several unaffiliated service providers. For these
services, the Fund pays .025%, .175%, .175%, .175% and .175% to the
Adviser, SSBSI, RIS, Commercial Banking, and Solutions, 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, 1998, the Fund was charged
shareholder servicing expenses of $1,272,091, $342,254, $83,611, $158,036,
and $34,464, by the Adviser, SSBSI, RIS, Commercial Banking, and Solutions,
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 21
<PAGE>
SSgA
MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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, 1998.
BOARD OF TRUSTEES: The Investment Company pays each Trustee not affiliated
with the Investment Company a retainer of $48,000 annually, $1,500 for each
board meeting attended, an additional $1,500 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, 1998 WERE
AS FOLLOWS:
<TABLE>
<S> <C>
Advisory fees $ 2,302,520
Administration fees 140,102
Custodian fees 243,585
Distribution fees 187,910
Shareholder servicing fees 212,550
Transfer agent fees 64,026
Trustees' fees 13,863
-----------
$ 3,164,556
-----------
-----------
</TABLE>
5. FUND SHARE TRANSACTIONS (ON A CONSTANT DOLLAR BASIS):
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS)
FOR THE YEARS ENDED AUGUST 31,
------------------------------
1998 1997
------------- --------------
<S> <C> <C>
Proceeds from shares sold 73,966,529 59,548,475
Proceeds from reinvestment
of distributions 238,349 194,301
Payments for shares redeemed (73,006,513) (58,940,717)
------------- -------------
Total net increase (decrease) 1,198,365 802,059
------------- -------------
------------- -------------
</TABLE>
22 Annual Report
<PAGE>
SSgA MONEY MARKET FUND
One International Place, 27th 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
Mark E. Swanson, Assistant Secretary and Principal Accounting Officer
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.
One International Place, 27th 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
PricewaterhouseCoopers LLP
One Post Office Square
Boston, Massachusetts 02109
Annual Report 20
<PAGE>
SSgA-Registered Trademark- Funds
MATRIX EQUITY FUND
Annual Report
August 31, 1998
Table of Contents
Page
Chairman's Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion and Analysis . . . . . . . . . . . . . . 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-Registered Trademark-" IS A REGISTERED TRADEMARK 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, 1998. Over the past year, the Funds have grown to include
twenty-one 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 SSgA Matrix Equity Fund. I hope you find this
information a useful tool as you review your overall investment strategy.
The SSgA Funds have also opened four additional funds in fiscal 1998. The
investment objectives for these four new funds are as follows:
The SSgA Special Equity Fund seeks to maximize total return through investment
in mid- and small capitalization US equity securities. This Fund was opened as
an alternative investment strategy for the SSgA Small Cap Fund that closed to
new investors on August 31, 1998.
The SSgA International Growth Opportunities Fund seeks to provide long-term
capital growth by investing primarily in securities of foreign issuers.
The SSgA High Yield Bond Fund seeks to maximize total return by investing
primarily in non investment-grade bonds, including, but not limited to, those
represented by the Lehman Brothers High Yield Bond Index.
The SSgA Real Estate Equity Fund seeks to provide income and capital growth by
investing primarily in publicly traded securities of real estate companies.
During the past fiscal year, the SSgA Funds were proud to announce that the SSgA
S&P 500 Index Fund and the SSgA Yield Plus Fund each achieved five years of
operational history. We are proud of our long term record and look forward to
having additional funds reach their five year anniversary.
SSgA intends to proceed with the evolution of new products and services while
committing to your investment needs. We will continue to develop our
professional expertise by focusing on the expansion of both our global resources
and our diversified product lines.
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. As a result, the portfolios we
manage benefit from the knowledge of the entire team.
Mr. Peter M. Stonberg, CFA, Principal, was the portfolio manager primarily
responsible for investment decisions regarding the SSgA Matrix Equity Fund for
the fiscal year ended August 31, 1998. Mr. Stonberg joined State Street in
1981. Prior to joining SSgA, he was a securities analyst with the Fidelity
group of mutual funds, Director of Research at the Mercantile National Bank in
Dallas, and a performance measurement consultant to major pension and endowment
funds in the Master Trust Division of State Street Bank and Trust Company. Mr.
Stonberg has taught courses in investment and computer disciplines. 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: Large capitalization US equity securities.
STRATEGY: The Fund management team uses a quantitative approach to investment
management, designed to uncover equity securities which are undervalued, with
superior growth potential. This quantitative investment approach involves a
modeling process to evaluate vast amounts of financial data and corporate
earnings forecasts. This structured and disciplined approach seeks to provide
long-term total returns in excess of the S&P 500-Registered Trademark- Index
through strong bottom-up stock selection within a risk controlled framework.
[GRAPH]
GROWTH OF $10,000 INVESTMENT
<TABLE>
<CAPTION>
DATES MATRIX EQUITY FUND S&P 500-REGISTERED TRADEMARK INDEX**
<S> <C> <C>
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
1998 $25,192 $26,887
</TABLE>
YEARLY PERIODS ENDED AUGUST 31
SSgA
MATRIX EQUITY FUND
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ------------ ------------ ------------
<S> <C> <C>
1 Year $ 10,209 2.09%
5 Years $ 20,733 15.70%+
Inception $ 25,192 15.74%+
</TABLE>
STANDARD & POOR'S-Registered Trademark-
500 Composite Stock Price Index
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ------------ ------------ ------------
<S> <C> <C>
1 Year $ 10,809 8.09%
5 Years $ 23,121 18.25%+
Inception $ 26,887 16.90%+
</TABLE>
SEE RELATED NOTES ON THE FOLLOWING PAGE.
PERFORMANCE REVIEW
For the fiscal year ended August 31, 1998, the SSgA Matrix Equity Fund had a
total return of 2.09% as compared to the S&P 500 Index results of 8.09%. This
underperformance was partially caused by the underperformance of stocks within
the technology sector, where the Fund held 18.5% in technology, 2.4% greater
than the S&P 500 Index weight. The industries within technology with the
greatest impact on the Fund's negative performance versus the benchmark were the
computer hardware and software industries. Stocks within the consumer staples
and cyclicals sectors also contributed to the Fund's negative performance.
The investment process employed by the Fund emphasizes quantitative modeling,
which implements an integrated growth and value bottom-up stock selection method
designed to outperform the benchmark index over the long-term. While risk
controls are used in portfolio construction, the Fund will take controlled
positions which deviate from the benchmark in those industries with fair
valuations and strong long-term
6 Annual Report
<PAGE>
SSgA MATRIX EQUITY FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
growth prospects. Because value is an integral component of the investment
process, the Fund will not be overweighted in stocks which the Manager views to
be excessively expensive.
As the Fund's investment process is disciplined and driven from the bottom-up,
overall strategy and approach does not deviate during times of underperformance
or market volatility. The Fund avoids responding suddenly to the current
investment environment through sector timing or top-down thematic investing. It
is this unwavering investment philosophy that seeks to add long-term value
versus the benchmark. When, in unusually volatile short-term periods, if Fund
performance lags the index due to the very nature the process, it is this strong
discipline that allows a consistent focus on meeting long-term objectives. This
disciplined approach dampened current period Fund returns in industries such as
food and beverage, where price momentum continued through the end of the period.
MARKET AND PORTFOLIO HIGHLIGHTS
Over the past twelve months ended August 31, 1998, the US equity market, as
measured by the S&P 500 Index, returned to normalcy in terms of volatility.
After three years of straight-up, historically unprecedented returns, the equity
market corrected in October 1997, primarily driven by the emerging Asian crisis.
However, the market soon shrugged off this overseas turmoil, pushing the large
cap US stock indices to new records. With many economies virtually collapsing
around the Pacific Rim, US corporate profits slowing, and signs of decelerating
economic growth around the world, the resilience of the US stock market
continued to surprise most investors. However, the stock market peak of July
1998 turned downward at the current fiscal year end. The US equity market is now
primarily responding to the continued financial markets crises overseas, and the
impacts that are finally being felt on our shores.
In this market environment, the largest of the large cap stocks continued to
dominate returns for the S&P 500 Index. As of August 31, 1998, the top 50
largest companies in the Index outperformed the bottom 450 companies by more
than 14% year to date. The factors driving this trend include the continued
posting of profits by the largest cap US firms, and the liquidity provided by
larger entities during this very popular US equity market. It appears that
speculation and momentum may be driving the prices of too many securities, given
the high absolute multiple of the S&P 500 Index, currently at 27 times next
year's earnings, as of August 31, 1998.
At the end of the fiscal year, the SSgA Matrix Equity Fund held 125 stocks with
market capitalizations ranging from $784 million to $260 billion, resulting in
an average weighted market capitalization of $58 billion. As the Fund's
objective is achieved through stock selection with a disciplined investment
approach, the portfolio will be fully invested at all times.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
(AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31, 1998
<S> <C>
Microsoft Corp. 3.8%
General Electric Co. 3.0
Lucent Technologies, Inc. 2.8
AT&T Corp. 2.3
Exxon Corp. 2.1
Pfizer, Inc. 2.1
Nationsbank Corp. 2.0
Amgen, Inc. 1.9
Chase Manhattan Corp. 1.9
Philip Morris Cos., Inc. 1.8
</TABLE>
- --------------------------------------------------------------------------------
---------------
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:
In our opinion, the accompanying statement of assets and liabilities and
statement of net assets, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of SSgA Matrix Equity Fund (the "Fund") at
August 31, 1998, the results of its operations for the fiscal year then ended
and 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. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at August 31, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
Boston, Massachusetts
October 8, 1998
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
MATRIX EQUITY FUND
STATEMENT OF NET ASSETS
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
COMMON STOCKS - 98.9%
BASIC INDUSTRIES - 3.8%
Dow Chemical Co. 11,600 $ 905
du Pont (E.I.) de Nemours & Co. 31,500 1,817
Goodrich (B.F.) Co. 17,000 460
PPG Industries, Inc. 77,000 3,912
Premark International, Inc. 48,100 1,272
Solutia, Inc. 235,600 5,286
USX-U.S. Steel Group 166,500 3,486
----------
17,138
----------
CAPITAL GOODS - 5.9%
Aeroquip-Vickers, Inc. 13,500 544
Caterpillar, Inc. 126,400 5,333
Deere & Co. 103,600 3,412
General Electric Co. 165,700 13,256
Ingersoll-Rand Co. 39,800 1,582
National Service Industries, Inc. 54,700 2,038
----------
26,165
----------
CONSUMER BASICS - 19.5%
Abbott Laboratories 16,600 639
American Home Products Corp. 22,400 1,123
Amgen, Inc. (a) 140,500 8,571
Arterial Vascular Engineering, Inc. (a) 123,900 4,306
Becton, Dickinson & Co. 80,400 2,678
Bristol-Myers Squibb Co. 82,600 8,085
Cardinal Health, Inc. 30,700 2,686
Coca-Cola Co. (The) 115,900 7,548
Food Lion, Inc. Class B 46,500 462
Fort James Corp. 17,600 513
General Nutrition Companies, Inc. (a) 63,500 845
Interstate Bakeries Corp. 89,600 2,335
Johnson & Johnson 40,700 2,808
Kroger Co. (a) 74,000 3,330
Lilly (Eli) & Co. 20,900 1,369
McKesson Corp. 40,200 3,015
Merck & Co., Inc. 48,700 5,646
Pfizer, Inc. 101,600 9,449
Philip Morris Cos., Inc. 196,100 8,150
Procter & Gamble Co. 50,600 3,871
Quaker Oats Co. 43,800 2,327
Schering-Plough Corp. 12,900 1,109
Suiza Foods Corp. (a) 45,300 2,191
Wellpoint Health Networks, Inc. Class A (a) 67,000 3,576
----------
86,632
----------
CONSUMER DURABLES - 1.7%
Ford Motor Co. 67,200 2,957
General Motors Corp. 43,700 2,524
PACCAR, Inc. 47,500 1,941
----------
7,422
----------
CONSUMER NON-DURABLES - 10.4%
Anheuser-Busch Cos., Inc. 80,900 3,732
Avon Products, Inc. 13,000 817
Costco Companies, Inc. (a) 16,100 758
Dayton Hudson Corp. 73,700 2,653
Federated Department Stores, Inc. (a) 146,500 6,382
Home Depot, Inc. (The) 17,000 655
Intimate Brands, Inc. Class A 38,900 720
Lowe's Cos., Inc. 87,000 3,050
May Department Stores Co. 97,300 5,473
Ross Stores, Inc. 39,100 1,422
Sears Roebuck & Co. 96,000 4,362
TJX Cos., Inc. 308,400 6,881
V.F. Corp. 38,700 1,466
Wal-Mart Stores, Inc. 135,100 7,937
----------
46,308
----------
</TABLE>
Annual Report 9
<PAGE>
SSgA
MATRIX EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
CONSUMER SERVICES - 1.7%
Carnival Corp. Class A 84,000 $ 2,426
Disney (Walt) Co. 47,100 1,292
Tricon Global Restaurants, Inc. (a) 107,200 3,973
----------
7,691
----------
ENERGY - 6.2%
Amoco Corp. 33,500 1,518
Chevron Corp. 40,900 3,029
Energy East Corp. 31,300 1,409
Exxon Corp. 146,700 9,600
Global Industries, Inc. (a) 337,400 3,163
Mobil Corp. 93,200 6,442
Texaco, Inc. 47,600 2,645
----------
27,806
----------
FINANCE - 14.4%
Allstate Corp. 183,800 6,892
American Express Co. 1,800 140
American General Corp. 19,600 1,259
American International Group, Inc. 32,850 2,540
AmSouth Bancorp 56,250 1,934
BankAmerica Corp. 38,800 2,486
Bear Stearns Cos., Inc. 16,800 621
Chase Manhattan Corp. 159,200 8,438
Citicorp 9,000 973
Comerica, Inc. 93,800 4,901
Countrywide Credit Industries, Inc. 48,400 1,812
Equitable Companies, Inc. 17,000 972
First Union Corp. 53,100 2,575
FIRSTPLUS Financial Group, Inc. (a) 207,800 4,727
Lehman Brothers Holdings, Inc. 109,200 4,300
Marsh & McLennan Cos., Inc. 5,950 289
Morgan Stanley, Dean Witter, Discover and Co. 114,200 6,631
NationsBank Corp. 155,100 8,841
Republic of New York Corp. 68,200 2,813
Travelers, Inc. 24,800 1,100
----------
64,244
----------
GENERAL BUSINESS - 3.6%
AccuStaff, Inc. (a) 127,500 1,594
American Greetings Corp. Class A 21,500 787
Belo (A.H.) Corp. Class A 200 4
Computer Sciences Corp. 26,700 1,510
Gannett Co., Inc. 76,100 4,490
SBC Communications, Inc. 107,238 4,075
Valassis Communications, Inc. (a) 118,000 3,518
----------
15,978
----------
SHELTER - 0.3%
USG Corp. 29,900 1,286
----------
1,286
----------
TECHNOLOGY - 21.8%
Autodesk, Inc. 90,200 2,108
BMC Software, Inc. (a) 59,800 2,542
Cadence Design Systems, Inc. (a) 90,200 1,905
Cisco Systems, Inc. (a) 26,000 2,129
Computer Associates International, Inc. 67,750 1,829
EMC Corp. (a) 59,200 2,675
General Dynamics Corp. 52,400 2,492
General Instrument Corp. (a) 57,900 1,151
Guidant Corp. 61,900 3,822
Honeywell, Inc. 69,400 4,338
Intel Corp. 70,200 4,997
International Business Machines Corp. 37,400 4,212
</TABLE>
10 Annual Report
<PAGE>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
Lexmark International Group, Inc. Class A (a) 87,400 $ 5,293
Lockheed Martin Corp. 50,000 4,372
Lucent Technologies, Inc. 178,000 12,616
Microsoft Corp. (a) 177,200 17,000
Oracle Systems Corp. (a) 198,800 3,964
Storage Technology Corp. (a) 69,200 1,505
Tandy Corp. 53,700 2,930
Unisys Corp. (a) 131,000 2,350
United Technologies Corp. 77,100 5,595
Xerox Corp. 80,100 7,034
----------
96,859
----------
TRANSPORTATION - 0.4%
Trinity Industries, Inc. 56,100 1,697
----------
1,697
----------
UTILITIES - 9.2%
Ameritech Corp. 134,600 6,343
AT&T Corp. 200,900 10,070
Bell Atlantic Corp. 160,598 7,086
BellSouth Corp. 61,600 4,223
DTE Energy Co. 20,000 843
GPU, Inc. 32,300 1,213
GTE Corp. 31,400 1,570
PP&L Resources, Inc. 59,100 1,393
Public Service Enterprise Group, Inc. 87,300 3,197
U.S. West Communications Group 100,300 5,216
----------
41,154
----------
TOTAL COMMON STOCKS
(cost $443,102) 440,380
----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
<S> <C> <C>
SHORT-TERM INVESTMENTS - 1.5%
AIM Short Term Investment
Treasury Portfolio Class A (b) $ 31 $ 31
Federated Investors Prime
Obligations Fund (b) 6,668 6,668
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $6,699) 6,699
----------
TOTAL INVESTMENTS
(identified cost $449,801)(c) - 100.4% 447,079
OTHER ASSETS AND LIABILITIES,
NET - (0.4%) (2,002)
----------
NET ASSETS - 100.0% $ 445,077
----------
----------
</TABLE>
(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, 1998
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $449,801)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . $ 447,079
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000
Receivables:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 711
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,147
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168
--------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 456,105
LIABILITIES
Payables:
Investments purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,490
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 892
Accrued fees to affiliates and trustees (Note 4) . . . . . . . . . . . . . . . . . 611
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
--------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,028
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 445,077
--------------
--------------
NET ASSETS CONSIST OF:
Undistributed net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,038
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,290
Unrealized appreciation (depreciation) on investments. . . . . . . . . . . . . . . . . . . . . . . . . . (2,722)
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 372,443
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 445,077
--------------
--------------
NET ASSET VALUE, offering and redemption price per share:
($445,076,733 divided by 28,389,023 shares of $.001 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15.68
--------------
--------------
</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, 1998
Amounts in
thousands
<S> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,437
EXPENSES (Notes 2 and 4):
Advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,831
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 439
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
--------------
Expenses before reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,974
Expense reductions (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,469)
--------------
Expenses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,505
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,932
--------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93,449
Net change in unrealized appreciation or depreciation of investments . . . . . . . . . . . . . . . . . . (86,774)
--------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,675
--------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . $ 11,607
--------------
--------------
</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
1998 1997
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,932 $ 4,705
Net realized gain (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . 93,449 61,309
Net change in unrealized appreciation or depreciation . . . . . . . . . . . . (86,774) 61,311
------------ ------------
Net increase (decrease) in net assets resulting from operations. . . . . . 11,607 127,325
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,051) (4,696)
Net realized gain on investments. . . . . . . . . . . . . . . . . . . . . . . (74,385) (22,485)
------------ ------------
Total Distributions to Shareholders. . . . . . . . . . . . . . . . . . . . (79,436) (27,181)
------------ ------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from
Fund share transactions (Note 5) . . . . . . . . . . . . . . . . . . . . . 83,509 67,365
------------ ------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . 15,680 167,509
NET ASSETS
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 429,397 261,888
------------ ------------
End of period (including undistributed net investment income of
$1,038 and $1,157, respectively) . . . . . . . . . . . . . . . . . . . . . $ 445,077 $ 429,397
------------ ------------
------------ ------------
</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
period and other performance information derived from the financial statements.
YEAR ENDED AUGUST 31,
----------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . $ 18.41 $ 14.13 $ 13.93 $ 12.06 $ 11.95
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . .17 .21 .24 .28 .24
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . . . . . . . . . . . .29 5.43 1.64 1.93 .28
---------- ---------- ---------- ---------- ----------
Total Income From Investment Operations. . . . . . . . . . .46 5.64 1.88 2.21 .52
---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . (.19) (.22) (.24) (.28) (.23)
Net realized gain on investments. . . . . . . . . . . . . . . (3.00) (1.14) (1.44) (.06) (.09)
In excess of net realized gain on investments . . . . . . . . -- -- -- -- (.09)
---------- ---------- ---------- ---------- ----------
Total Distributions. . . . . . . . . . . . . . . . . . . . (3.19) (1.36) (1.68) (.34) (.41)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . $ 15.68 $ 18.41 $ 14.13 $ 13.93 $ 12.06
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
TOTAL RETURN(%). . . . . . . . . . . . . . . . . . . . . . . . . 2.09 42.75 14.67 18.81 4.41
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted). . . . . . . . . . . 445,077 429,397 261,888 198,341 130,764
Ratios to average net assets(%):
Operating expenses, net (a) . . . . . . . . . . . . . . . . . .69 .58 .66 .68 .58
Operating expenses, gross (a) . . . . . . . . . . . . . . . . .97 .96 1.04 1.06 .96
Net investment income . . . . . . . . . . . . . . . . . . . . .97 1.33 1.76 2.25 2.16
Portfolio turnover rate (%). . . . . . . . . . . . . . . . . . . 133.63 117.27 150.68 129.98 127.20
</TABLE>
(a) See Note 4 for current period amounts.
Annual Report 15
<PAGE>
SSgA
MATRIX EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1998
1. ORGANIZATION
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 21 investment portfolios which are in operation as
of August 31, 1998. 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.
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.
16 Annual Report
<PAGE>
SSgA
MATRIX EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
FEDERAL INCOME TAXES: Since the Investment Company is a Massachusetts
business trust, each fund 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, 1998 are as follows:
<TABLE>
<CAPTION>
NET
UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
-------------- -------------- -------------- --------------
<S> <C> <C> <C>
$ 449,801,000 $ 39,231,012 $ (41,953,012) $ (2,722,000)
</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 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.
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%.
Annual Report 17
<PAGE>
SSgA
MATRIX EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the year ended August 31, 1998, purchases and
sales of investment securities, excluding short-term investments,
aggregated to $668,180,995 and $662,929,273 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 four months ended December
31, 1997, the Adviser voluntarily agreed to waive .375% of its advisory fee
to the Fund. Beginning January 1, 1998, the Advisor voluntarily agreed to
waive .25% 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 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%, for the period
September 1, 1997 to December 31, 1997, and up to a maximum of 5%, for the
period January 1, 1998 to August 31, 1998, of the asset-based fee
determined in (i)); (iii) out-of-pocket expenses; and (iv) start-up costs
for new funds.
On August 10, 1998, Frank Russell Company entered into an agreement with
The Northwestern Mutual Life Insurance Co., an insurance organization,
pursuant to which Northwestern Mutual Life will acquire all of the
outstanding common stock of Frank Russell Company.
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.
18 Annual Report
<PAGE>
SSgA
MATRIX EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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 charged 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") the
Adviser's Metropolitan Division of Commercial Banking ("Commercial
Banking") and State Street Solutions ("Solutions")(collectively the
"Agents"), as well as several unaffiliated service providers. For these
services, the Fund pays .025%, .175%, .175%, .175%, and .175% to the
Adviser, SSBSI, RIS, Commercial Banking, and Solutions, 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, 1998, the Fund was charged
shareholder servicing expenses of $116,059, $2,827, $114,363 and $205,703,
by the Adviser, SSBSI, RIS, and Solutions, 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, 1998.
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 $221,282 for the year ended August 31,
1998.
BOARD OF TRUSTEES: The Investment Company pays each Trustee not affiliated
with the Investment Company a retainer of $48,000 annually, $1,500 for each
board meeting attended, an additional $1,500 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.
Annual Report 19
<PAGE>
SSgA
MATRIX EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
ACCRUED FEES PAYABLE TO AFFILIATES AND TRUSTEES AS OF AUGUST 31, 1998 WERE
AS FOLLOWS:
<TABLE>
<S> <C>
Advisory fees $ 455,501
Administration fees 14,488
Custodian fees 43,288
Distribution fees 12,230
Shareholder servicing fees 42,196
Transfer agent fees 36,793
Trustees' fees 6,044
-----------
$ 610,540
-----------
-----------
</TABLE>
BENEFICIAL INTEREST: As of August 31, 1998, three shareholders (two of
which were also affiliates of the Investment Company) were record owners
of approximately 26%, 14% and 11%, respectively, of the total
outstanding shares of the Fund.
5. FUND SHARE TRANSACTIONS
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS)
FOR THE YEARS ENDED AUGUST 31,
--------------------------------------------------------
1998 1997
-------------------------- --------------------------
SHARES DOLLARS SHARES DOLLARS
----------- ----------- ----------- -----------
<S> <C> <C> <C>
Proceeds from shares sold 11,656 $ 208,056 31,200 $ 545,016
Proceeds from reinvestment
of distributions 4,508 75,301 1,760 25,673
Payments for shares redeemed (11,100) (199,848) (28,170) (503,324)
----------- ----------- ----------- -----------
Total net increase (decrease) 5,064 $ 83,509 4,790 $ 67,365
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
6. LINE OF CREDIT
The Fund and several affiliated Funds (the "Participants") share in a $50
million revolving credit facility for temporary or emergency purposes,
including the meeting of redemption requests that otherwise might require
the untimely disposition of securities. The Participants are charged an
annual commitment fee of .065% on the average daily unused amount of the
Aggregate commitment, which is allocated among each of the Participants.
Interest, at the Federal Fund Rate plus .50% annually, is calculated based
on the market rates at the time of the borrowing. The Fund may borrow up to
a maximum of 33 1/3 percent of the value of its total assets under the
agreement.
7. DIVIDENDS
On September 1, 1998, the Board of Trustees declared a dividend of $.0365
from net investment income, payable on September 9, 1998 to shareholders of
record on September 2, 1998.
20 Annual Report
<PAGE>
SSgA
MATRIX EQUITY FUND
TAX INFORMATION
August 31, 1998 (Unaudited)
The Fund paid distributions of $34,448,082 from net long-term capital gains
during its taxable year ended August 31, 1998. Pursuant to Section 852 of the
Internal Revenue Code, the Fund designates $10,927,158 as 20% capital gain
dividends for its taxable year ended August 31, 1998.
Please consult a tax advisor for questions about federal or state income tax
laws.
Annual Report 21
<PAGE>
SSgA MATRIX EQUITY FUND
One International Place, 27th 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
Mark E. Swanson, Assistant Secretary and Principal Accounting Officer
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.
One International Place, 27th 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
PricewaterhouseCoopers LLP
One Post Office Square
Boston, Massachusetts 02109
22 Annual Report
<PAGE>
SSgA-Registered Trademark- FUNDS
PRIME MONEY MARKET FUND
Annual Report
August 31, 1998
Table of Contents
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion and Analysis . . . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . 17
Fund Management and Service Providers. . . . . . . . . . . . . . . . . . . . 21
"SSgA-Registered Trademark- " IS A REGISTERED TRADEMARK 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 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, 1998. Over the past year, the Funds have grown to include
twenty-one 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 SSgA Prime Money Market Fund. I hope you find
this information a useful tool as you review your overall investment strategy.
The SSgA Funds have also opened four additional funds in fiscal 1998. The
investment objectives for these four new funds are as follows:
The SSgA Special Equity Fund seeks to maximize total return through investment
in mid- and small capitalization US equity securities. This Fund was opened as
an alternative investment strategy for the SSgA Small Cap Fund that closed to
new investors on August 31, 1998.
The SSgA International Growth Opportunities Fund seeks to provide long-term
capital growth by investing primarily in securities of foreign issuers.
The SSgA High Yield Bond Fund seeks to maximize total return by investing
primarily in non investment-grade bonds, including, but not limited to, those
represented by the Lehman Brothers High Yield Bond Index.
The SSgA Real Estate Equity Fund seeks to provide income and capital growth by
investing primarily in publicly traded securities of real estate companies.
During the past fiscal year, the SSgA Funds were proud to announce that the SSgA
S&P 500 Index Fund and the SSgA Yield Plus Fund each achieved five years of
operational history. We are proud of our long term record and look forward to
having additional funds reach their five year anniversary.
SSgA intends to proceed with the evolution of new products and services while
committing to your investment needs. We will continue to develop our
professional expertise by focusing on the expansion of both our global resources
and our diversified product lines.
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. As a result, the portfolios we
manage benefit from the knowledge of the entire team.
Ms. Lisa Hatfield, Principal, has been the portfolio manager primarily
responsible for investment decisions regarding the SSgA Prime Money Market Fund
since January 1998. 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 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]
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION> PRIME MONEY SALOMON BROTHERS
DATES MARKET FUND 3-MONTH TREASURY BILL INDEX
<S> <C> <C>
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
1998 $12,716 $12,564
YEARLY PERIODS ENDED AUGUST 31
</TABLE>
SSgA PRIME MONEY MARKET FUND
<TABLE>
<CAPTION>
Period Ending Growth of Total
08/31/98 $10,000 Return
- ------------- ------------- -------------
<S> <C> <C>
1 Year $ 10,563 5.63%
Inception $ 12,716 5.46%+
</TABLE>
SALOMON BROTHERS 3-MONTH TREASURY BILL INDEX
<TABLE>
<CAPTION>
Period Ending Growth of Total
08/31/98 $10,000 Return
- ------------- ------------- -------------
<S> <C> <C>
1 Year $ 10,522 5.22%
Inception $ 12,564 5.20%+
</TABLE>
SEE RELATED NOTES ON THE FOLLOWING PAGE
PERFORMANCE REVIEW
The Fund had a one-year total return of 5.63% for the fiscal year ended August
31, 1998. This compares favorably to the return of 5.22% 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.
Effects of the Asian crisis, which began in October 1997, had many economists
predicting a global slowdown in growth and increased deflationary pressures.
Viewed as a "safe haven", yields on US Treasury securities flattened, with the
two-year, 10-year and 30-year falling 13, 36 and 48 basis points, respectively,
during the fourth quarter. Although the Federal Reserve Open Market Committee
(FOMC) maintained a "tightening bias" throughout the second half of 1997,
turmoil in the Asian region reduced the need to raise the Federal Funds rate in
response to strong domestic growth. Market participants, as well as the Federal
Reserve, were forced to take a wait-and-see approach on the economic situation.
As year end approached, signs were already appearing that some slowdown in
growth would reach American soil.
6 Annual Report
<PAGE>
SSgA PRIME MONEY MARKET FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
In the first quarter of 1998, GDP advanced at an annualized rate of 5.4% while
the unemployment rate stood at 4.6%. Domestic economic releases confirmed strong
growth and a non-inflationary environment. Although the domestic backdrop showed
signs of an overheating economy, rising uncertainty of the Asian epidemic served
to keep the Fed on hold. Chairman Greenspan confirmed this dichotomy in
testimonies before Congress, praising the economy's performance but warned
against impending fallout from Asia. These comments made by the Federal Reserve
set the markets in a trading range which has persisted throughout the rest of
the fiscal year. For the year, one- and 30-year Treasuries fell 29 and 115 basis
points, respectively. During the second quarter of 1998, impact from Asian trade
drag came full force as GDP advanced only 1.6%. Underlying fundamentals for
domestic growth persisted. High levels of consumer confidence and strong
consumer and capital spending, combined with unemployment of 4.3% inspired a
tightening bias.
MARKET AND 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 and providing competitive returns. The Fund's net
assets have trended higher, increasing by 51% over the past year, with new cash
flows invested in a combination of fixed and floating rate securities. During
this period, the Manager felt the Fed was on hold and that the flatness of the
yield curve would persist, making floating rate securities more attractive. The
Fund's investment strategy concentrated primarily on indices such as one- and
three-month LIBOR (London Interbank Offering Rate), with a small allocation
based on Fed Funds and Prime rates. The average maturity of the Fund ranged from
45 to 61 days over the last year, as the Fund selectively purchased one-year
securities to extend its average days to maturity.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS (BY INVESTMENT TYPE,
AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31, 1998
<S> <C>
Corporate Bonds and Notes 38.9%
Domestic Commercial Paper 16.4
Yankee Certificates of Deposit 13.0
Eurodollar Time Deposits 10.6
Repurchase Agreements 8.2
</TABLE>
- --------------------------------------------------------------------------------
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:
In our opinion, the accompanying statement of assets and liabilities and
statement of net assets, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of SSgA Prime Money Market Fund (the "Fund") at
August 31, 1998, the results of its operations for the fiscal year then ended
and 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 February 22, 1994 (commencement of
operations) to August 31, 1994, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at August 31, 1998 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
Boston, Massachusetts
October 8, 1998
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
PRIME MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
August 31, 1998
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY (000)
-------------------------------------------------------
<S> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES - 38.8%
Abbey National Treasury Services PLC (MTN)(a). . . . . . . . . . . . $ 20,000 5.535% 07/26/99 $ 19,985
AVCO Financial Services, Inc. (MTN)(a) . . . . . . . . . . . . . . . 25,000 5.628 11/17/98 25,000
BankBoston NA. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 5.600 11/03/98 25,000
Bayerishche Landesbank (MTN)(a). . . . . . . . . . . . . . . . . . . 35,000 5.512 05/10/99 34,981
Bayerishche Landesbank (MTN)(a). . . . . . . . . . . . . . . . . . . 25,000 5.521 06/29/99 24,984
Caterpillar Financial Services . . . . . . . . . . . . . . . . . . . 8,000 5.180 10/01/98 7,995
Comerica Bank, Michigan (MTN)(a) . . . . . . . . . . . . . . . . . . 20,000 5.548 09/11/98 20,000
Comerica Bank, Michigan (MTN)(a) . . . . . . . . . . . . . . . . . . 25,000 5.553 06/10/99 24,987
Comerica Bank, Michigan (MTN)(a) . . . . . . . . . . . . . . . . . . 15,000 5.515 07/23/99 14,989
Deutsche Bank AG (MTN)(a). . . . . . . . . . . . . . . . . . . . . . 25,000 5.516 08/16/99 24,984
Disney Walt Co. (MTN)(a) . . . . . . . . . . . . . . . . . . . . . . 15,000 5.615 02/10/99 14,998
Fleet National Bank (MTN)(a) . . . . . . . . . . . . . . . . . . . . 20,000 5.550 05/11/99 19,991
General Electric Capital Corp. (MTN)(a). . . . . . . . . . . . . . . 20,000 5.610 05/04/99 20,000
General Electric Capital Corp. (MTN)(a). . . . . . . . . . . . . . . 10,000 5.563 06/09/99 9,996
General Motors Acceptance Corp. (MTN)(a) . . . . . . . . . . . . . . 5,000 5.568 09/21/98 5,000
Goldman Sachs Group L.P. (MTN)(a). . . . . . . . . . . . . . . . . . 19,000 5.728 02/01/99 19,004
Goldman Sachs Group L.P. (MTN)(a). . . . . . . . . . . . . . . . . . 15,000 5.688 03/26/99 15,000
Household Financial Corp. (MTN)(a) . . . . . . . . . . . . . . . . . 20,000 5.648 07/26/99 20,000
IBM Credit Corp. (MTN)(a). . . . . . . . . . . . . . . . . . . . . . 30,000 5.538 10/23/98 29,997
IBM Credit Corp. (MTN)(a). . . . . . . . . . . . . . . . . . . . . . 15,000 5.518 07/06/99 14,988
JP Morgan & Co., Inc. (MTN). . . . . . . . . . . . . . . . . . . . . 20,000 5.750 03/10/99 20,000
JP Morgan & Co., Inc. (MTN)(a) . . . . . . . . . . . . . . . . . . . 20,000 5.542 07/07/99 19,988
Key Bank NA (MTN)(a) . . . . . . . . . . . . . . . . . . . . . . . . 25,000 5.550 02/24/99 24,989
Liquid Asset Backed Securities Trust (MTN)(a). . . . . . . . . . . . 19,195 5.648 02/26/99 19,195
Merrill Lynch & Co., Inc. (MTN)(a) . . . . . . . . . . . . . . . . . 25,000 5.608 08/13/99 24,998
Merrill Lynch & Co., Inc. (MTN)(a) . . . . . . . . . . . . . . . . . 10,000 5.888 02/08/99 10,011
Morgan Guaranty Trust Co.. . . . . . . . . . . . . . . . . . . . . . 25,000 5.550 02/04/99 24,993
Morgan Stanley Dean Witter (MTN)(a). . . . . . . . . . . . . . . . . 25,000 5.608 10/26/98 25,000
Morgan Stanley Dean Witter (MTN)(a). . . . . . . . . . . . . . . . . 5,000 5.908 03/01/99 5,007
National City Bank . . . . . . . . . . . . . . . . . . . . . . . . . 15,000 5.725 04/19/99 14,995
National City Bank (MTN)(a). . . . . . . . . . . . . . . . . . . . . 25,000 5.542 03/08/99 24,992
National City Bank (MTN)(a). . . . . . . . . . . . . . . . . . . . . 10,000 5.546 03/08/99 9,997
Nationsbank Corp. (MTN)(a) . . . . . . . . . . . . . . . . . . . . . 5,000 5.638 01/05/99 5,000
Nationsbank Corp. (MTN)(a) . . . . . . . . . . . . . . . . . . . . . 15,000 5.858 06/28/99 15,029
Nationsbank Corp. (MTN)(a) . . . . . . . . . . . . . . . . . . . . . 20,000 6.150 12/14/98 20,000
Nationsbank Corp. (MTN)(a) . . . . . . . . . . . . . . . . . . . . . 25,000 5.638 12/01/98 25,000
Old Kent Bank & Trust Co. (MTN)(a) . . . . . . . . . . . . . . . . . 15,000 5.650 11/19/98 14,999
PNC Bank NA (MTN)(a) . . . . . . . . . . . . . . . . . . . . . . . . 25,000 5.530 07/02/99 24,984
</TABLE>
Annual Report 9
<PAGE>
SSgA
PRIME MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY (000)
-------------------------------------------------------
<S> <C> <C> <C> <C>
PNC Bank NA (MTN)(a) . . . . . . . . . . . . . . . . . . . . . . . . $ 25,000 5.516% 08/16/99 $ 24,982
STEERS-A37 (MTN)(a). . . . . . . . . . . . . . . . . . . . . . . . . 48,793 5.648 10/25/11 48,793
Wells Fargo & Co. (MTN)(a) . . . . . . . . . . . . . . . . . . . . . 30,000 5.553 10/05/98 29,999
----------
TOTAL CORPORATE BONDS AND NOTES (cost $824,830). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 824,830
----------
DOMESTIC COMMERCIAL PAPER - 16.3%
Asset Securitization Cooperative Corp. . . . . . . . . . . . . . . . 30,000 5.540 09/02/98 29,995
Delaware Funding Corp. . . . . . . . . . . . . . . . . . . . . . . . 20,000 5.530 09/10/98 19,972
Diageo Capital PLC . . . . . . . . . . . . . . . . . . . . . . . . . 32,000 5.510 09/09/98 31,961
Dupont EI De Nemours & Co. . . . . . . . . . . . . . . . . . . . . . 20,000 5.510 09/22/98 19,936
Falcon Asset Securitization. . . . . . . . . . . . . . . . . . . . . 17,615 5.530 09/08/98 17,596
Falcon Asset Securitization. . . . . . . . . . . . . . . . . . . . . 22,000 5.520 09/16/98 21,949
Falcon Asset Securitization. . . . . . . . . . . . . . . . . . . . . 15,000 5.530 09/21/98 14,954
General Electric Capital Corp. . . . . . . . . . . . . . . . . . . . 15,000 5.540 10/20/98 14,887
General Electric Capital Corp. . . . . . . . . . . . . . . . . . . . 15,000 5.500 10/28/98 14,869
Goldman Sachs Group L.P. . . . . . . . . . . . . . . . . . . . . . . 20,000 5.490 11/19/98 19,759
JP Morgan & Co., Inc.. . . . . . . . . . . . . . . . . . . . . . . . 15,000 5.490 11/04/98 14,854
KFW International, Inc.. . . . . . . . . . . . . . . . . . . . . . . 20,000 5.500 09/11/98 19,969
Merrill Lynch & Co., Inc.. . . . . . . . . . . . . . . . . . . . . . 20,000 5.500 12/02/98 19,719
Preferred Receivables Funding Corp.. . . . . . . . . . . . . . . . . 26,915 5.520 09/10/98 26,878
Preferred Receivables Funding Corp.. . . . . . . . . . . . . . . . . 20,000 5.530 09/17/98 19,951
Prudential Funding Corp. . . . . . . . . . . . . . . . . . . . . . . 20,000 5.520 09/08/98 19,979
Salomon Smith Barney Holdings, Inc.. . . . . . . . . . . . . . . . . 20,000 5.520 11/09/98 19,788
----------
TOTAL DOMESTIC COMMERCIAL PAPER (cost $347,016). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 347,016
----------
FOREIGN COMMERCIAL PAPER - 4.2%
Abbey National Treasury Services PLC . . . . . . . . . . . . . . . . 20,000 5.480 02/04/99 19,525
Commonwealth Bank. . . . . . . . . . . . . . . . . . . . . . . . . . 15,000 5.510 09/17/98 14,963
Cregem North American, Inc.. . . . . . . . . . . . . . . . . . . . . 15,000 5.510 09/11/98 14,977
Den Danske Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 5.510 09/08/98 24,973
Unifunding, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000 5.510 10/15/98 14,899
----------
TOTAL FOREIGN COMMERCIAL PAPER (cost $89,337). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89,337
----------
</TABLE>
10 Annual Report
<PAGE>
SSgA
PRIME MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY (000)
-------------------------------------------------------
<S> <C> <C> <C> <C>
EURODOLLAR CERTIFICATES OF DEPOSIT - 3.3%
Abbey National Treasury Services PLC . . . . . . . . . . . . . . . . $ 20,000 5.600% 12/09/98 $ 20,000
Bank of Scotland . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 5.640 12/02/98 20,001
Nationsbank Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . 15,000 5.600 09/08/98 15,000
Svenska Handelsbanken. . . . . . . . . . . . . . . . . . . . . . . . 15,000 5.790 05/20/99 14,993
----------
TOTAL EURODOLLAR CERTIFICATES OF DEPOSIT (cost $69,994). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,994
----------
DOMESTIC TIME DEPOSITS - 4.3%
Chase Manhattan Bank . . . . . . . . . . . . . . . . . . . . . . . . 90,000 6.000 09/01/98 90,000
----------
TOTAL DOMESTIC TIME DEPOSITS (cost $90,000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,000
----------
EURODOLLAR TIME DEPOSITS - 10.6%
Canadian Imperial Bank . . . . . . . . . . . . . . . . . . . . . . . 70,000 5.875 09/01/98 70,000
Dresdner Bank AG . . . . . . . . . . . . . . . . . . . . . . . . . . 85,000 6.000 09/01/98 85,000
First Union National Bank . . . . . . . . . . . . . . . . . . . . . 45,163 6.000 09/01/98 45,163
Societe Generale . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 5.600 10/06198 25,000
----------
TOTAL EURODOLLAR TIME DEPOSITS (cost $225,163) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225,163
----------
UNITED STATES GOVERNMENT AGENCIES - 1.2%
Federal Home Loan Mortgage Corp. (a) . . . . . . . . . . . . . . . . 25,000 5.448 01/26/99 24,993
----------
TOTAL UNITED STATES GOVERNMENT AGENCIES (cost $24,993) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,993
----------
YANKEE CERTIFICATES OF DEPOSIT - 13.0%
Abbey National Treasury Services PLC . . . . . . . . . . . . . . . . 8,000 5.540 01/20/99 7,999
Barclays Bank PLC. . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 5.560 02/25/99 19,994
Barclays Bank PLC. . . . . . . . . . . . . . . . . . . . . . . . . . 15,000 5.645 03/02/99 14,996
Barclays Bank PLC (a). . . . . . . . . . . . . . . . . . . . . . . . 25,000 5.516 06/01/99 24,986
Barclays Bank PLC (a). . . . . . . . . . . . . . . . . . . . . . . . 15,000 5.521 06/02/99 14,991
Barclays Bank PLC (a). . . . . . . . . . . . . . . . . . . . . . . . 10,000 5.670 12/16/98 9,999
Canadian Imperial Bank . . . . . . . . . . . . . . . . . . . . . . . 5,000 5.940 10/23/98 5,000
Canadian Imperial Bank . . . . . . . . . . . . . . . . . . . . . . . 10,000 5.550 02/10/99 9,998
Den Danske Bank (a). . . . . . . . . . . . . . . . . . . . . . . . . 15,000 5.553 06/07/99 14,992
Deutsche Bank AG . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000 5.670 01/08/99 4,999
Deutsche Bank AG . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000 5.730 04/16/99 14,996
Dresdner Bank AG . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 5.510 01/15/99 19,997
</TABLE>
Annual Report 11
<PAGE>
SSgA
PRIME MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY (000)
-------------------------------------------------------
<S> <C> <C> <C> <C>
National Westminster Bank PLC. . . . . . . . . . . . . . . . . . . . $ 10,000 5.700% 03/31/99 $ 9,994
Royal Bank of Canada . . . . . . . . . . . . . . . . . . . . . . . . 15,000 5.600 08/23/99 14,990
Svenska Handelsbanken. . . . . . . . . . . . . . . . . . . . . . . . 15,000 5.790 05/07/99 14,994
Svenska Handelsbanken. . . . . . . . . . . . . . . . . . . . . . . . 15,000 5.685 07/23/99 14,992
Svenska Handelsbanken. . . . . . . . . . . . . . . . . . . . . . . . 15,000 5.610 08/17/99 14,992
Svenska Handelsbanken (a) . . . . . . . . . . . . . . . . . . . . . 25,000 5.536 06/01/99 24,985
Westpac Banking. . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 5.670 03/26/99 9,997
Westpac Banking. . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000 5.730 06/09/99 7,997
--------------
TOTAL YANKEE CERTIFICATES OF DEPOSIT (cost $275,888) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 275,888
--------------
TOTAL INVESTMENTS (amortized cost $1,947,221) - 91.7%. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,947,221
--------------
REPURCHASE AGREEMENT - 8.2%
Agreement with Lehman Brothers of $175,000
acquired August 31, 1998 at 5.850% to be repurchased at $175,028
on September 1, 1998, collateralized by:
$172,430 United States Treasury Notes
5.625% due 05/15/01 valued at $178,510. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175,000
--------------
TOTAL REPURCHASE AGREEMENT (identified cost $175,000). . . . . . . . . . . . . . . . . . . . . . . . . . . . 175,000
--------------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENT
(cost $2,122,221)(b) - 99.9% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,122,221
OTHER ASSETS AND LIABILITIES, NET - 0.1 %. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,799
--------------
NET ASSETS - 100.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,125,020
--------------
--------------
</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
PRIME MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1998
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at amortized cost which approximates market (Note 2) . . . . . . . . . . . . . . . . . . . . $ 1,947,221
Repurchase agreement (identified cost $175,000)(Note 2). . . . . . . . . . . . . . . . . . . . . . . . . 175,000
Interest receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,287
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
--------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,134,511
LIABILITIES
Payables:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,762
Accrued fees to affiliates and trustees (Note 4) . . . . . . . . . . . . . . . . . . 485
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244
--------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,491
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,125,020
--------------
--------------
NET ASSETS CONSIST OF:
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (7)
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,125
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,122,902
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,125,020
--------------
--------------
NET ASSET VALUE, offering and redemption price per share:
($2,125,019,622 divided by 2,125,038,500 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
PRIME MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Fiscal Year Ended August 31, 1998
Amounts
in thousands
<S> <C> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 98,042
EXPENSES (Notes 2 and 4):
Advisory fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,587
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 522
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 370
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 470
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 276
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 431
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Amortization of deferred organization expenses . . . . . . . . . . . . . . . . . . . . 6
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
--------------
Expenses before reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,888
Expense reductions (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,438)
--------------
Expenses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,450
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,592
--------------
REALIZED GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
--------------
Net increase in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . . . . . . . $ 94,630
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 Annual Report
<PAGE>
SSgA
PRIME MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Fiscal Years Ended August 31,
Amounts in thousands
1998 1997
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 94,592 $ 69,115
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 38
------------ ------------
Net increase in net assets resulting from operations. . . . . . . . . . . . . . 94,630 69,153
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (94,592) (69,115)
------------ ------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from
Fund share transactions (Note 5). . . . . . . . . . . . . . . . . . . . . . . . 718,719 310,594
------------ ------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . 718,757 310,632
NET ASSETS
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,406,263 1,095,631
------------ ------------
End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,125,020 $ 1,406,263
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 15
<PAGE>
SSgA
PRIME MONEY MARKET FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each
period and other performance information derived from the financial statements.
YEAR ENDED AUGUST 31,
------------------------------------------------------------
1998 1997 1996 1995 1994*
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . .0544 .0528 .0546 .0567 .0207
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . . . . (.0544) (.0528) (.0546) (.0567) (.0207)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . 5.63 5.52 5.60 5.82 2.09
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted). . . 2,125,020 1,406,263 1,095,631 1,076,630 432,224
Ratios to average net assets (%)(b):
Operating expenses, net (c) . . . . . . . . .20 .20 .20 .14 .16
Operating expenses, gross (c) . . . . . . . .28 .28 .25 .27 .32
Net investment income . . . . . . . . . . . 5.48 5.40 5.44 5.76 4.00
</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.
16 Annual Report
<PAGE>
SSgA
PRIME MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1998
1. ORGANIZATION
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 21 investment portfolios which are in operation as
of August 31, 1998. 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 fund 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, 1998, the Fund had a net tax basis capital loss carryover of
$48,676, which may be applied against any realized net taxable gains in
each succeeding year or until its expiration date of August 31, 2005,
whichever occurs first. As permitted by tax regulations, the Fund intends
to defer a net realized capital loss of $2,976 incurred from November 1,
1997 to August 31, 1998, and treat it as arising in fiscal year 1999.
Annual Report 17
<PAGE>
SSgA
PRIME MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 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.
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, 1998, purchases,
sales, and maturities of investment securities, excluding US Government and
Agency obligations and repurchase agreements, for the Fund aggregated to
$57,231,508,009, $414,809,947, and $56,188,803,000, respectively.
For the year ended August 31, 1998, purchases, sales and maturities of US
Government and Agency obligations, excluding repurchase agreements
aggregated to $39,972,085, $15,005,205, and $125,000,000, 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
18 Annual Report
<PAGE>
SSgA
PRIME MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
assets on an annual basis. As of August 31, 1998, the receivable 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%, for the period
September 1, 1997 to December 31, 1997, and up to a maximum of 5%, for the
period January 1, 1998 to August 31, 1998 of the asset-based fee determined
in (i)); (iii) out-of-pocket expenses; and (iv) start-up costs for new
funds.
On August 10, 1998, Frank Russell Company entered into an agreement with
The Northwestern Mutual Life Insurance Co., an insurance organization,
pursuant to which Northwestern Mutual Life will acquire all of the
outstanding common stock of Frank Russell Company.
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 charged3 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, 1998, the Fund
was charged shareholder servicing expenses of $431,218 by 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
Annual Report 19
<PAGE>
SSgA
PRIME MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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, 1998.
BOARD OF TRUSTEES: The Investment Company pays each Trustee not affiliated
with the Investment Company a retainer of $48,000 annually, $1,500 for each
board meeting attended, an additional $1,500 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, 1998 WERE
AS FOLLOWS:
<TABLE>
<S> <C>
Advisory fees $ 194,046
Administration fees 54,807
Custodian fees 101,847
Distribution fees 48,658
Shareholder servicing fees 42,564
Transfer agent fees 35,409
Trustees' fees 7,365
---------
$ 484,696
---------
---------
</TABLE>
BENEFICIAL INTEREST: As of August 31, 1998, one shareholder was a record
owner of approximately 63% of the total outstanding shares of the Fund.
5. FUND SHARE TRANSACTIONS (ON A CONSTANT DOLLAR BASIS):
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS)
FOR THE YEARS ENDED AUGUST 31,
---------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Proceeds from shares sold $ 29,224,823 $ 14,602,335
Proceeds from reinvestment
of distributions 77,726 28,659
Payments for shares redeemed (28,583,830) (14,320,400)
------------ ------------
Total net increase (decrease) $ 718,719 $ 310,594
------------ ------------
------------ ------------
</TABLE>
20 Annual Report
<PAGE>
SSgA PRIME MONEY MARKET FUND
One International Place, 27th 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
Mark E. Swanson, Assistant Secretary and Principal Accounting Officer
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.
One International Place, 27th 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
PricewaterhouseCoopers LLP
One Post Office Square
Boston, Massachusetts 02109
Annual Report 21
<PAGE>
SSgA-Registered Trademark- Funds
SMALL CAP FUND
Annual Report
August 31, 1998
Table of Contents
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion and Analysis . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . 17
Tax Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Fund Management and Service Providers. . . . . . . . . . . . . . . . . . 24
"SSgA-Registered Trademark-" IS A REGISTERED TRADEMARK 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, 1998. Over the past year, the Funds have grown to include
twenty-one 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 SSgA Small Cap Fund. I hope you find this
information a useful tool as you review your overall investment strategy.
The SSgA Funds have also opened four additional funds in fiscal 1998. The
investment objectives for these four new funds are as follows:
The SSgA Special Equity Fund seeks to maximize total return through investment
in mid- and small capitalization US equity securities. This Fund was opened as
an alternative investment strategy for the SSgA Small Cap Fund that closed to
new investors on August 31, 1998.
The SSgA International Growth Opportunities Fund seeks to provide long-term
capital growth by investing primarily in securities of foreign issuers.
The SSgA High Yield Bond Fund seeks to maximize total return by investing
primarily in non investment-grade bonds, including, but not limited to, those
represented by the Lehman Brothers High Yield Bond Index.
The SSgA Real Estate Equity Fund seeks to provide income and capital growth by
investing primarily in publicly traded securities of real estate companies.
During the past fiscal year, the SSgA Funds were proud to announce that the SSgA
S&P 500 Index Fund and the SSgA Yield Plus Fund each achieved five years of
operational history. We are proud of our long term record and look forward to
having additional funds reach their five year anniversary.
SSGA intends to proceed with the evolution of new products and services while
committing to your investment needs. We will continue to develop our
professional expertise by focusing on the expansion of both our global resources
and our diversified product lines.
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. As a result, the portfolios we
manage benefit from the knowledge of the entire team.
Mr. Jeffrey Adams, Principal, was the portfolio manager primarily responsible
for investment decisions regarding the SSgA Small Cap Fund since 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: The Fund seeks to maximize total return through investments in
equity securities.
INVESTS IN: At least 65% of the total assets will be invested in smaller
capitalization securities.
STRATEGY: The Fund management team uses a quantitative approach to investment
management, designed to uncover equity securities which are undervalued, with
superior growth potential. This quantitative investment approach involves a
modeling process to evaluate vast amounts of financial data and corporate
earnings forecasts. This structured and disciplined approach seeks to provide
long-term total returns in excess of the Russell 2000-Registered Trademark-
Index through bottom-up stock selection within a risk controlled framework.
[GRAPH]
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
DATES SMALL CAP FUND S&P-Registered Trademark- MIDCAP 400 INDEX** RUSSELL 2000-Registered Trademark- INDEX+
<S> <C> <C> <C>
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
1998 $21,906 $22,376 $19,634
</TABLE>
YEARLY PERIODS ENDED AUGUST 31
SSgA SMALL CAP FUND
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ------------ ------------ ------------
<S> <C> <C>
1 Year $ 7,768 (22.32)%
5 Years $ 17,552 11.91%+
Inception $ 21,906 13.56%+
</TABLE>
STANDARD & POOR'S-Registered Trademark- MIDCAP 400 INDEX
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ------------ ------------ ------------
<S> <C> <C>
1 Year $ 9,062 (9.38)%
5 Years $ 17,545 11.90%+
Inception $ 22,376 13.95%+
</TABLE>
RUSSELL 2000-Registered Trademark- INDEX
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ------------ ------------ ------------
<S> <C> <C>
1 Year $ 8,060 (19.40)%
5 Years $ 14,741 8.07%+
Inception $ 19,634 11.56%+
</TABLE>
SEE RELATED NOTES ON THE FOLLOWING PAGE.
PERFORMANCE REVIEW
For the fiscal year ended August 31, 1998, the SSgA Small Cap Fund lost 22.3%,
as compared to the Russell 2000 Index, which was off 19.4%. The Fund's 2.9%
underperformance relative to the benchmark resulted primarily from poor
performance within the technology sector, where the Fund held an 18.4% sector
weight. Within the technology sector, the computer hardware, software,
semiconductor and computer services industries were very weak throughout the
year. Also contributing to the Fund's underperformance was weak performance
within the communication services industry, which totaled 3.6% for the
portfolio.
MARKET AND PORTFOLIO HIGHLIGHTS
Following the correction which began last spring, the small cap stock market
officially entered bear market territory in late August 1998. This is reflected
in the poor performance results of the Russell 2000 Index, which, as of
6 Annual Report
<PAGE>
SSgA SMALL CAP FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
August 31, 1998, was down 31% since late April. On a twelve month basis the
Index lost 19.4%, however, this return masks the degree of the correction, as
the Index dropped 19.4% in August 1998 alone. Large cap stocks outperformed
small caps, which is reflected in the three-year annualized returns of 21.8% for
the S&P 500 versus 4.8% for the Russell 2000. Large cap stocks also lead small
caps on a ten year annualized basis, posting gains of 17.1% for the S&P 500
versus 10.6% for the Russell 2000. A "flight to quality" by investors due to
continued turmoil in the Asian markets and more recently, global emerging
markets, contributed to large cap outperformance. Additionally, due to the
popularity of equities over the past several years, investment managers have
been forced to put the increased cash flows to work in larger, more liquid
names, which has helped push price/earnings multiples to historically high
ranges.
It has been a trying time for small cap stock investors. Historically, small cap
stocks have reflected higher long-term returns and associated volatility, and
their performance cycles of over or under performance tend to be more extended.
While near-term market events may be noteworthy for media coverage, the Manager
believes that investors should not let market shocks change their long-term
investment perspective as recoveries happen in short bursts which are difficult
to anticipate.
At the end of the fiscal year, the SSgA Small Cap Fund held 175 stocks with
market capitalizations ranging from $117 million to $5 billion, resulting in an
average weighted market capitalization of $880 million. The Fund has portfolio
characteristics in line with the Russell 2000 Index due to the risk-controlled
nature of the investment process. As the Fund's objective is achieved through
stock selection with a disciplined investment approach, the portfolio will be
fully invested at all times.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
(AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31, 1998
<S> <C>
Nationwide Financial Services, Inc. Class A 1.6%
Waters Corp. 1.6
Arterial Vascular Engineering, Inc. 1.6
LandAmerica Financial Group, Inc. 1.5
First American Financial Corp. 1.5
Camden Property Trust 1.5
Symantec Corp. 1.5
Footstar, Inc. 1.5
Brightpoint, Inc. 1.4
Brinker International, Inc. 1.4
</TABLE>
- --------------------------------------------------------------------------------
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:
In our opinion, the accompanying statement of assets and liabilities and
statement of net assets, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of SSgA Small Cap Fund (the "Fund") at August
31, 1998, the results of its operations for the fiscal year then ended and 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.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at August
31, 1998 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
Boston, Massachusetts
October 8, 1998
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
SMALL CAP FUND
STATEMENT OF NET ASSETS
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
COMMON STOCKS - 100.7%
BASIC INDUSTRIES - 4.3%
ARMCO, Inc. (a) 333,000 $ 1,374
Octel Corp. (a) 245,400 3,773
Precision Castparts Corp. 19,400 731
Texas Industries, Inc. 91,800 3,322
Waters Corp. (a) 101,400 5,463
----------
14,663
----------
CAPITAL GOODS - 7.4%
Aeroquip-Vickers, Inc. 14,900 601
Applied Power, Inc., Class A 109,100 2,707
AptarGroup, Inc. 52,200 1,481
Essex International, Inc. (a) 34,900 654
General Cable Corp. 236,250 4,725
Hughes Supply, Inc. 58,800 1,602
JLG Industries, Inc. 117,600 1,727
Kuhlman Corp. 66,400 1,569
Manitowoc Co., Inc. 84,375 2,220
Sanmina Corp. (a) 85,400 2,616
Superior TeleCom, Inc. 91,000 3,469
Terex Corp. (a) 133,200 2,098
----------
25,469
----------
CONSUMER BASICS - 12.7%
Arterial Vascular Engineering, Inc. (a) 156,600 5,442
Bindley Western Industries, Inc. 114,133 2,996
BJ's Wholesale Club, Inc. (a) 33,400 1,127
Cooper Companies, Inc. (a) 59,200 1,188
Dura Pharmaceuticals, Inc. (a) 130,300 2,134
Fleming Cos., Inc. 142,600 1,702
Integrated Health Services, Inc. 185,200 3,588
Medicis Pharmaceutical Corp. Class A. (a) 140,800 4,603
Medquist, Inc. (a) 73,200 1,537
NBTY, Inc. (a) 195,700 1,786
PathoGenesis Corp. (a) 58,400 1,292
Pediatrix Medical Group (a) 62,900 2,449
Pilgrim's Pride Corp. 54,100 1,058
Ralcorp Holdings, Inc. New (a) 182,900 3,532
Rexall Sundown, Inc. (a) 191,500 3,483
Trigon Healthcare, Inc. (a) 133,200 3,680
Twinlab Corp. New (a) 74,500 2,170
----------
43,767
----------
CONSUMER DURABLES - 2.6%
Arvin Industries, Inc. 59,900 2,261
Avis Rent A Car, Inc. (a) 125,000 1,961
Budget Group, Inc. Class A (a) 66,600 1,132
Carlisle Cos., Inc. 40,900 1,549
Ethan Allen Interiors, Inc. 7,900 257
Linens 'N Things, Inc. (a) 76,800 1,795
----------
8,955
----------
CONSUMER NON-DURABLES - 10.4%
Action Performance Companies, Inc. (a) 10,000 230
Ames Department Stores, Inc. New (a) 130,500 1,909
Canandaigua Wine International, Inc. Class A (a) 69,800 2,914
Cato Corp. Class A 55,400 526
Department 56, Inc. (a) 70,000 2,065
Dress Barn, Inc. (a) 85,000 1,477
Family Dollar Stores, Inc. 76,800 975
Fingerhut Cos., Inc. 124,600 3,022
Footstar, Inc. (a) 173,100 5,042
Goody's Family Clothing, Inc. (a) 173,800 3,128
Mohawk Industries, Inc. (a) 124,100 3,296
Nautica Enterprises, Inc. (a) 55,600 1,063
Pier 1 Imports, Inc. 306,600 3,047
Ross Stores, Inc. 38,600 1,404
Shopko Stores, Inc. (a) 91,500 2,350
Zale Corp. (a) 152,800 3,514
----------
35,962
----------
</TABLE>
Annual Report 9
<PAGE>
SSgA
SMALL CAP FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
CONSUMER SERVICES - 6.1%
AAR Corp. 75,050 $ 1,660
Alaska Air Group, Inc. (a) 69,000 2,687
Brinker International, Inc. (a) 290,300 4,971
Buffets, Inc. (a) 40,000 505
CEC Entertainment, Inc. (a) 91,400 2,085
Equity Inns, Inc. 150,900 1,509
MeriStar Hospitality Corp. REIT (a) 153,443 2,589
Midwest Express Holdings, Inc. (a) 94,350 2,524
Ruby Tuesday, Inc. 77,200 1,086
Sonic Corp. (a) 88,500 1,405
----------
21,021
----------
ENERGY - 0.8%
Key Energy Group, Inc. (a) 114,600 709
Pool Energy Services Co. (a) 32,700 229
Veritas DGC, Inc. (a) 111,500 1,672
----------
2,610
----------
FINANCE - 14.7%
Commerce Bancorp, Inc. 32,625 1,146
Commercial Federal Corp. 56,550 1,244
Cullen Frost Bankers, Inc. 36,300 1,552
Enhance Financial Services Group, Inc. 42,600 1,070
Envoy Corp. New (a) 60,000 1,298
Fidelity National Financial 162,330 4,495
Financial Security Assurance Holdings, Ltd. 44,900 2,217
First American Financial Corp. 203,850 5,249
FirstFed Financial Corp. (a) 28,800 425
FIRSTPLUS Financial Group, Inc. (a) 147,600 3,358
Gallagher (Arthur J.) & Co. 17,800 659
Hartford Life, Inc. Class A 67,500 3,459
IMC Mortgage Co. (a) 95,300 643
Imperial Credit Mortgage Holdings 76,800 984
Jefferies Group, Inc. 43,700 1,248
LandAmerica Financial Group, Inc. 106,100 5,272
Nationwide Financial Services, Inc. Class A 124,200 5,550
Peoples Heritage Financial Group 81,300 1,275
Presidential Life Corp. 26,700 527
Resource America, Inc. Class A 44,100 595
Resource Bancshares Mortgage Group 84,300 1,328
Riggs National Corp. 40,000 880
TR Financial Corp. 21,300 437
Trustmark Corp. 129,800 2,255
UniCapital Corp. New (a) 114,000 1,197
Union Planters Corp. 20,534 827
Webster Financial Corp. 75,800 1,563
----------
50,753
----------
GENERAL BUSINESS - 6.4%
Advo Systems, Inc. (a) 74,900 1,863
Applied Graphics Technologies, Inc. (a) 18,500 377
Computer Task Group, Inc. 26,300 676
DSP Communications, Inc. (a) 100,000 1,144
Hollinger International, Inc. Class A 215,000 3,010
Interim Services, Inc. (a) 56,400 1,156
Mail-Well, Inc. (a) 161,200 2,680
Media General, Inc. Class A 10,900 463
Personnel Group of America, Inc. (a) 101,200 1,145
Pulitzer Publishing Co. 10,800 821
SABRE Group Holdings, Inc. (The) Class A (a) 20,700 662
SPS Transaction Services, Inc. (a) 16,700 521
StaffMark, Inc. (a) 129,000 2,306
Systems & Computer Technology Corp. (a) 162,400 2,192
United Stationers, Inc. (a) 51,400 3,033
----------
22,049
----------
</TABLE>
10 Annual Report
<PAGE>
SSgA
SMALL CAP FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
MISCELLANEOUS - 10.1%
Apartment Investment &
Management Co. Class A 53,600 $ 1,836
Avalon Bay Communities, Inc. REIT 43,500 1,436
Camden Property Trust 208,600 5,228
CBL & Associates Properties, Inc. 100,300 2,495
Colonial Properties Trust 25,000 609
FelCor Suite Hotels, Inc. REIT (a) 69,400 1,414
General Growth Properties, Inc. 118,100 4,259
Glenborough Realty Trust, Inc. REIT 21,800 474
Health Care, Inc. 24,000 552
Home Properties of New York, Inc. 38,300 919
Hospitality Properties Trust 79,800 2,195
JDN Realty Corp. 68,950 1,401
Kimco Realty Corp. REIT 28,500 1,012
Liberty Property Trust 110,700 2,505
Merry Land & Investment, Inc. 84,800 1,738
Mills Corp. 42,400 822
Reckson Associates Realty Corp. REIT 141,900 3,042
Rental Service Corp. (a) 53,800 1,295
TriNet Corporate Realty Trust, Inc. 6,900 198
Webb (Del E.) Corp. 74,500 1,467
----------
34,897
----------
SHELTER - 3.5%
Highwoods Properties, Inc. 56,300 1,432
Kaufman & Broad Home Corp. 216,800 4,634
Pulte Corp. 63,800 1,842
Southdown, Inc. 50,200 2,121
Standard Pacific Corp. 97,700 1,154
U.S. Home Corp. (a) 36,800 1,042
----------
12,225
----------
TECHNOLOGY - 14.5%
Affiliated Computer Services, Inc.
Class A (a) 101,600 3,321
Avant! Corp. (a) 70,900 895
AXENT Technologies, Inc. (a) 64,000 1,000
BE Aerospace, Inc. (a) 87,800 1,822
Brightpoint, Inc. (a) 549,700 4,982
CHS Electronics, Inc. (a) 377,700 4,769
Ciber, Inc. (a) 103,300 2,595
Computer Horizons Corp. (a) 198,300 4,487
Cordant Technologies, Inc. 34,400 1,226
CTS Corp. 65,000 1,844
Diamond Multimedia Systems, Inc. (a) 117,500 411
IDT Corp. (a) 105,100 1,524
Informix Corp. (a) 232,800 815
Learning Co., Inc. (The) (a) 239,800 4,241
MAPICS, Inc. (a) 42,600 740
Mastech Corp. (a) 1,000 21
Microchip Technology, Inc. (a) 171,800 3,135
NeoMagic Corp. (a) 336,700 4,314
Progress Software Corp. (a) 48,300 875
STAR Telecommunications, Inc. (a) 180,800 1,853
Symantec Corp. (a) 310,900 5,091
----------
49,961
----------
TRANSPORTATION - 2.7%
Airborne Freight Corp. 52,400 1,022
America West Holding Corp. Class B (a) 140,800 2,737
Coach USA, Inc. (a) 25,100 660
Hunt (JB) Transportation Services, Inc. 37,200 619
M.S. Carriers, Inc. (a) 33,000 668
Rollins Truck Leasing Corp. 39,300 373
USFreightways Corp. 140,100 3,135
----------
9,214
----------
</TABLE>
Annual Report 11
<PAGE>
SSgA
SMALL CAP FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
UTILITIES - 4.5%
Aliant Communications, Inc. 46,300 $ 1,146
Conectiv, Inc. 78,600 1,601
MDU Resources Group, Inc. 67,650 1,729
New Jersey Resources Corp. 16,500 556
Pacific Gateway Exchange, Inc. (a) 95,300 3,347
Piedmont Natural Gas Co., Inc. 28,900 815
Public Service Co. of New Mexico 26,500 530
Rochester Gas & Electric Corp. 69,000 2,014
United Illuminating Co. 43,700 2,188
Washington Gas & Light Co. 65,300 1,551
----------
15,477
----------
TOTAL COMMON STOCKS
(cost $441,804) 347,023
----------
TOTAL INVESTMENTS
(identified cost $441,804)(b) - 100.7% $ 347,023
OTHER ASSETS AND LIABILITIES,
NET - (0.7%) (2,393)
----------
NET ASSETS - 100.0% $ 344,630
----------
----------
</TABLE>
(a) Nonincome-producing security.
(b) See Note 2 for federal income tax information.
ABBREVIATIONS:
REIT - Real Estate Investment Trust
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, 1998
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $441,804)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . $ 347,023
Receivables:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,767
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,303
--------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 351,218
LIABILITIES
Payables:
Bank overdraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,309
Investments purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 663
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,827
Accrued fees to affiliates and trustees (Note 4) . . . . . . . . . . . . . . . . . 712
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
--------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,588
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 344,630
--------------
--------------
NET ASSETS CONSIST OF:
Undistributed net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 22
Accumulated distributions in excess of net realized gain . . . . . . . . . . . . . . . . . . . . . . . . (4,807)
Unrealized appreciation (depreciation) on investments. . . . . . . . . . . . . . . . . . . . . . . . . . (94,781)
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 444,174
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 344,630
--------------
--------------
NET ASSET VALUE, offering and redemption price per share:
($344,629,711 divided by 21,591,792 shares of $.001 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15.96
--------------
--------------
</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, 1998
Amounts
in thousands
<S> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,890
Interest.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
--------------
Total Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,913
EXPENSES (Notes 2 and 4):
Advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,570
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 323
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
--------------
Total Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,580
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 333
--------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,398
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (129) 2,269
--------------
Net change in unrealized appreciation or depreciation of investments . . . . . . . . . . . . . . . . . . (122,590)
--------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (120,321)
--------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . $ (119,988)
--------------
--------------
</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
1998 1997
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 333 $ 166
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . 2,269 8,545
Net change in unrealized appreciation or depreciation . . . . . . . . . . . . (122,590) 22,222
------------ ------------
Net increase (decrease) in net assets resulting from operations. . . . . . (119,988) 30,933
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . (448) (44)
Net realized gain on investments. . . . . . . . . . . . . . . . . . . . . . . (10,718) (4,408)
In excess of net realized gain on investments . . . . . . . . . . . . . . . . (4,807) --
------------ ------------
Total Distributions to Shareholders. . . . . . . . . . . . . . . . . . . . (15,973) (4,452)
------------ ------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from
Fund share transactions (Note 5) . . . . . . . . . . . . . . . . . . . . . 330,783 68,119
------------ ------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . 194,822 94,600
NET ASSETS
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149,808 55,208
------------ ------------
End of period (including undistributed net investment income
of $22 and $137, respectively) . . . . . . . . . . . . . . . . . . . . . . $ 344,630 $ 149,808
------------ ------------
------------ ------------
</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
period and other performance information derived from the financial statements.
YEAR ENDED AUGUST 31,
----------------------------------------------------------
1998 1997 1996 1995* 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . $ 22.11 $ 17.44 $ 14.42 $ 11.88 $ 12.24
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . .02 .03 .04 .13 .21
Net realized and unrealized gain on investments . . . . . . . (4.54) 5.87 3.25 3.19 .24
---------- ---------- ---------- ---------- ----------
Total Income From Investment Operations. . . . . . . . . . (4.52) 5.90 3.29 3.32 .45
---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . (.04) (.01) (.07) (.15) (.21)
Net realized gain on investments. . . . . . . . . . . . . . . (1.10) (1.22) (.20) (.58) (.60)
In excess of net realized gain on investments . . . . . . . . (.49) -- -- (.05) --
---------- ---------- ---------- ---------- ----------
Total Distributions. . . . . . . . . . . . . . . . . . . . (1.63) (1.23) (.27) (.78) (.81)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . $ 15.96 $ 22.11 $ 17.44 $ 14.42 $ 11.88
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
TOTAL RETURN (%) . . . . . . . . . . . . . . . . . . . . . . . . (22.32) 35.85 23.14 30.04 3.90
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . . . . . . . . . 344,630 149,808 55,208 23,301 25,716
Ratios to average net assets (%):
Operating expenses, net. . . . . . . . . . . . . . . . . . 1.04 1.00 1.00 .97 .30
Operating expenses, gross. . . . . . . . . . . . . . . . . 1.04 1.09 1.18 1.58 .81
Net investment income. . . . . . . . . . . . . . . . . . . .10 .18 .26 .81 1.73
Portfolio turnover rate (%) . . . . . . . . . . . . . . . . . 86.13 143.79 76.85 192.88 44.86
</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.
16 Annual Report
<PAGE>
SSgA
SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1998
1. ORGANIZATION
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 21 investment portfolios which are in operation as
of August 31, 1998. These financial statements report on one portfolio, the
SSgA Small Cap 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.
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
SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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 fund 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 $4,883,568 incurred from November 1, 1997 to August 31,
1998, and treat it as arising in the fiscal year 1999.
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, 1998 are as follows:
<TABLE>
<CAPTION>
NET
UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
-------------- -------------- -------------- --------------
<S> <C> <C> <C>
$ 441,804,005 $ 11,974,022 $ (106,755,027) $ (94,781,005)
</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 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 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 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
18 Annual Report
<PAGE>
SSgA
SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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%.
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 for the year ended August 31, 1998,
purchases and sales of investment securities, excluding short-term
investments and futures contracts aggregated to $600,983,030, and
$281,484,045, respectively.
FUTURES TRANSACTIONS: The Fund's transactions in futures contracts for year
ended August 31, 1998, were as follows:
<TABLE>
<CAPTION>
FUTURES CONTRACTS PURCHASED
-----------------------------
AGGREGATE
NUMBER OF FACE VALUE OF
CONTRACTS CONTRACTS (1)
------------- -------------
<S> <C> <C>
Outstanding at August 31, 1997 -- $ --
Contracts opened 46 10,118,498
Contracts closed (46) (10,118,498)
------------- -------------
Outstanding at August 31, 1998 -- $ --
------------- -------------
------------- -------------
</TABLE>
(1) The aggregate face value of contracts is computed on the date each
contract was opened.
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 four months ended December 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. Beginning January 1,
1998, the Advisor has removed the expense cap. The Investment Company also
Annual Report 19
<PAGE>
SSgA
SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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 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% for the
period September 1, 1997 to December 31, 1997, and up to a maximum of 5%
for the period January 1, 1998 to August 31, 1998, of the asset-based fee
determined in (i)); (iii) out-of-pocket expenses; and (iv) start-up costs
for new funds.
On August 10, 1998, Frank Russell Company entered into an agreement with
The Northwestern Mutual Life Insurance Co., an insurance organization,
pursuant to which Northwestern Mutual Life will acquire all of the
outstanding common stock of Frank Russell Company.
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 charged 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"), the
Adviser's Metropolitan Division of Commercial Banking ("Commercial
Banking") and State Street Solutions ("Solutions")(collectively the
"Agents"), as well as several unaffiliated service providers. For these
services, the Fund pays .025%, .175%, .175%, .175% and .175% to the
Adviser, SSBSI, RIS, Commercial Banking, and Solutions, respectively, based
upon the average daily value of all Fund shares held
20 Annual Report
<PAGE>
SSgA
SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
by or for customers of these Agents. For the for the year ended August 31,
1998, the Fund was charged shareholder servicing expenses of $82,841,
$4,536, $162,004, $380, and $71,108, by the Adviser, SSBSI, RIS, Commercial
Banking, and Solutions, 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 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, 1998.
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 $54,003 for the for the year ended
August 31, 1998.
BOARD OF TRUSTEES: The Investment Company pays each Trustee not affiliated
with the Investment Company a retainer of $48,000 annually, $1,500 for each
board meeting attended, an additional $1,500 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, 1998 WERE
AS FOLLOWS:
<TABLE>
<S> <C>
Advisory fees $ 574,341
Administration fees 11,256
Custodian fees 28,317
Distribution fees 22,836
Shareholder servicing fees 38,384
Transfer agent fees 35,280
Trustees' fees 1,758
-----------
$ 712,172
-----------
-----------
</TABLE>
BENEFICIAL INTEREST: As of August 31, 1998, two shareholders (one of which
was also an affiliate of the Investment Company) were record owners of
approximately 23% and 11%, respectively, of the total outstanding shares of
the Fund.
Annual Report 21
<PAGE>
SSgA
SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
5. FUND SHARE TRANSACTIONS
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS)
FOR THE YEAR ENDED AUGUST 31,
--------------------------------------------------------
1998 1997
-------------------------- --------------------------
SHARES DOLLARS SHARES DOLLARS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Proceeds from shares sold 26,193 $ 567,051 5,423 $ 103,546
Proceeds from reinvestment
of distributions 703 15,185 237 4,094
Payments for shares redeemed (12,081) (251,453) (2,048) (39,521)
----------- ----------- ----------- -----------
Total net increase (decrease) 14,815 $ 330,783 3,612 $ 68,119
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
6. LINE OF CREDIT
The Fund and several affiliated Funds (the "Participants") share in a
$50 million revolving credit facility for temporary or emergency
purposes, including the meeting of redemption requests that otherwise
might require the untimely disposition of securities. The Participants
are charged an annual commitment fee of .065% on the average daily
unused amount of the aggregate commitment, which is allocated among each
of the Participants. Interest, at the Federal Fund Rate plus 0.50%
annually, is calculated based on the market rates at the time of the
borrowing. The Fund may borrow up to a maximum of 33 1/3 percent of the
value of its total assets under the agreement.
22 Annual Report
<PAGE>
SSgA
SMALL CAP FUND
TAX INFORMATION
August 31, 1998 (Unaudited)
The Fund paid distributions of $6,817,787 from net long-term capital gains
during its taxable year ended August 31, 1998. Pursuant to Section 852 of the
Internal Revenue Code, the Fund designates $2,286,882 as 20% capital gain
dividends for its taxable year ended August 31, 1998.
Please consult a tax advisor for questions about federal or state income tax
laws.
Annual Report 23
<PAGE>
SSgA SMALL CAP FUND
One International Place, 27th 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
Mark E. Swanson, Assistant Secretary and Principal Accounting Officer
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.
One International Place, 27th 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
PricewaterhouseCoopers LLP
One Post Office Square
Boston, Massachusetts 02109
24 Annual Report
<PAGE>
SSgA-Registered Trademark- FUNDS
US TREASURY MONEY MARKET FUND
Annual Report
August 31, 1998
Table of Contents
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion and Analysis . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . 16
Fund Management and Service Providers. . . . . . . . . . . . . . . . . . 20
"SSgA-Registered Trademark-" IS A REGISTERED TRADEMARK 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 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, 1998. Over the past year, the Funds have grown to include
twenty-one 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 SSgA US Treasury Money Market Fund. I hope you
find this information a useful tool as you review your overall investment
strategy.
The SSgA Funds have also opened four additional funds in fiscal 1998. The
investment objectives for these four new funds are as follows:
The SSgA Special Equity Fund seeks to maximize total return through investment
in mid- and small capitalization US equity securities. This Fund was opened as
an alternative investment strategy for the SSgA Small Cap Fund that closed to
new investors on August 31, 1998.
The SSgA International Growth Opportunities Fund seeks to provide long-term
capital growth by investing primarily in securities of foreign issuers.
The SSgA High Yield Bond Fund seeks to maximize total return by investing
primarily in non investment-grade bonds, including, but not limited to, those
represented by the Lehman Brothers High Yield Bond Index.
The SSgA Real Estate Equity Fund seeks to provide income and capital growth by
investing primarily in publicly traded securities of real estate companies.
During the past fiscal year, the SSgA Funds were proud to announce that the SSgA
S&P 500 Index Fund and the SSgA Yield Plus Fund each achieved five years of
operational history. We are proud of our long term record and look forward to
having additional funds reach their five year anniversary.
SSgA intends to proceed with the evolution of new products and services while
committing to your investment needs. We will continue to develop our
professional expertise by focusing on the expansion of both our global resources
and our diversified product lines.
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. As a result, the portfolios we
manage benefit from the knowledge of the entire team.
Ms. Susan Chaisson, Principal, has been the portfolio manager primarily
responsible for investment decisions regarding the SSgA US Treasury Money Market
Fund 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 her 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]
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
DATES US TREASURY MONEY MARKET FUND SALOMON BROTHERS 3-MONTH TREASURY 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
1998 $12,675 $12,659
</TABLE>
YEARLY PERIODS ENDED AUGUST 31
SSgA US TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ------------ ------------ ------------
<S> <C> <C>
1 Year $ 10,553 5.53%
Inception $ 12,675 5.12%+
</TABLE>
SALOMON BROTHERS 3-MONTH TREASURY BILL INDEX
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ------------ ------------ ------------
<S> <C> <C>
1 Year $ 10,522 5.22%
Inception $ 12,659 5.09+
</TABLE>
SEE RELATED NOTES ON THE FOLLOWING PAGE.
PERFORMANCE REVIEW
The Fund had a one-year total return of 5.53% for the fiscal year ended August
31, 1998. This compares favorably to the return of 5.22% 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.
Effects of the Asian crisis, which began in October 1997, had many economists
predicting a global slowdown in growth and increased deflationary pressures.
Viewed as a "safe haven", yields on US Treasury securities flattened, with the
two-year, 10-year and 30-year falling 13, 36, and 48 basis points, respectively,
during the fourth quarter. Although the Federal Reserve Open Market Committee
(FOMC) maintained a "tightening bias" throughout the second half of 1997,
turmoil in the Asian region reduced the need to raise the Federal Funds rate in
response to strong domestic growth. Market participants, as well as the Federal
Reserve,
6 Annual Report
<PAGE>
SSgA US TREASURY MONEY MARKET FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
were forced to take a wait-and-see approach on the economic situation. As year
end approached, signs were already appearing that some slowdown in growth would
reach American soil.
In the first quarter of 1998, GDP advanced at an annualized rate of 5.4% while
the unemployment rate stood at 4.6%. Domestic economic releases confirmed strong
growth and a non-inflationary environment. Although the domestic backdrop showed
signs of an overheating economy, rising uncertainty of the Asian epidemic served
to keep the Fed on hold. Chairman Greenspan confirmed this dichotomy in
testimonies before Congress, praising the economy's performance but warned
against impending fallout from Asia. These comments made by the Federal Reserve
set the markets in a trading range which has persisted throughout the rest of
the fiscal year. For the year, one- and 30-year Treasuries fell 29 and 115 basis
points, respectively. During the second quarter of 1998, impact from Asian trade
drag came full force as GDP advanced only 1.6%. Underlying fundamentals for
domestic growth persisted. High levels of consumer confidence and strong
consumer and capital spending, combined with unemployment of 4.3% inspired a
tightening bias.
MARKET AND PORTFOLIO HIGHLIGHTS
In the last year, the SSgA US Treasury Money Market Fund was managed
consistently with its objective of providing safety of principal and liquidity
by investing in obligations backed by the US Treasury. Treasuries became very
expensive and traded at levels below the Federal Funds rate. Due to our belief
that the Fed was on hold and the flatness of the yield curve would persist, we
increased our percentage of overnight Repurchase Agreements to 80% of the Fund.
The average maturity of the Fund over the course of the year ranged between 21
and 36 days, primarily due to the Repo roll-over strategy yield advantage over
treasury securities. When opportunities arose in the market, the Fund
selectively purchased one-year securities to extend its average days to
maturity.
------------------
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:
In our opinion, the accompanying statement of assets and liabilities and
statement of net assets, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of SSgA US Treasury Money Market Fund (the
"Fund") at August 31, 1998, the results of its operations for the fiscal year
then ended and 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 December 1, 1993
(commencement of operations) to August 31, 1994 in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at August 31, 1998 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
Boston, Massachusetts
October 8, 1998
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
US TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
August 31, 1998
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY (000)
-------------------------------------------------------
<S> <C> <C> <C> <C>
UNITED STATES GOVERNMENT TREASURIES - 17.5%
United States Treasury Bills . . . . . . . . . . . . . . . . . . . . $ 50,000 5.589% 09/15/98 $ 49,893
United States Treasury Notes . . . . . . . . . . . . . . . . . . . . 40,000 6.000 09/30/98 40,011
United States Treasury Notes . . . . . . . . . . . . . . . . . . . . 30,000 5.000 02/15/99 29,945
United States Treasury Notes . . . . . . . . . . . . . . . . . . . . 30,000 6.250 03/31/99 30,116
United States Treasury Notes . . . . . . . . . . . . . . . . . . . . 25,000 6.250 05/31/99 25,109
----------
TOTAL UNITED STATES GOVERNMENT TREASURIES (cost $175,074). . . . . . . . . . . . . . . . . . . . . . . . . . . 175,074
----------
TOTAL INVESTMENTS (amortized cost $175,074) - 17.5%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175,074
----------
REPURCHASE AGREEMENTS - 82.9%
Agreement with Bankers Trust of $220,000
acquired August 31, 1998 at 5.820% to be repurchased at $220,036
on September 1, 1998, collateralized by:
$223,578 United States Treasury Notes
5.125% due 08/31/00 valued at $225,009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220,000
Agreement with Bear Stearns & Co., Inc. of $40,000
acquired August 31, 1998 at 5.960% to be repurchased at $40,007
on September 1, 1998, collateralized by:
$14,800 United States Treasury Notes
6.375% due 05/15/00 valued at $15,399
$14,616 United States Treasury Notes
5.750% due 11/15/00 valued at $15,090
$10,155 United States Treasury Notes
5.250% due 08/15/03 valued at $10,322 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000
Agreement with Deutsche Bank AG of $40,000
acquired August 31, 1998 at 5.850% to be repurchased at $40,007
on September 1, 1998, collateralized by:
$27,500 United States Treasury Notes
12.750% due 11/15/10 valued at $40,976. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000
</TABLE>
Annual Report 9
<PAGE>
SSgA
US TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
VALUE
(000)
----------
<S> <C>
Agreement with Donaldson, Lufkin & Jenrette Securities Corp. of $220,000
acquired August 31, 1998 at 5.820% to be repurchased at $220,036
on September 1, 1998, collateralized by:
$38,334 United States Treasury Notes
5.625% due 11/30/98 valued at $38,938
$50,000 United States Treasury Notes
5.750% due 12/31/98 valued at $50,606
$43,820 United States Treasury Notes
6.000% due 10/15/99 valued at $45,223
$49,701 United States Treasury Notes
5.500% due 05/31/00 valued at $50,818
$38,337 United States Treasury Notes
5.625% due 02/28/01 valued at $38,905 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 220,000
Agreement with Dresdner Bank AG of $40,000
acquired August 31, 1998 at 5.900% to be repurchased at $40,007
on September 1, 1998, collateralized by:
$39,519 United States Treasury Notes
5.750% due 08/15/03 valued at $40,800 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000
Agreement with Goldman Sachs of $29,317
acquired August 31, 1998 at 5.950% to be repurchased at $29,322
on September 1, 1998, collateralized by:
$18,965 United States Treasury Notes
13.875% due 05/15/11 valued at $29,903. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,317
Agreement with Greenwich Capital Market, Inc. of $40,000
acquired August 31, 1998 at 5.830% to be repurchased at $40,006
on September 1, 1998, collateralized by:
$32,654 United States Treasury Notes
7.500% due 11/15/16 valued at $41,232 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000
Agreement with Lehman Brothers Securities, Inc. of $40,000
acquired August 31, 1998 at 5.850% to be repurchased at $40,007
on September 1, 1998, collateralized by:
$39,415 United States Treasury Notes
5.625% due 05/15/01 valued at $40,805 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000
</TABLE>
10 Annual Report
<PAGE>
SSgA
US TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
VALUE
(000)
----------
<S> <C>
Agreement with Merrill Lynch of $40,000
acquired August 31, 1998 at 5.880% to be repurchased at $40,007
on September 1, 1998, collateralized by:
$30,650 United States Treasury Bond
10.750% due 08/15/05 valued at $40,803. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 40,000
Agreement with JP Morgan of $40,000
acquired August 31, 1998 at 5.870% to be repurchased at $40,007
on September 1, 1998, collateralized by:
$26,953 United States Treasury Notes
12.000% due 08/15/13 valued at $40,800. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000
Agreement with Swiss Bank Corp. of $40,000
acquired August 31, 1998 at 5.830% to be repurchased at $40,006
on September 1, 1998, collateralized by:
$38,042 United States Treasury Notes
6.625% due 04/30/02 valued at $40,800 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000
Agreement with Westdeutsche Landesbank of $40,000
acquired August 31, 1998 at 5.780% to be repurchased at $40,006
on September 1, 1998, collateralized by:
$40,250 United States Treasury Notes
5.780% due 02/15/00 valued at $40,805 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000
----------
TOTAL REPURCHASE AGREEMENTS (identified cost $829,317) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 829,317
----------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS
(cost $1,004,391)(a) - 100.4%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,004,391
OTHER ASSETS AND LIABILITES, NET - (0.4%). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,024)
----------
NET ASSETS - 100.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,000,367
----------
----------
</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, 1998
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at amortized cost which approximates market (Note 2) . . . . . . . . . . . . . . . . . . . . $ 175,074
Repurchase agreements (identified cost $829,317)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . 829,317
Interest receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,399
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
--------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,006,792
LIABILITIES
Payables:
Bank overdraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,590
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,556
Accrued fees to affiliates and trustees (Note 4) . . . . . . . . . . . . . . . . . 269
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
--------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,425
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,000,367
--------------
--------------
NET ASSETS CONSIST OF:
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 999,365
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,000,367
--------------
--------------
NET ASSET VALUE, offering and redemption price per share:
($1,000,366,685 divided by 1,000,376,311 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, 1998
Amounts in
thousands
<S> <C> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 59,006
EXPENSES (Notes 2 and 4):
Advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,636
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 319
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 377
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 294
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 264
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Amortization of deferred organization expenses . . . . . . . . . . . . . . . . . . 11
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
--------------
Expenses before reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,092
Expense reductions (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,984)
--------------
Expenses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,108
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,898
--------------
REALIZED GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
--------------
Net increase in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . . . . . . . $ 56,942
--------------
--------------
</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
1998 1997
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 56,898 $ 18,879
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . 44 57
------------ ------------
Net increase in net assets resulting from operations . . . . . . . . . . . 56,942 18,936
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . (56,898) (18,879)
------------ ------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from
Fund share transactions (Note 5) . . . . . . . . . . . . . . . . . . . . . 83,478 727,784
------------ ------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . 83,522 727,841
NET ASSETS
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 916,845 189,004
------------ ------------
End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,000,367 $ 916,845
------------ ------------
------------ ------------
</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
period and other performance information derived from the financial statements.
YEAR ENDED AUGUST 31,
----------------------------------------------------------
1998 1997 1996 1995 1994*
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . .0540 .0515 .0529 .0536 .0249
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . (.0540) (.0515) (.0529) (.0536) (.0249)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
TOTAL RETURN (%)(a) . . . . . . . . . . . . . . . . . . . . . . 5.53 5.36 5.42 5.48 2.51
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . . . . . . . . . 1,000,367 916,845 189,004 160,893 154,858
Ratios to average net assets (%)(b):
Operating expenses, net (c) . . . . . . . . . . . . . . . .20 .20 .20 .13 .13
Operating expenses, gross (c) . . . . . . . . . . . . . . .39 .46 .38 .39 .38
Net investment income. . . . . . . . . . . . . . . . . . . 5.40 5.28 5.29 5.38 3.28
</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, 1998
1. ORGANIZATION
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 21 investment portfolios which are in operation as
of August 31, 1998. 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 fund 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.
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.
16 Annual Report
<PAGE>
SSgA
US TREASURY MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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, 1998, purchases,
sales, and maturities of US Government and Agency obligations, excluding
repurchase agreements aggregated to $399,993,292, $60,365,234, and
$295,000,000, 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 .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, 1998, 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.
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%, for the period
September 1, 1997 to
Annual Report 17
<PAGE>
SSgA
US TREASURY MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
December 31, 1997, and up to a maximum of 5%, for the period January 1,
1998 to August 31, 1998 of the asset-based fee determined in (i)); (iii)
out-of-pocket expenses; and (iv) start-up costs for new funds.
On August 10, 1998, Frank Russell Company entered into an agreement with
The Northwestern Mutual Life Insurance Co., an insurance organization,
pursuant to which Northwestern Mutual Life will acquire all of the
outstanding common stock of Frank Russell Company.
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 charged 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, 1998, the Fund
was charged shareholder servicing expenses of $263,589 by 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 carryover expenses subsequent to
the Distribution Plan's termination or noncontinuance. There were no
carryover expenses as of August 31, 1998.
BOARD OF TRUSTEES: The Investment Company pays each Trustee not affiliated
with the Investment Company a retainer of $48,000 annually, $1,500 for each
board meeting attended, an additional $1,500 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.
18 Annual Report
<PAGE>
SSgA
US TREASURY MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
ACCRUED FEES PAYABLE TO AFFILIATES AND TRUSTEES AS OF AUGUST 31, 1998 WERE
AS FOLLOWS:
<TABLE>
<S> <C>
Advisory fees $ 78,439
Administration fees 26,592
Custodian fees 86,924
Distribution fees 26,960
Shareholder servicing fees 21,125
Transfer agent fees 24,485
Trustees' fees 4,040
-----------
$ 268,565
-----------
-----------
</TABLE>
BENEFICIAL INTEREST: As of August 31, 1998, two shareholders, who were also
affiliates of the Investment Company, were record owners of approximately
59% and 14%, respectively, of the total outstanding shares of the Fund.
5. FUND SHARE TRANSACTIONS (ON A CONSTANT DOLLAR BASIS):
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS)
FOR THE YEARS ENDED AUGUST 31,
------------------------------
1998 1997
------------- --------------
<S> <C> <C>
Proceeds from shares sold 9,616,163 4,609,904
Proceeds from reinvestment
of distributions 16,817 6,915
Payments for shares redeemed (9,549,502) (3,889,035)
------------- -------------
Total net increase (decrease) 83,478 727,784
------------- -------------
------------- -------------
</TABLE>
Annual Report 19
<PAGE>
SSgA US TREASURY MONEY MARKET FUND
One International Place, 27th 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
Mark E. Swanson, Assistant Secretary and Principal Accounting Officer
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.
One International Place, 27th 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
PricewaterhouseCoopers LLP
One Post Office Square
Boston, Massachusetts 02109
20 Annual Report
<PAGE>
SSgA-Registered Trademark- Funds
YIELD PLUS FUND
Annual Report
August 31, 1998
Table of Contents
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion and Analysis . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . 16
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . 17
Fund Management and Service Providers. . . . . . . . . . . . . . . . . 24
"SSgA-Registered Trademark- " IS A REGISTERED TRADEMARK 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, 1998. Over the past year, the Funds have grown to include
twenty-one 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 SSgA Yield Plus Fund. I hope you find this
information a useful tool as you review your overall investment strategy.
The SSgA Funds have also opened four additional funds in fiscal 1998. The
investment objectives for these four new funds are as follows:
The SSgA Special Equity Fund seeks to maximize total return through investment
in mid- and small capitalization US equity securities. This Fund was opened as
an alternative investment strategy for the SSgA Small Cap Fund that closed to
new investors on August 31, 1998.
The SSgA International Growth Opportunities Fund seeks to provide long-term
capital growth by investing primarily in securities of foreign issuers.
The SSgA High Yield Bond Fund seeks to maximize total return by investing
primarily in non investment-grade bonds, including, but not limited to, those
represented by the Lehman Brothers High Yield Bond Index.
The SSgA Real Estate Equity Fund seeks to provide income and capital growth by
investing primarily in publicly traded securities of real estate companies.
During the past fiscal year, the SSgA Funds were proud to announce that the SSgA
S&P 500 Index Fund and the SSgA Yield Plus Fund each achieved five years of
operational history. We are proud of our long term record and look forward to
having additional funds reach their five year anniversary.
SSgA intends to proceed with the evolution of new products and services while
committing to your investment needs. We will continue to develop our
professional expertise by focusing on the expansion of both our global resources
and our diversified product lines.
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. As a result, the portfolios we
manage benefit from the knowledge of the entire team.
Mr. John Reohr, Principal, has been the portfolio manager primarily responsible
for investment decisions regarding the SSgA Yield Plus Fund since January 1998.
Mr. Reohr joined SSgA in April 1993 with responsibilities in cash and enhanced
cash portfolio management. Mr. Reohr began his Fixed Income career in 1983
working for Lehman Brothers' Treasury Trading Desk. Until 1989, Mr. Reohr
managed short and intermediate Fixed Income portfolios for Continental Bank.
Since then, Mr. Reohr has also managed government, mortgage, money market, and
Federal Funds arbitrage portfolios for the Federal Home Loan Bank of Boston. He
earned his BA in Political Science at Dickinson College and his MBA from the
University of Chicago. There are ten other portfolio managers working with Mr.
Reohr.
Annual Report 5
<PAGE>
SSgA YIELD PLUS FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
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 sectors and issues which can vary depending on the general level of
interest rates, market determined risk premiums, as well as supply/demand
imbalances in the market.
[GRAPH]
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
DATES YIELD PLUS FUND SALOMON BROTHERS 3-MONTH TREASURY BILL INDEX SALOMON BROTHERS 6 MONTH TREASURY BILL INDEX
<S> <C> <C> <C>
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 $12,532
1998 $13,308 $13,082 $13,209
</TABLE>
YEARLY PERIODS ENDED AUGUST 31
SSgA YIELD PLUS FUND
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ------------ ------------ ---------
<S> <C> <C>
1 Year $ 10,540 5.40%
5 Year $ 12,940 5.29%+
Inception $ 13,308 5.04%+
</TABLE>
SALOMON BROTHERS 3-MONTH TREASURY BILL INDEX
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ------------ ------------ ---------
<S> <C> <C>
1 Year $ 10,522 5.22%
5 Year $ 12,757 4.99%+
Inception $ 13,082 4.71%+
</TABLE>
NARROWLY BASED INDEX:
SALOMON BROTHERS 6-MONTH TREASURY BILL INDEX
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ------------ ------------ ---------
<S> <C> <C>
1 Year $ 10,540 5.40%
5 Year $ 12,860 5.16%+
Inception $ 13,209 4.89%+
</TABLE>
SEE RELATED NOTES ON THE FOLLOWING PAGE.
PERFORMANCE REVIEW
The SSgA Yield Plus Fund performed well in a year that ranks as one of the most
volatile this decade. The Fund returned 5.40%, and managed to meet or exceed the
returns of its benchmarks. The Fund's performance results exceeded the Salomon
Brothers 3-Month Treasury Bill Index gain of 5.22% by 18 basis points, and
matched the return of the 6-Month Treasury Bill Index.
Although the Federal Reserve did not change interest rate policy this year, the
Treasury curve fluctuated wildly. Two year Treasury note yields moved in an
above average 125 basis point range, culminating in a massive rally that began
in July and left yields at 4.78%, almost 75 basis points below overnight rates.
Coincident with the Treasury rally, the risk premium for all non-Treasury debt
increased markedly. The Manager believes the market re-priced all credit risks.
Swap spreads reflect these generic market requirements for accepting credit
risk, as they represent the yield difference between Treasuries and top tier
international banks, and are highly correlated with spreads on corporate bonds,
asset-backed
6 Annual Report
<PAGE>
SSgA YIELD PLUS FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
securities, mortgages, and other investments held by the Fund. Assuming other
variables remain constant, wider swap spreads cause prices on these securities
to drop. Short maturity swap spreads have more than doubled this year and
adversely impacted the total return of the Fund.
MARKET AND PORTFOLIO HIGHLIGHTS
The Fund's duration was managed consistently short, relative to its benchmarks.
The month end duration of the Fund exceeded .25 years only three times during
the period, and reached a maximum of .33 years. This was done to minimize the
risk of the yield curve reverting to its average slope for the decade. The front
of the yield curve as represented by the spread from the Federal Funds effective
overnight rate to the two year Treasury Note averaged 76 basis points since
1990, with a standard deviation of 69 basis points. In comparison, this
relationship averaged 2 basis points for the fiscal year ended August 31, 1998,
and closed the year down 110 basis points, as fears over the emerging markets
crisis in Asia, Russia, and Latin America blossomed. The flat-to-inverted curve
held little promise for appreciation from duration roll-down.
A primary objective of the Fund's investment strategy this year was increasing
its exposure to highly rated issuers. Specifically, sector allocations to the
AAA/Aaa rated Asset-Backed and US Government Agency mortgage-backed markets were
increased. Within the Asset-Backed sector, Fund allocations were shifted away
from the mature credit card market and directed into the home equity market.
Three-year credit card issues began the year at discount margins of eight basis
points over LIBOR, while similar average-life home equity transactions were
pricing at LIBOR plus 25 basis points. The spread differential on these markets
narrowed considerably during the year, contributing to the Fund's total return.
Credit card issues finished the year unchanged, and home equities closed up 19
basis points. Additionally, the collateral which supports home equity
transactions is secured by real estate and represents a stronger claim than the
unsecured receivables which collateralize credit cards. The Fund increased its
mortgage allocation from 0% to 18.9% as the sector traded cheaply and also
improved the portfolio credit quality. The Fund owns only those mortgages issued
by Federal agencies that carry either an explicit or implicit government
guarantee. The high quality nature of the Fund's holdings have helped it to
weather the current instability in the market.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP TEN ISSUERS
(AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31, 1998
<S> <C>
Federal National Mortgage Association 10.5%
General Motors Acceptance Corp. 4.5
Federal Home Loan Mortgage Corp. 4.1
BankBoston Corp. 3.9
MBNA Master Credit Card Trust 3.6
Student Loan Marketing Association 3.2
Government National Mortgage Association 3.1
Amresco Residential Services 3.0
Merrill Lynch & Co. 3.0
Contimortgage Home Equity Loan Trust 2.9
</TABLE>
- --------------------------------------------------------------------------------
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:
In our opinion, the accompanying statement of assets and liabilities and
statement of net assets, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of SSgA Yield Plus Fund (the "Fund") at August
31, 1998, the results of its operations for the fiscal year then ended and 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.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at August
31, 1998 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
Boston, Massachusetts
October 8, 1998
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
YIELD PLUS FUND
STATEMENT OF NET ASSETS
August 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
<S> <C> <C>
LONG-TERM INVESTMENTS - 80.2%
ASSET-BACKED SECURITIES - 29.0%
Advanta Mortgage Loan Trust
Series 1996-1 Class A5
6.350% due 10/25/21 $ 5,000 $ 5,059
Amresco Residential Securities
Mortgage Loan Trust (a)
Series 1997-3 Class A10
5.838% due 09/01/27 7,331 7,339
Series 1998-1 Class A7
5.848% due 10/25/27 12,775 12,792
BA Master Credit Card Trust
Series 1996-A Class A
5.786% due 08/15/03 8,000 8,010
BankBoston Recreational Vehicle
Asset Backed Trust
Series 1997-1 Class A3
6.432% due 12/15/02 2,256 2,256
Beneficial Mortgage Corp.
Series 1997-2 Class A
5.772% due 09/28/37 (a) 14,428 14,410
Capital One Master Trust
Series 1995-1 Class A
5.830% due 10/15/03 (a) 8,000 8,000
Contimortgage Home
Equity Loan Trust
Series 1996-1 Class A4
5.980% due 01/15/11 6,500 6,490
Series 1996-4 Class A4
6.370% due 10/15/11 12,800 12,800
Delta Funding Home
Equity Loan Trust
Series 1998-1 Class A2F
6.310% due 08/25/19 5,000 5,042
Ford Credit Grantor Trust
Series 1995-B Class A
5.900% due 10/15/00 1,035 1,036
General Electric Capital
Mortgage Services, Inc.
Series 1997-HE3 Class A1
6.530% due 12/25/10 4,928 4,924
IMC Home Equity Loan Trust
Series 1998-3 Class A3
6.160% due 05/20/14 (a) 10,000 10,062
MBNA Master Credit Card Trust
Series 1998-A Class A
5.766% due 08/15/05 (a) 24,000 24,007
Providian Master Trust
Series 1997-1 Class A
5.730% due 05/15/06 (a) 4,000 3,995
Student Loan Marketing Association
Series 1997-3 Class A1
5.650% due 04/25/06 (a) 21,586 21,495
Textron Financial Corp. Receivables
Series 1997-A Class A
6.050% due 09/15/99 9,232 9,274
The Money Store Home Equity Trust
Series 1994-A Class A3
5.525% due 09/15/18 (a) 2,480 2,455
Toyota Auto Receivables Grantor Trust
Series 1996-A Class A
6.300% due 07/20/01 5,739 5,762
UCFC Home Equity Loan
Series 1998-AA Class A
5.830% due 02/15/28 (a) 13,342 13,342
Westpac Securitisation Trust
Series 1998-1G Class A
5.796% due 07/19/29 (a) 16,367 16,347
----------
194,897
----------
CORPORATE BONDS AND
NOTES - 24.7%
Associates Corp. of
North America
5.787% due 08/27/01 (a) 18,000 17,968
BankBoston Corp. (a)
5.812% due 02/10/01 5,000 4,979
5.812% due 08/24/01 (MTN) 9,000 8,982
5.837% due 07/14/03 (MTN) 10,000 9,988
</TABLE>
Annual Report 9
<PAGE>
SSgA
YIELD PLUS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
<S> <C> <C>
Beneficial Corp.
5.837% due 11/15/01 (MTN)(a) $ 7,500 $ 7,508
Boeing Capital Corp.
5.787% due 03/27/02 (MTN)(a) 12,500 12,438
Countrywide Home Loan Corp.
5.807% due 02/25/00 (MTN)(a) 10,100 10,074
Series E
5.867% due 08/08/00 (MTN)(a) 7,500 7,470
Dean Witter Discover & Co.
6.062% due 03/01/00 (a) 6,000 6,021
General Motors Acceptance Corp. (a)
5.787% due 08/18/03 10,000 9,956
5.687% due 10/30/00 (MTN) 20,000 19,935
Goldman Sachs Group L.P.
5.937% due 06/02/04 (a) 5,000 4,988
Household Finance Corp.
5.987% due 06/17/05 (MTN)(a) 18,000 17,954
Merrill Lynch & Co.
5.757% due 08/10/01 (MTN)(a) 20,000 19,967
PNC Bank NA
5.767% due 06/03/03 (a) 5,000 5,001
Time Warner Inc.
7.950% due 02/02/00 3,000 3,073
----------
166,302
----------
EURODOLLAR BONDS - 7.7%
Allied Irish Banks
5.987% due 10/31/06 (MTN)(a) 13,000 12,940
Bankamerica Corp.
5.750% due 03/24/03 (MTN)(a) 5,000 4,984
Denmark Danske Bank
6.117% due 06/04/06 (a) 2,000 1,989
Foreningssparbanken
7.531% due 10/29/49 (a)(f) 7,000 7,001
Lehman Brothers Holdings PLC (a)
5.987% due 09/03/02 (MTN) 5,000 4,974
6.062% due 11/06/00 (MTN) 2,500 2,501
Lloyds Bank PLC
6.000% due 06/29/49 (a)(f) 3,000 2,624
National Westminster Finance
5.812% due 04/18/05 (a) 15,000 14,808
----------
51,821
----------
MORTGAGE-BACKED SECURITIES - 18.8%
Federal Home Loan Mortgage Corp.
Participation Certificate
7.000% due 2000 738 743
6.560% due 2018 (a) 3,204 3,257
7.430% due 2020 (a) 9,253 9,578
7.570% due 2020 (a) 7,900 8,218
7.320% due 2023 (a) 1,692 1,723
7.380% due 2024 (a) 3,769 3,810
Federal Home Loan
Mortgage Corp. Strip
6.622% due 07/01/29 (a) 7,725 7,737
Federal National Mortgage
Association
7.610% due 2008 (a) 6,681 6,931
8.000% due 2013 8,383 8,526
6.590% due 2019 (a) 5,108 5,136
6.630% due 2019 (a) 1,497 1,511
7.090% due 2020 (a) 5,069 5,207
7.400% due 2022 (a) 17,311 17,771
7.260% due 2023 (a) 7,543 7,684
7.560% due 2025 (a) 2,745 2,846
7.470% due 2030 (a) 14,327 14,887
Government National Mortgage
Association
8.000% due 2012 1,819 1,883
5.000% due 2028(a) 18,777 18,718
----------
126,166
----------
TOTAL LONG-TERM INVESTMENTS
(cost $540,384) 539,186
----------
</TABLE>
10 Annual Report
<PAGE>
SSgA
YIELD PLUS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
<S> <C> <C>
SHORT-TERM INVESTMENTS - 2.0%
AIM Short Term Investment Treasury
Portfolio Class A (b) $ 13,796 $ 13,796
Federated Investors Prime
Obligations Fund (b) 49 49
United States Treasury Bills
5.022% due 11/12/98 (c)(d) 20 20
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $13,865) 13,865
----------
TOTAL INVESTMENTS
(identified cost $554,249)(e) - 82.2% 553,051
----------
REPURCHASE AGREEMENTS - 17.2%
Agreement with Lehman Brothers Co.
of $40,581 acquired 08/31/98 at 5.970%
to be repurchased at $40,588
on 09/01/98, collateralized by:
$38,920 United States Treasury Note,
5.375% due 09/30/01, valued at $41,397 40,581
Agreement with Merrill Lynch of $75,000
acquired 08/31/98 at 5.970%
to be repurchased at $75,012
on 09/01/98, collateralized by:
$76,500 Federal Home Loan
Mortgage Corp. Discount Note,
8.780% due 09/01/98, valued at $76,500 75,000
----------
TOTAL REPURCHASE AGREEMENTS
(cost $115,581) 115,581
----------
TOTAL INVESTMENTS AND
REPURCHASE AGREEMENTS
(identified cost $669,830)(c) - 99.4% $ 668,632
OTHER ASSETS AND LIABILITIES,
NET - 0.6% 3,833
----------
NET ASSETS - 100.0% $ 672,465
----------
----------
</TABLE>
(a) Adjustable or floating-rate securities.
(b) At cost, which approximates market.
(c) Rate noted is yield-to-maturity.
(d) Held as collateral by the custodian in connection with futures contracts
sold short by the Fund.
(e) See Note 2 for federal income tax information.
(f) Perpetual floating rate note.
ABBREVIATIONS:
MTN - Medium Term Note
PLC - Public Limited Company
The accompanying notes are an integral part of the financial statements.
Annual Report 11
<PAGE>
SSgA
YIELD PLUS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
--------- -------------
<S> <C> <C>
FUTURES CONTRACTS
SOLD SHORT (Notes 2 and 3)
Eurodollar Financial
Futures Contracts
Expiration date 09/99 35 $ (22)
------------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Sold Short (*) $ (22)
------------
------------
</TABLE>
(*) At August 31, 1998, United States Treasury Bills valued at $20 were held as
collateral by the custodian in connection with open futures contracts sold
short by the Fund.
The accompanying notes are an integral part of the financial statements.
12 Annual Report
<PAGE>
SSgA
YIELD PLUS FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1998
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $554,249)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . $ 553,051
Repurchase agreements (identified cost $115,581)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . 115,581
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,114
Receivables:
Dividends and interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,692
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,507
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 930
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
--------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 682,891
LIABILITIES
Payables:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 111
Investments purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,970
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,038
Accrued fees to affiliates and trustees (Note 4) . . . . . . . . . . . . . . . . . 291
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Daily variation margin on futures contracts (Notes 2 and 3). . . . . . . . . . . . 4
--------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,426
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 672,465
--------------
--------------
NET ASSETS CONSIST OF:
Accumulated distributions in excess of net investment income . . . . . . . . . . . . . . . . . . . . . . $ (75)
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,906)
Unrealized appreciation (depreciation) on:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,198)
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (22)
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 675,599
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 672,465
--------------
--------------
NET ASSET VALUE, offering and redemption price per share:
($672,464,920 divided by 67,432,154 shares of $.001 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9.97
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 13
<PAGE>
SSgA
YIELD PLUS FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Fiscal Year Ended August 31, 1998
Amounts
in thousands
<S> <C> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 36,975
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 998
--------------
Total Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,973
EXPENSES (Notes 2 and 4):
Advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,562
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 271
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Amortization of deferred organization expenses . . . . . . . . . . . . . . . . . . 2
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
--------------
Total Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,587
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,386
--------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (499)
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146 (353)
--------------
Net change in unrealized appreciation or depreciation of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,633)
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (22) (1,655)
-------------- --------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,008)
--------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . $ 33,378
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 Annual Report
<PAGE>
SSgA
YIELD PLUS FUND
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Fiscal Years Ended August 31,
Amounts in thousands
1998 1997
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 35,386 $ 50,065
Net realized gain (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (353) 1,027
Net change in unrealized appreciation or depreciation . . . . . . . . . . . . . . . . . . . (1,655) (106)
------------ ------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . 33,378 50,986
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (35,250) (50,066)
In excess of net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (136) (136)
------------ ------------
Total Distributions to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . (35,386) (50,202)
------------ ------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from
Fund share transactions (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . (165,582) (94,214)
------------ ------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . (167,590) (93,430)
NET ASSETS
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 840,055 933,485
------------ ------------
End of period (including accumulated distributions in excess of
net investment income of $75 and $136, respectively) . . . . . . . . . . . . . . . . . . $ 672,465 $ 840,055
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 15
<PAGE>
SSgA
YIELD PLUS FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each
period and other performance information derived from the financial statements.
YEAR ENDED AUGUST 31,
----------------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . $ 10.01 $ 10.00 $ 10.00 $ 9.99 $ 10.01
---------- ---------- ---------- --------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . . .57 .54 .56 .56 .38
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . . . . . . (.04) .01 -- 02 (.02)
---------- ---------- ---------- --------- ----------
Total Income From Investment Operations . . . . . .53 .55 .56 .58 .36
---------- ---------- ---------- --------- ----------
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . . . . . . . (.57) (.54) (.56) (.56) (.38)
In excess of net realized gain on investments . . . -- -- -- (.01) --
---------- ---------- ---------- --------- ----------
Total Distributions . . . . . . . . . . . . . . . (.57) (.54) (.56) (.57) (.38)
---------- ---------- ---------- --------- ----------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . $ 9.97 $ 10.01 $ 10.00 $ 10.00 $ 9.99
---------- ---------- ---------- --------- ----------
---------- ---------- ---------- --------- ----------
TOTAL RETURN (%) . . . . . . . . . . . . . . . . . . . 5.40 5.67 5.73 6.01 3.65
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted). . . . . . 672,465 840,055 933,485 1,447,097 1,358,464
Ratios to average net assets (%):
Operating expenses . . . . . . . . . . . . . . . .41 .38 .36 .38 .35
Net investment income . . . . . . . . . . . . . . 5.66 5.42 5.59 5.64 3.82
Portfolio turnover (%). . . . . . . . . . . . . . . 249.10 92.38 97.05 199.69 142.68
</TABLE>
16 Annual Report
<PAGE>
SSgA
YIELD PLUS FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1998
1. ORGANIZATION
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 21 investment portfolios which are in operation as
of August 31, 1998. 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 fund is a separate corporate taxpayer and determines
its net investment income and capital gains (or losses) and the
Annual Report 17
<PAGE>
SSgA
YIELD PLUS FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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, 1998, the Fund had a net tax basis capital loss carryover of
$1,086,433 which may be applied against any realized net taxable gains in
each succeeding year or until its expiration date of August 31, 2004. As
permitted by tax regulations, the Fund intends to defer a net realized
capital loss of $842,006 incurred from November 1, 1997 to August 31, 1998,
and treat it as arising in fiscal year 1999.
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, 1998 are as follows:
<TABLE>
<CAPTION>
NET
UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
------------- ------------ -------------- --------------
<S> <C> <C> <C>
$ 669,830,000 $ 308,260 $ (1,506,260) $ (1,198,000)
</TABLE>
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.
The following reclassifications have been made at August 31, 1998:
<TABLE>
<CAPTION>
UNDISTRIBUTED ACCUMULATED ADDITIONAL
NET INVESTMENT NET REALIZED PAID-IN
INCOME GAIN (LOSS) CAPITAL
-------------- ------------ ----------
<S> <C> <C>
$ 60,687 $ (40,294) $ (20,393)
</TABLE>
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.
18 Annual Report
<PAGE>
SSgA
YIELD PLUS FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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.
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 utilizes 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.
Annual Report 19
<PAGE>
SSgA
YIELD PLUS FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the year ended August 31, 1998, purchases and
sales of investment securities, excluding US Government and Agency
obligations, short-term investments, and repurchase agreements aggregated
to $1,207,230,890 and $1,572,064,356, respectively.
For the year ended August 31, 1998, purchases and sales of US Government
and Agency obligations, excluding short-term investments, futures contracts
and repurchase agreements aggregated to $297,783,854 and $194,974,000,
respectively.
FUTURES TRANSACTIONS: Fund transactions in futures contracts during the
year ended August 31, 1998 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, 1997 -- $ -- -- $ --
Contracts opened 385 90,806,255 825 194,230,838
Contracts closed (350) (82,535,125) (825) (194,230,838)
--------- ------------- --------- ------------
Outstanding at August 31, 1998 35 $ 8,271,130 -- $ --
--------- ------------- --------- ------------
--------- ------------- --------- ------------
</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.
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
20 Annual Report
<PAGE>
SSgA
YIELD PLUS FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
Company's Distributor on behalf of the Fund (up to a maximum of 10% for the
period September 1, 1997 to December 31, 1997, and up to a maximum of 5%
for the period January 1, 1998 to August 31, 1998 of the asset-based fee
determined in (i)); (iii) out-of-pocket expenses; and (iv) start-up costs
for new funds.
On August 10, 1998, Frank Russell Company entered into an agreement with
The Northwestern Mutual Life Insurance Co., an insurance organization,
pursuant to which Northwestern Mutual Life will acquire all of the
outstanding common stock of Frank Russell Company.
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 charged 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"), the
Adviser's Metropolitan Division of Commercial Banking ("Commercial
Banking") and State Street Solutions ("Solutions")(collectively the
"Agents"), as well as several unaffiliated service providers. For these
services, the Fund pays .025%, .175%, .175%, .175%, and .175% to the
Adviser, SSBSI, RIS, Commercial Banking, and Solutions, 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, 1998, the Fund was charged
shareholder servicing expenses of $155,854, $1,162, $27,339 and $86,102, by
the Adviser, SSBSI, Commercial Banking, and Solutions, 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, 1998.
Annual Report 21
<PAGE>
SSgA
YIELD PLUS FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
BOARD OF TRUSTEES: The Investment Company pays each Trustee not affiliated
with the Investment Company a retainer of $48,000 annually, $1,500 for each
board meeting attended, an additional $1,500 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, 1998 WERE
AS FOLLOWS:
<TABLE>
<S> <C>
Advisory fees $ 205,675
Administration fees 14,710
Custodian fees 24,267
Distribution fees 13,685
Shareholder servicing fees 22,086
Transfer agent fees 9,019
Trustees' fees 1,653
---------
$ 291,095
---------
---------
</TABLE>
BENEFICIAL INTEREST: As of August 31, 1998, one shareholder (who was also
an affiliate of the Investment Company) was a record owner of approximately
53% of the total outstanding shares of the Fund.
5. FUND SHARE TRANSACTIONS
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS)
FOR THE YEARS ENDED AUGUST 31,
-----------------------------------------------------------
1998 1997
--------------------------- ----------------------------
SHARES DOLLARS SHARES DOLLARS
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Proceeds from shares sold 187,164 $ 1,870,329 206,514 $ 2,066,206
Proceeds from reinvestment
of distributions 3,401 33,983 4,931 49,336
Payments for shares redeemed (207,076) (2,069,894) (220,864) (2,209,756)
---------- ------------- ---------- -------------
Total net increase (decrease) (16,511) $ (165,582) (9,419) $ (94,214)
---------- ------------- ---------- -------------
---------- ------------- ---------- -------------
</TABLE>
22 Annual Report
<PAGE>
SSgA YIELD PLUS FUND
One International Place, 27th 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
Mark E. Swanson, Assistant Secretary and Principal Accounting Officer
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.
One International Place, 27th 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
PricewaterhouseCoopers LLP
One Post Office Square
Boston, Massachusetts 02109
Annual Report 23
<PAGE>
SSgA-Registered Trademark- Funds
BOND MARKET FUND
Annual Report
August 31, 1998
Table of Contents
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion and Analysis . . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . 18
Fund Management and Service Providers. . . . . . . . . . . . . . . . . . . 24
"SSgA-Registered Trademark- " IS A REGISTERED TRADEMARK 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, 1998. Over the past year, the Funds have grown to include
twenty-one 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 SSgA Bond Market Fund. I hope you find this
information a useful tool as you review your overall investment strategy.
The SSgA Funds have also opened four additional funds in fiscal 1998. The
investment objectives for these four new funds are as follows:
The SSgA Special Equity Fund seeks to maximize total return through investment
in mid- and small capitalization US equity securities. This Fund was opened as
an alternative investment strategy for the SSgA Small Cap Fund that closed to
new investors on August 31, 1998.
The SSgA International Growth Opportunities Fund seeks to provide long-term
capital growth by investing primarily in securities of foreign issuers.
The SSgA High Yield Bond Fund seeks to maximize total return by investing
primarily in non investment-grade bonds, including, but not limited to, those
represented by the Lehman Brothers High Yield Bond Index.
The SSgA Real Estate Equity Fund seeks to provide income and capital growth by
investing primarily in publicly traded securities of real estate companies.
During the past fiscal year, the SSgA Funds were proud to announce that the SSgA
S&P 500 Index Fund and the SSgA Yield Plus Fund each achieved five years of
operational history. We are proud of our long term record and look forward to
having additional funds reach their five year anniversary.
SSGA intends to proceed with the evolution of new products and services while
committing to your investment needs. We will continue to develop our
professional expertise by focusing on the expansion of both our global resources
and our diversified product lines.
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. As a result, the portfolios we
manage benefit from the knowledge of the entire team.
Mr. John Kirby, Principal, has been the portfolio manager primarily responsible
for investment decisions regarding the SSgA Bond Market Fund since the Fund's
inception. Prior to joining State Street Bank in 1995, Mr. Kirby was an account
manager with Lowell, Blake & Associates. Prior to that he was 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: Investment grade debt instruments including: US Government
Treasuries, 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]
<TABLE>
<CAPTION>
GROWTH OF A $10,000 INVESTMENT
LEHMAN BROTHERS
DATES BOND MARKET FUND AGGREGATE BOND INDEX**
<S> <C> <C>
Inception* $10,000 $10,000
1996 $9,781 $9,824
1997 $10,707 $10,806
1998 $11,762 $11,949
YEARLY PERIODS ENDED AUGUST 31
</TABLE>
SSgA BOND MARKET FUND
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- -------------- --------- ------
<S> <C> <C>
1 Year $ 10,986 9.86%
Inception $ 11,762 6.54%+
</TABLE>
LEHMAN BROTHERS AGGREGATE
BOND INDEX
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- -------------- --------- ------
<S> <C> <C>
1 Year $ 11,057 10.57%
Inception $ 11,949 7.13%+
</TABLE>
SEE RELATED NOTES ON THE FOLLOWING PAGE.
PERFORMANCE REVIEW
For the year ended August 31, 1998, the SSgA Bond Market Fund returned 9.86%
versus 10.57% for its benchmark, the Lehman Brothers Aggregate Bond Index.
Deviation from the benchmark was principally due to payment of operating
expenses by the Fund, whereas Index results do not include expenses of any kind.
The Fund does not pursue active interest exposure. The primary source of risk in
the portfolio is from sector over/underweight versus the index. This risk
profile is less volatile than one resulting from active duration management.
Over the year, the portfolio's tracking error versus the index decreased, as the
sector exposure was reduced in anticipation of broadening global financial
crisis.
The interest rate environment was favorable during the fiscal year ended August
31, 1998. The Federal Reserve was diligent in its commitment to moderate growth
and control inflation. For the majority of fiscal 1998, the yield difference
6 Annual Report
<PAGE>
SSgA BOND MARKET FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
between short and long term Treasury issues narrowed. The Federal Reserve Bank's
decision not to lower the Fed Funds rate served to anchor short rates, but
provided momentum for inflation concerns to be taken out of long interest rates.
This trend prevailed until the global financial crisis sparked a
flight-to-quality rally into US Treasuries. As the fiscal year ended, US
Treasuries yields were approaching new lows. At August 31, 1998, two-year US
Treasuries yielded 4.77%, with the 30-year bond yielding 5.26%.
MARKET AND 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, 1998, the Fund's duration matched
the Index at 4.46 years.
As the fiscal year began, the Fund employed a strategy to overweight corporate
debt and mortgage backed securities to provide incremental yield to the
portfolio. However, as the year progressed, the Fund underwent a strategic shift
in its intermediate and long corporate positions, underweighting both, to
reflect a possible slowing global economy. An overweight exposure in short
duration corporate securities (five years and under) was maintained throughout
the period. Within the corporate allocation, the Fund continued to favor
aerospace/defense, cable media, UK regional electric companies, natural gas
pipelines/distribution, Canadian provinces, and selected bank, finance, and
insurance companies. The mortgage market was pressured from falling Treasury
yields and increased risk premium built into swap spreads, which caused them to
widen on an option-adjusted basis. The Fund was overweight in mortgages for the
majority of the year, and also benefited from an underweight in premium
pass-through instruments. As the risk of crisis increased, the Fund went to a
neutral weight in mortgages.
The heightened risk in financial markets has widened the risk premium demanded
in all spread markets and substantively reduced the overall liquidity of global
non-government markets. The current weightings of the Fund reflect a cautious
exposure to the global financial economy and markets.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP TEN ISSUERS
(AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31, 1998
<S> <C>
Federal National Mortgage Association 32.9%
United States Government Treasuries 23.9
Government National Mortgage Association 7.1
Federal Farm Credit Banks 6.3
CIT Group Holdings, Inc. 1.7
Federal Home Loan Mortgage Corp. 1.5
Ford Motor Credit Co. 1.5
Manitoba, Province of 1.1
Premier Auto Trust 1.0
International Lease Finance Corp. 0.9
</TABLE>
- --------------------------------------------------------------------------------
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:
In our opinion, the accompanying statement of assets and liabilities and
statement of net assets, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of SSgA Bond Market Fund (the "Fund") at August
31, 1998, the results of its operations for the fiscal year then ended and 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 February 7, 1996 (commencement of
operations) to August 31, 1996, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at August 31, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
Boston, Massachusetts
October 8, 1998
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
BOND MARKET FUND
STATEMENT OF NET ASSETS
August 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
<S> <C> <C>
LONG-TERM INVESTMENTS - 99.7%
ASSET-BACKED SECURITIES - 3.6%
Chase Manhattan Auto Owner Trust
Series 1998-A Class A3
5.700% due 09/17/01 $ 750 $ 753
Series 1998-B Class A3
5.750% due 09/15/00 500 502
CIT RV Trust
6.400% due 02/15/07 247 249
Citibank Credit Card Master Trust I
Series 1998-6 Class A
5.850% due 04/10/03 830 845
Discover Card Master Trust I
Series 1996-3 Class A
6.050% due 08/18/08 200 200
First USA Credit Card Master Trust
Series 1997-6 Class A
6.420% due 03/17/05 1,000 1,024
Ford Credit Auto Loan Master Trust
Series 1995-1 Class A
6.500% Series 08/15/02 200 203
Ford Credit Auto Owner Trust
Series 1998-A Class A3
5.650% Series 10/15/01 850 850
Premier Auto Trust
Series 1996-2 Class A4
6.575% Series 10/06/00 1,000 1,007
Series 1997-1 Class A4
6.350% Series 04/06/02 250 253
Series 1997-2 Class A4
6.250% Series 06/06/01 125 126
Series 1997-3 Class A4
6.200% Series 01/06/01 400 402
Series 1998-1 Class A3
5.630% Series 10/15/01 500 500
----------
6,914
----------
CORPORATE BONDS AND NOTES - 21.6%
A.H. Belo Corp.
6.875% due 06/01/02 750 770
Branch Banking & Trust Co.
5.700% due 02/01/01 250 249
Burlington Northern Santa Fe Corp.
6.375% due 12/15/05 500 501
6.700% due 08/01/28 1,000 953
Caterpillar Inc.
6.625% due 07/15/28 500 498
Chemical Bank New York Corp.
7.250% due 09/15/02 40 42
CIT Group Holdings, Inc.
6.250% due 10/04/99 (MTN) 500 502
6.400% due 01/28/00 (MTN) 1,000 1,004
6.700% due 05/28/01 (MTN) 1,000 1,028
6.375% due 08/01/02 1,500 1,530
Commercial Credit Group, Inc.
6.000% due 06/15/00 350 352
Cox Communications, Inc.
6.800% due 08/01/28 500 474
Crestar Capital Trust I
8.160% due 12/15/26 700 764
Donaldson, Lufkin & Jenrette, Inc.
6.110% due 05/15/01 (MTN) 500 505
Enron Corp.
9.650% due 05/15/01 250 272
Equitable Life Assurance Society
6.950% due 12/01/05 1,000 1,044
Finova Capital Corp.
6.375% due 05/15/05 500 505
Fleet Financial Group
6.700% due 07/15/28 500 483
Ford Motor Co.
7.700% due 05/15/97 450 479
Ford Motor Credit Co.
6.375% due 10/06/00 (Regd.) 500 505
7.000% due 09/25/01 500 516
6.110% due 12/28/01 (MTN) 900 908
Gatx Capital Corp.
6.500% due 11/01/00 1,000 1,011
</TABLE>
Annual Report 9
<PAGE>
SSgA
BOND MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
<S> <C> <C>
General Electric Capital Corp.
8.300% due 09/20/09 $ 1,000 $ 1,181
General Motors Acceptance Corp.
6.625% due 04/24/00 (MTN) 440 446
8.400% due 10/15/99 450 461
9.625% due 12/15/01 810 898
GTE Corp.
9.375% due 12/01/00 800 858
International Business Machines Corp.
7.125% due 12/01/96 250 255
International Lease Finance Corp.
6.375% due 01/18/00 1,000 1,008
6.625% due 08/15/00 200 203
6.125% due 11/01/99 1,000 1,004
Kemper Corp.
6.875% due 09/15/03 345 356
KN Energy, Inc.
7.450% due 03/01/98 250 235
Lehman Brothers Holdings, Inc.
6.150% due 03/15/00 (MTN) 1,000 1,009
6.050% due 04/28/00 (MTN) 1,000 1,009
Lockheed Martin Corp.
6.850% due 05/15/01 1,000 1,019
Masco Corp.
6.625% due 04/15/18 250 242
Merrill Lynch & Co.
6.000% due 02/12/03 500 502
6.050% due 03/06/01 (MTN) 625 632
National City Bank of Cleveland, Ohio
6.350% due 03/15/01 1,000 1,003
Nationsbank Corp.
7.625% due 04/15/05 1,000 1,067
6.800% due 03/15/28 700 698
Norwest Financial, Inc.
Series B
6.050% due 11/19/99 (MTN) 1,000 1,006
Raytheon Co.
6.300% due 03/15/05 1,000 989
6.750% due 03/15/18 600 586
Sola International, Inc.
6.875% due 03/15/08 150 148
Sun Life Canada (US) Capital Trust
8.526% due 05/29/49 500 582
Suntrust Banks, Inc.
6.125% due 02/15/04 1,300 1,302
6.000% due 02/15/26 300 299
TCI Communications Inc.
7.125% due 02/15/28 600 589
Tele-Communications, Inc.
8.250% due 01/15/03 1,000 1,075
Tennessee Gas Pipeline Co.
7.000% due 03/15/27 700 694
Tommy Hilfiger USA, Inc.
6.500% due 06/01/03 500 491
Tosco Corp.
7.800% due 01/01/27 250 248
Travelers Group, Inc.
9.500% due 03/01/02 285 316
US Bancorp First Bank Systems, Inc.
7.625% due 05/01/05 500 537
USA Waste Services, Inc.
6.500% due 12/15/02 1,000 1,001
Worldcom Inc.
6.400% due 08/15/05 200 201
Xerox Capital Trust I
8.000% due 02/01/27 1,250 1,295
Zions Institutional Capital Trust A
8.536% due 12/15/26 600 657
----------
40,997
----------
EURODOLLAR BONDS - 0.9%
DR Investments
7.450% due 05/15/07 250 268
Hyder PLC
6.750% due 12/15/04 1,000 1,027
Yorkshire Power Finance, Ltd.
6.154% due 02/25/03 500 505
----------
1,800
----------
</TABLE>
10 Annual Report
<PAGE>
SSgA
BOND MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
<S> <C> <C>
MORTGAGE-BACKED SECURITIES - 32.0%
Federal Home Loan Mortgage Corp.
Participation Certificate Groups
7.000% due 2001 $ 140 $ 142
9.000% due 2004 55 57
9.000% due 2005 397 413
9.000% due 2010 372 393
6.000% due 2011 108 108
8.000% due 2011 157 162
8.500% due 2025 47 49
7.500% due 2028 794 816
Federal National Mortgage
Association Pools
6.000% due 2009 155 155
6.000% due 2011 186 186
6.000% due 2013 (d) 3,179 3,172
8.000% due 2023 4 4
8.500% due 2024 26 27
7.500% due 2025 105 108
8.000% due 2026 148 153
9.000% due 2026 102 108
6.500% due 2027 264 265
8.000% due 2027 5,878 6,087
7.500% due 2028 3,000 3,085
Federal National Mortgage
Association (c)
5.500% 15 Year TBA 165 162
6.500% 30 Year Pass-thru TBA 7,500 7,528
7.000% 30 Year TBA 15,920 16,208
7.500% 30 Year TBA 4,500 4,622
Government National Mortgage
Association Pools
8.000% due 1999 131 137
8.000% due 2012 1,472 1,523
10.000% due 2013 22 23
10.000% due 2014 9 9
7.000% due 2022 (d) 368 374
7.500% due 2022 14 15
6.880% due 2023 (d) 353 360
7.000% due 2023 (d) 595 608
6.500% due 2024 38 38
7.500% due 2024 249 257
8.500% due 2025 218 230
9.500% due 2025 174 188
7.500% due 2027 1,795 1,849
8.000% due 2027 26 27
8.000% due 2028 2,196 2,278
Government National
Mortgage Association (c)
7.000% 30 Year TBA 4,250 4,338
7.500% 30 Year TBA 4,000 4,119
8.000% 30 Year TBA 400 415
----------
60,798
----------
UNITED STATES GOVERNMENT
AGENCIES - 6.9%
Federal Farm Credit Bank (MTN)
6.060% due 05/28/13 670 696
Federal Home Loan Bank
7.310% due 06/16/04 1,000 1,086
6.995% due 04/02/07 300 329
Federal National Mortgage
Association
8.500% due 02/01/05 1,500 1,564
6.560% due 11/26/07 400 413
6.160% due 08/07/28 2,605 2,711
Federal National Mortgage
Association (MTN)
6.790% due 06/02/04 1,000 1,060
6.480% due 06/28/04 1,000 1,046
6.590% due 09/17/07 500 535
6.550% due 11/21/07 1,000 1,029
6.170% due 01/15/08 235 238
6.270% due 02/05/08 220 224
6.270% due 02/13/08 1,000 1,016
6.150% due 07/02/08 500 506
</TABLE>
Annual Report 11
<PAGE>
SSgA
BOND MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
<S> <C> <C>
State of Israel United States Government
Guaranteed Notes
Series 3-B
6.625% due 02/15/04 $ 250 $ 262
Series 7-B
5.700% due 02/15/03 500 504
----------
13,219
----------
UNITED STATES GOVERNMENT
TREASURIES - 29.5%
United States Treasury Bonds
7.500% due 11/15/16 2,000 2,472
8.875% due 08/15/17 1,350 1,894
8.750% due 08/15/20 2,270 3,217
8.000% due 11/15/21 350 466
7.625% due 11/15/22 3,600 4,640
6.875% due 08/15/25 2,153 2,586
6.500% due 11/15/26 990 1,142
United States Treasury Notes
6.500% due 05/31/01 100 104
6.625% due 07/31/01 500 521
6.250% due 10/31/01 1,000 1,035
6.125% due 12/31/01 1,650 1,704
7.500% due 02/15/05 5,500 6,229
6.250% due 06/30/02 1,930 2,010
5.500% due 02/28/03 10,000 10,193
5.500% due 05/31/03 950 970
5.375% due 06/30/03 500 509
7.250% due 05/15/04 150 166
6.500% due 05/15/05 500 541
7.000% due 07/15/06 9,275 10,394
6.125% due 08/15/07 1,500 1,606
6.500% due 08/15/07 1,000 1,085
5.625% due 05/15/08 2,500 2,612
----------
56,096
----------
YANKEE BONDS - 5.2%
DR Investments
7.100% due 05/15/02 500 522
Manitoba, Province of
8.750% due 05/15/01 1,000 1,074
6.875% due 09/15/02 1,000 1,039
Series C-J
9.500% due 10/01/00 351 377
National Bank of Hungary
7.950% due 11/01/03 500 528
New Brunswick, Province of
7.125% due 10/01/02 500 528
Ontario, Province of
7.375% due 01/27/03 1,070 1,135
7.625% due 06/22/04 585 638
Quebec, Province of
9.125% due 03/01/00 500 522
11.000% due 06/15/15 1,000 1,122
Tyco International Group S.A.
6.125% due 06/15/01 1,790 1,792
Westpac Banking, Ltd.
9.125% due 08/15/01 500 541
----------
9,818
----------
TOTAL LONG-TERM INVESTMENTS
(cost $187,154) 189,642
----------
SHORT-TERM INVESTMENTS - 23.8%
Federal Farm Credit Bank
Discount Note
5.700% due 09/01/98 (a)(e) 14,000 14,000
Federal National Mortgage Association
Discount Notes
5.440% due 09/14/98 (a)(e) 25,000 24,951
Federated Investors Prime
Obligations Fund (a) 6,206 6,206
Valiant Money Market Fund
Class A (a) 3 3
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $45,160) 45,160
----------
</TABLE>
12 Annual Report
<PAGE>
SSgA
BOND MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
MARKET
VALUE
(000)
-------------
<S> <C>
TOTAL INVESTMENTS
(identified cost $232,314)(b) - 123.5% $ 234,802
OTHER ASSETS AND LIABILITIES,
NET - (23.5%) (44,651)
----------
NET ASSETS - 100.0% $ 190,151
----------
----------
</TABLE>
(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.
(e) Rate noted is yield-to-maturity (Unaudited).
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, 1998
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $232,314)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . $ 234,802
Receivables:
Dividends and interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,850
Investments sold (delayed settlement)(Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,036
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,069
--------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 284,757
LIABILITIES
Payables:
Investments purchased (regular settlement) . . . . . . . . . . . . . . . . . . . . $ 17,244
Investments purchased (delayed settlement)(Note 2) . . . . . . . . . . . . . . . . 76,644
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 570
Accrued fees to affiliates and trustees (Note 4) . . . . . . . . . . . . . . . . . 111
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
--------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,606
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 190,151
--------------
--------------
NET ASSETS CONSIST OF:
Undistributed net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,322
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,575
Unrealized appreciation (depreciation) on investments. . . . . . . . . . . . . . . . . . . . . . . . . . 2,488
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183,748
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 190,151
--------------
--------------
NET ASSET VALUE, offering and redemption price per share:
($190,150,573 divided by 18,374,053 shares of $.001
par value shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . $ 10.35
--------------
--------------
</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, 1998
Amounts
in thousands
<S> <C> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,718
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 496
--------------
Total Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,214
EXPENSES (Notes 2 and 4):
Advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 396
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
--------------
Expenses before reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 681
Expense reductions (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . (52)
--------------
Expenses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 629
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,585
--------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,055
Net change in unrealized appreciation or depreciation of investments . . . . . . . . . . . . . . . . . . 2,334
--------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,389
--------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . $ 11,974
--------------
--------------
</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
1998 1997
---------- ----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,585 $ 2,911
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,055 230
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . . . . 2,334 853
---------- ----------
Net increase (decrease) in net assets resulting from operations . . . . . . . . 11,974 3,994
---------- ----------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,281) (2,242)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . (350) --
---------- ----------
Total Distributions to Shareholders . . . . . . . . . . . . . . . . . . . . . . (6,631) (2,242)
---------- ----------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from
Fund share transactions (Note 5). . . . . . . . . . . . . . . . . . . . . . . . 97,138 56,903
---------- ----------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . 102,481 58,655
NET ASSETS
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,670 29,015
---------- ----------
End of period (including undistributed net investment income of
$2,322 and $1,053, respectively). . . . . . . . . . . . . . . . . . . . . . . . $ 190,151 $ 87,670
---------- ----------
---------- ----------
</TABLE>
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
period and other performance information derived from the financial statements.
YEAR ENDED AUGUST 31,
-----------------------------------------
1998 1997 1996*
---------- ---------- ----------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . $ 9.97 $ 9.63 $ 10.00
---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . .55 .53 .27
Net realized and unrealized gain (loss) on investments . . . . . . . . . .40 .35 (.49)
---------- ---------- ----------
Total Income From Investment Operations . . . . . . . . . . . . . . . .95 .88 (.22)
---------- ---------- ----------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . (.54) (.54) (.15)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . (.03) -- --
---------- ---------- ----------
Total Distributions . . . . . . . . . . . . . . . . . . . . . . . . . (.57) (.54) (.15)
---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . $ 10.35 $ 9.97 $ 9.63
---------- ---------- ----------
---------- ---------- ----------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . 9.86 9.47 (2.19)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . . . . . . . . . . . . . . 190,151 87,670 29,015
Ratios to average net assets (%)(b):
Operating expenses, net (c) . . . . . . . . . . . . . . . . . . . . . .48 .50 .63
Operating expenses, gross (c) . . . . . . . . . . . . . . . . . . . .52 .74 .93
Net investment income . . . . . . . . . . . . . . . . . . . . . . . 5.74 6.05 5.66
Portfolio turnover (%)(b). . . . . . . . . . . . . . . . . . . . . . . 565.75 453.14 313.85
</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, 1998
1. ORGANIZATION
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 21 investment portfolios which are in operation as
of August 31, 1998. 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, 1998
AMORTIZATION AND ACCRETION: All zero-coupon bond discounts and original
issue discounts are accredit for both tax and financial reporting purposes.
All short- and long-term market premiums/discounts are amortized/accredit
for both tax and financial reporting purposes.
FEDERAL INCOME TAXES: Since the Investment Company is a Massachusetts
business trust, each fund 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, 1998 are as follows:
<TABLE>
<CAPTION>
NET
UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
---------------- -------------- --------------- ----------------
<S> <C> <C> <C>
$ 232,390,168 $ 2,797,727 $ (385,895) $ 2,411,832
</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 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, 1998
The following reclassifications have been made at August 31, 1998:
<TABLE>
<CAPTION>
UNDISTRIBUTED ACCUMULATED ADDITIONAL
NET INVESTMENT NET REALIZED PAID-IN
INCOME GAIN (LOSS) CAPITAL
----------------- -------------- ------------
<C> <C> <C>
$ (34,175) $ 30,539 $ 3,636
</TABLE>
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 Advisor 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, 1998, purchases and
sales of investment securities, excluding US Government and Agency
obligations and short-term investments, aggregated to $81,019,280 and
$68,112,504, respectively.
20 Annual Report
<PAGE>
SSgA
BOND MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
For the year ended August 31, 1998, purchases and sales of US Government
and Agency obligations, excluding short-term investments, aggregated to
$742,333,065 and $656,173,097, 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 .30% of its average daily net assets. For the four months ended December
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. Beginning
January 1, 1998, the Adviser has agreed to reimburse the Fund for all
expenses in excess of .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%, for the period
September 1, 1997 to December 31, 1997, and up to a maximum of 5%, for the
period January 1, 1998 to August 31, 1998 of the asset-based fee determined
in (i)); (iii) out-of-pocket expenses; and (iv) start-up costs for new
funds.
On August 10, 1998, Frank Russell Company entered into an agreement with
The Northwestern Mutual Life Insurance Co., an insurance organization,
pursuant to which Northwestern Mutual Life will acquire all of the
outstanding common stock of Frank Russell Company.
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.
Annual Report 21
<PAGE>
SSgA
BOND MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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 charged 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 agreement with the Adviser, the Adviser's
Retirement Investment Services Division ("RIS"), the Adviser's Metropolitan
Division of Commercial Banking ("Commercial Banking") and State Street
Solutions ("Solutions")(collectively the "Agents"), as well as several
unaffiliated service providers. For these services, the Fund pays .025%,
.050%, .050%, and .100% to the Adviser, RIS, Commercial Banking, and
Solutions, 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, 1998, the Fund was charged shareholder servicing expenses of $22,800,
$30 and $3,510 by the Adviser, RIS and Solutions. 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, 1998.
BOARD OF TRUSTEES: The Investment Company pays each Trustee not affiliated
with the Investment Company a retainer of $48,000 annually, $1,500 for each
board meeting attended, an additional $1,500 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.
22 Annual Report
<PAGE>
SSgA
BOND MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
ACCRUED FEES PAYABLE TO AFFILIATES AND TRUSTEES AS OF AUGUST 31, 1998 WERE
AS FOLLOWS:
<TABLE>
<S> <C>
Advisory $ 84,806
Administration fees 4,532
Custodian fees 11,369
Distribution fees 2,353
Shareholder servicing fees 3,013
Transfer agent fees 3,929
Trustees' fees 585
-----------
$ 110,587
-----------
-----------
</TABLE>
BENEFICIAL INTEREST: As of August 31, 1998, one shareholder was a record
owner of approximately 16% of the total outstanding shares of the Fund.
5. FUND SHARE TRANSACTIONS
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS)
FOR THE YEARS ENDED AUGUST 31,
-----------------------------------------------------
1998 1997
-------------------------- -----------------------
SHARES DOLLARS SHARES DOLLARS
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Proceeds from share sold 13,299 $ 134,745 8,168 $ 80,169
Proceeds from reinvestment
of distributions 366 3,664 32 315
Payments for shares redeemed (4,086) (41,271) (2,417) (23,581)
--------- --------- --------- ---------
Total net increase (decrease) 9,579 $ 97,138 5,783 $ 56,903
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
6. DIVIDENDS
On September 1, 1998, the Board of Trustees declared a dividend of $.1333
from net investment income, payable on September 9, 1998 to shareholders of
record on September 2, 1998.
Annual Report 23
<PAGE>
SSgA BOND MARKET FUND
One International Place, 27th 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
Mark E. Swanson, Assistant Secretary and Principal Accounting Officer
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.
One International Place, 27th 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
PricewaterhouseCoopers LLP
One Post Office Square
Boston, Massachusetts 02109
24 Annual Report
<PAGE>
SSgA-Registered Trademark- Funds
S&P 500 INDEX FUND
Annual Report
August 31, 1998
Table of Contents
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion and Analysis . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . 21
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . 22
Tax Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Fund Management and Service Providers. . . . . . . . . . . . . . . . . 29
"SSgA-Registered Trademark- " IS A REGISTERED TRADEMARK 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, 1998. Over the past year, the Funds have grown to include
twenty-one 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 SSgA S&P 500 Index Fund. I hope you find this
information a useful tool as you review your overall investment strategy.
The SSgA Funds have also opened four additional funds in fiscal 1998. The
investment objectives for these four new funds are as follows:
The SSgA Special Equity Fund seeks to maximize total return through investment
in mid- and small capitalization US equity securities. This Fund was opened as
an alternative investment strategy for the SSgA Small Cap Fund that closed to
new investors on August 31, 1998.
The SSgA International Growth Opportunities Fund seeks to provide long-term
capital growth by investing primarily in securities of foreign issuers.
The SSgA High Yield Bond Fund seeks to maximize total return by investing
primarily in non investment-grade bonds, including, but not limited to, those
represented by the Lehman Brothers High Yield Bond Index.
The SSgA Real Estate Equity Fund seeks to provide income and capital growth by
investing primarily in publicly traded securities of real estate companies.
During the past fiscal year, the SSgA Funds were proud to announce that the SSgA
S&P 500 Index Fund and the SSgA Yield Plus Fund each achieved five years of
operational history. We are proud of our long term record and look forward to
having additional funds reach their five year anniversary.
SSGA intends to proceed with the evolution of new products and services while
committing to your investment needs. We will continue to develop our
professional expertise by focusing on the expansion of both our global resources
and our diversified product lines.
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. As a result, the portfolios we
manage benefit from the knowledge of the entire team.
Mr. James May, Principal, was 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 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 MDA 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]
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
DATES S&P 500 INDEX FUND S&P 500-Registered Trademark- INDEX**
<S> <C> <C>
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
1998 $24,713 $25,068
</TABLE>
YEARLY PERIODS ENDED AUGUST 31
SSgA S&P 500 INDEX FUND
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- --------------- ----------- --------
<S> <C> <C>
1 Year $ 10,791 7.91%
5 Year $ 22,868 17.99%
Inception $ 24,713 17.31%+
</TABLE>
STANDARD & POOR'S-Registered Trademark- 500 COMPOSITE STOCK PRICE INDEX
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- --------------- ----------- --------
<S> <C> <C>
1 Year $ 10,809 8.09%
5 Year $ 23,121 18.25%+
Inception $ 25,068 17.61%+
</TABLE>
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 7.91% return, which closely mirrors the
S&P 500 Index return of 8.09%. 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.
MARKET AND PORTFOLIO HIGHLIGHTS
The 500 stocks of the S&P 500 Index represent approximately 79% 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
6 Annual Report
<PAGE>
SSgA S&P 500 INDEX FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
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.
Low inflation, low unemployment, good corporate earnings and moderate economic
growth continued to push the US equity market forward. The US equity rally that
began back in 1994 continued to favor large capitalization stocks, many of which
are constituents of the S&P 500 Index.
In third quarter 1998, the rally began to lose some of its momentum. Overall,
corporate earnings remained healthy, however, they were not as strong as many
investors had anticipated. In addition, investor confidence began to wane, as
the global economic crises began to envelop Latin America and Russia.
The Asian crises also added uncertainty and volatility to the US equity markets.
While the full impact of the crises, including the Japanese recession, has not
been felt in the US, economists continue to debate the ultimate fallout from the
problems in the Far East. Many argue that it will help to keep US inflation in
check while others argue that it will hurt US corporate earnings and ultimately
the US equity market. Political and economic instability in Russia helped to
increase volatility throughout world markets. Although Russia does not wield the
same power as the former Soviet Union, the possibility of economic and political
collapse sent fear across global markets.
Over the past fiscal year, the S&P 500 continued to grow, with total
capitalization of reaching $8.5 trillion. The largest US company is General
Electric with a capitalization of $260 billion. Reflecting the strength of the
high tech sector over the past year, Microsoft Corp. followed closely, with a
total capitalization of $236 billion.
The best performing stock in the S&P 500 over the past fiscal year was Capital
One Financial, with a total return of 138.78%. Capital One was added to the S&P
in June, replacing Green Tree Financial. Also among the best performing issues
were Dell Computer, TeleCommunications, and Unisys Corp., posting gains of
133.92%, 92.70%, and 87.66%, respectively. The worst performing stocks include
IKON Office Solutions, Cabletron Systems, and Data General, posting losses of
81.11%, 79.34%, and 75.36%, respectively.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
(AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31, 1998
<S> <C>
General Electric Co. 3.3%
Microsoft Corp. 3.0
Coca-Cola Co. (The) 2.1
Exxon Corp. 2.1
Merck & Co., Inc. 1.8
Wal-Mart Stores, Inc. 1.7
Pfizer, Inc. 1.6
Intel Corp. 1.5
International Business Machines Corp. 1.4
Procter & Gamble Co. 1.3
</TABLE>
- --------------------------------------------------------------------------------
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:
In our opinion, the accompanying statement of assets and liabilities and
statement of net assets, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of SSgA S&P 500 Index Fund (the "Fund") at
August 31, 1998, the results of its operations for the fiscal year then ended
and 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. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at August 31, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
Boston, Massachusetts
October 8, 1998
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
S&P 500 INDEX FUND
STATEMENT OF NET ASSETS
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
COMMON STOCKS - 98.3%
BASIC INDUSTRIES - 4.1%
Air Products & Chemicals, Inc. 48,900 $ 1,495
Alcan Aluminum, Ltd. 48,900 929
Allegheny Teldyne, Inc. 40,777 614
Aluminum Co. of America 39,400 2,359
ARMCO, Inc. (a) 21,100 87
ASARCO, Inc. 7,300 116
Barrick Gold Corp. 78,500 1,021
Battle Mountain Gold Co. 43,700 134
Bemis Co., Inc. 10,500 377
Bethlehem Steel Corp. (a) 25,100 180
Boise Cascade Corp. 11,000 269
Champion International Corp. 19,100 630
Cincinnati Milacron, Inc. 7,400 143
Crown Cork & Seal Co., Inc. 27,400 897
Cyprus Amax Minerals Co. 17,600 162
Dow Chemical Co. 47,100 3,674
du Pont (E.I.) de Nemours & Co. 234,300 13,516
Eastman Chemical Co. 17,425 898
Engelhard Corp. 28,325 520
FMC Corp. (a) 6,700 347
Freeport-McMoRan Copper &
Gold, Inc. Class B 37,800 439
Goodrich (B.F.) Co. 14,300 387
Great Lakes Chemical Corp. 12,100 473
Hercules, Inc. 19,000 486
Homestake Mining Co. 43,600 387
Illinois Tool Works, Inc. 51,300 2,485
Inco, Ltd. 32,500 272
International Paper Co. 64,872 2,400
Kimberly-Clark Corp. 116,336 4,435
Mead Corp. 20,400 558
Minnesota Mining &
Manufacturing Co. 83,800 5,740
Monsanto Co. 124,000 6,781
Morton International, Inc. 29,400 654
Nalco Chemical Co. 13,600 394
Newmont Mining Corp. 30,567 418
Nucor Corp. 19,600 704
Owens-Illinois, Inc. (a) 32,300 1,007
Phelps Dodge Corp. 11,500 515
Placer Dome, Inc. 49,500 399
Potlatch Corp. 5,600 184
PPG Industries, Inc. 36,700 1,865
Praxair, Inc. 33,500 1,202
Reynolds Metals Co. 14,100 676
Rohm & Haas Co. 12,600 1,088
Sigma Aldrich Corp. 19,600 544
Stone Container Corp. (a) 19,100 199
Temple-Inland, Inc. 11,100 497
Union Camp Corp. 13,500 500
Union Carbide Corp. 29,200 1,173
USX-U.S. Steel Group 17,000 356
W.R. Grace & Co. (a) 14,200 184
Westvaco Corp. 19,900 419
Willamette Industries, Inc. 21,800 538
Worthington Industries, Inc. 18,100 236
----------
66,963
----------
CAPITAL GOODS - 5.5%
Aeroquip-Vickers, Inc. 5,500 222
Ball Corp. 5,900 221
Boston Scientific Corp. (a) 40,100 2,777
Briggs & Stratton Corp. 4,300 158
Browning-Ferris Industries, Inc. 39,400 1,281
Case Corp. 14,700 397
Caterpillar, Inc. 75,700 3,194
Cooper Industries, Inc. 25,800 1,098
Crane Co. 9,000 362
Cummins Engine Co., Inc. 7,500 305
Deere & Co. 51,500 1,696
Dover Corp. 46,300 1,262
Emerson Electric Co. 91,900 5,238
Fluor Corp. 16,100 637
Foster Wheeler Corp. 7,400 91
General Electric Co. 676,400 54,112
General Signal Corp. 8,800 323
Grainger (W.W.), Inc. 20,300 796
</TABLE>
Annual Report 9
<PAGE>
SSgA
S&P 500 INDEX FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
Harnischfeger Industries, Inc. 9,700 $ 156
Ingersoll-Rand Co. 35,300 1,403
ITT Industries, Inc. 23,200 699
Johnson Controls, Inc. 16,900 724
Millipore Corp. 8,600 187
NACCO Industries, Inc. Class A 1,500 143
National Service Industries, Inc. 7,800 291
Pall Corp. 23,700 486
Parker-Hannifin Corp. 22,250 645
Raychem Corp. 16,400 476
Raytheon Co. Class B 70,300 3,207
Timken Co. 12,200 221
Tyco International, Ltd. 120,600 6,692
----------
89,500
----------
CONSUMER BASICS - 22.0%
Abbott Laboratories 320,500 12,339
Albertson's, Inc. 51,800 2,619
Allergan, Inc. 12,800 605
ALZA Corp. (a) 16,900 608
American Home Products Corp. 272,500 13,659
American Stores Co. 58,100 1,685
Amgen, Inc. (a) 53,100 3,239
Archer-Daniels-Midland Co. 124,777 1,872
Bard (C.R.), Inc. 11,100 364
Bausch & Lomb, Inc. 10,900 461
Baxter International, Inc. 57,800 3,078
Becton, Dickinson & Co. 51,200 1,706
Bestfoods 59,200 2,971
Biomet, Inc. 22,200 597
Black & Decker Corp. 19,700 820
Bristol-Myers Squibb Co. 206,600 20,221
Campbell Soup Co. 94,900 4,781
Cardinal Health, Inc. 27,700 2,424
Clorox Co. 21,700 2,093
Coca-Cola Co. (The) 512,600 33,383
Colgate-Palmolive Co. 61,800 4,457
Columbia/HCA Healthcare Corp. 133,632 3,015
ConAgra, Inc. 100,100 2,477
Corning, Inc. 49,500 1,219
CVS Corp. 79,000 2,874
Fort James Corp. 46,000 1,340
Fred Meyer, Inc. (a) 32,700 1,286
General Mills, Inc. 33,400 2,186
Giant Food, Inc. Class A 10,400 442
Gillette Co. 233,200 9,590
Great Atlantic & Pacific
Tea Co., Inc. 7,500 179
HEALTHSOUTH Corp. (a) 89,500 1,695
Heinz (H.J.) Co. 75,950 4,049
Hershey Foods Corp. 29,900 2,093
Humana, Inc. (a) 33,200 432
Johnson & Johnson 279,200 19,265
Kellogg Co. 84,900 2,589
Kroger Co. (a) 54,200 2,439
Lilly (Eli) & Co. 229,900 15,058
Mallinckrodt, Inc. 14,400 329
Manor Care, Inc. 12,400 298
Medtronic, Inc. 97,300 4,999
Merck & Co., Inc. 248,100 28,764
PepsiCo, Inc. 309,500 8,569
Pfizer, Inc. 271,100 25,212
Pharmacia & Upjohn, Inc. 105,425 4,382
Philip Morris Cos., Inc. 504,300 20,960
Pioneer Hi-Bred International, Inc. 51,900 1,752
Procter & Gamble Co. 278,400 21,298
Quaker Oats Co. 29,500 1,567
Ralston-Purina Group 66,500 1,750
Rubbermaid, Inc. 31,100 791
Sara Lee Corp. 97,600 4,416
Schering-Plough Corp. 152,300 13,098
Snap-On Tools Corp. 11,600 305
St. Jude Medical, Inc. (a) 16,450 363
Stanley Works 17,400 685
SYSCO Corp. 70,600 1,425
Tenet Healthcare Corp. (a) 65,400 1,688
Tupperware Corp. 11,500 217
</TABLE>
10 Annual Report
<PAGE>
SSgA
S&P 500 INDEX FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
U.S. Surgical Corp. 15,000 $ 599
Unilever NV 132,900 8,423
United Healthcare Corp. 41,000 1,481
UST Corp. 37,300 974
Warner-Lambert Co. 170,100 11,098
Winn-Dixie Stores, Inc. 31,200 1,161
Wrigley (Wm.), Jr. Co. 24,600 1,906
----------
354,720
----------
CONSUMER DURABLES - 2.1%
AutoZone Inc. (a) 33,200 861
Chrysler Corp. 134,000 5,980
Cooper Tire & Rubber Co. 15,500 248
Dana Corp. 35,065 1,374
Eaton Corp. 14,800 867
Fleetwood Enterprises, Inc. 7,100 237
Ford Motor Co. 251,800 11,079
General Motors Corp. 138,800 8,016
Genuine Parts Co. 38,350 1,201
Goodyear Tire & Rubber Co. 32,600 1,597
Maytag Corp. 19,000 819
PACCAR, Inc. 15,890 649
Whirlpool Corp. 14,800 735
----------
33,663
----------
CONSUMER NON-DURABLES - 6.5%
Alberto Culver Co. Class B 11,100 222
Anheuser-Busch Cos., Inc. 101,500 4,682
Avon Products, Inc. 27,800 1,748
Brown-Forman Distillers, Inc.
Class B 15,200 912
Brunswick Corp. 19,400 290
Circuit City Stores, Inc. 21,600 667
Consolidated Stores Corp. (a) 21,142 666
Coors (Adolph) Co. Class B 6,600 271
Costco Companies, Inc. (a) 45,400 2,137
Dayton Hudson Corp. 91,500 3,294
Dillard's, Inc. Class A 22,300 644
Dollar General Corp. 29,500 793
Eastman Kodak Co. 67,300 5,258
Federated Department Stores, Inc. (a) 44,700 1,947
Fruit of the Loom, Inc. Class A (a) 14,000 314
Gap, Inc. 81,600 4,167
Hasbro, Inc. 26,300 824
Home Depot, Inc. (The) 305,098 11,746
Ikon Office Solutions, Inc. 26,500 147
International Flavors &
Fragrances, Inc. 21,200 822
JC Penney & Co., Inc. 51,400 2,548
Jostens, Inc. 7,514 149
Kmart Corp. (a) 103,700 1,322
Kohl's Corp. (a) 33,400 1,518
Limited, Inc. (The) 47,127 984
Liz Claiborne, Inc. 12,900 368
Longs Drug Stores, Inc. 7,000 239
Lowe's Cos., Inc. 72,600 2,546
Mattel, Inc. 61,307 1,985
May Department Stores Co. 47,900 2,694
Newell Co. 33,100 1,581
NIKE, Inc. Class B 59,800 2,074
Nordstrom, Inc. 30,300 907
Pep Boys - Manny, Moe & Jack 12,400 182
Polaroid Corp. 9,400 264
Reebok International, Ltd. (a) 10,500 170
Rite Aid Corp. 53,500 1,936
Russell Corp. 7,100 225
Seagram Co., Ltd. 72,100 2,226
Sears Roebuck & Co. 81,900 3,721
Springs Industries, Inc. 3,800 126
SuperValu, Inc. 22,800 463
TJX Cos., Inc. 66,800 1,490
Toys "R" Us, Inc. (a) 57,900 1,075
V.F. Corp. 25,700 973
Venator Group, Inc. (a) 26,500 240
Wal-Mart Stores, Inc. 466,300 27,394
</TABLE>
Annual Report 11
<PAGE>
SSgA
S&P 500 INDEX FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
Walgreen Co. 103,500 $ 3,984
----------
104,935
----------
CONSUMER SERVICES - 2.0%
AMR Corp. (a) 37,800 2,060
Darden Restaurants, Inc. 27,200 422
Delta Air Lines, Inc. 15,800 1,612
Disney (Walt) Co. 424,586 11,650
Harrah's Entertainment, Inc. (a) 19,800 286
Hilton Hotels Corp. 49,000 1,017
King World Productions, Inc. (a) 13,500 284
Marriot International, Inc.
Class A 54,200 1,521
McDonald's Corp. 142,700 8,000
Mirage Resorts, Inc. (a) 35,100 522
Southwest Airlines Co. 70,425 1,254
Tricon Global Restaurants, Inc. (a) 30,710 1,138
USAirways Group, Inc. (a) 21,500 1,252
Wendy's International, Inc. 25,800 517
----------
31,535
----------
ENERGY - 7.1%
Amerada Hess Corp. NPV 19,000 933
Amoco Corp. 199,200 9,026
Anadarko Petroleum Corp. 23,400 673
Apache Corp. 22,700 519
Ashland, Inc. 14,900 679
Atlantic Richfield Co. 67,150 3,895
Baker Hughes, Inc. 65,980 1,204
Burlington Resources, Inc. 37,222 1,100
Chevron Corp. 135,800 10,058
Dresser Industries, Inc. 35,700 913
Exxon Corp. 508,000 33,242
Halliburton Co. 55,100 1,464
Helmerich & Payne, Inc. 9,200 150
Kerr-McGee Corp. 9,400 363
McDermott International, Inc. 12,400 249
Mobil Corp. 162,200 11,212
Occidental Petroleum Corp. 76,700 1,419
ONEOK, Inc. 6,200 186
Oryx Energy Co. (a) 20,800 259
Pennzoil Co. 9,400 336
Phillips Petroleum Co. 54,100 2,208
Rowan Cos., Inc. (a) 17,000 157
Royal Dutch Petroleum Co. 445,200 17,697
Schlumberger, Ltd. 103,400 4,530
Sempra Energy (a) 50,611 1,287
Sun Co., Inc. 18,155 600
Texaco, Inc. 112,000 6,223
Union Pacific Resources
Group, Inc. 49,618 425
Unocal Corp. 51,300 1,606
USX-Marathon Group 60,200 1,566
----------
114,179
----------
FINANCE - 16.2%
Aetna, Inc. 30,202 1,818
Ahmanson (H.F.) & Co. 23,400 1,248
Allstate Corp. 173,688 6,513
American Express Co. 95,700 7,465
American General Corp. 52,687 3,385
American International Group, Inc. 217,887 16,845
AON Corp. 35,800 2,240
Associates First Capital
Corp. Class A 72,358 4,278
Banc One Corp. 145,089 5,513
Bank of New York Co., Inc. 157,200 3,802
BankAmerica Corp. 141,700 9,078
BankBoston Corp. 60,800 2,170
Bankers Trust New York Corp. 20,300 1,509
BB&T Corp. 58,800 1,657
Bear Stearns Cos., Inc. 22,600 835
Capital One Financial Corp. 13,700 1,199
Chase Manhattan Corp. 177,228 9,393
Chubb Corp. (The) 35,000 2,188
</TABLE>
12 Annual Report
<PAGE>
SSgA
S&P 500 INDEX FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
CIGNA Corp. 44,400 $ 2,584
Cincinnati Financial Corp. 35,200 1,184
Citicorp 93,700 10,131
Comerica, Inc. 32,550 1,701
Conseco, Inc. 64,345 1,778
Countrywide Credit Industries, Inc. 21,400 801
Dun & Bradstreet Corp. 37,400 879
Equifax, Inc. 31,700 1,129
Federal Home Loan Mortgage Corp. 140,600 5,554
Federal National Mortgage
Association 215,300 12,232
Fifth Third Bancorp 54,550 2,901
First Chicago NBD Corp. 60,048 3,806
First Union Corp. 201,212 9,759
Fleet Financial Group, Inc. 59,375 3,893
Franklin Resources, Inc. 52,700 1,700
General Re Corp. 15,800 3,279
Golden West Financial Corp. 11,300 860
Hartford Financial Services
Group, Inc. (The) 49,000 2,193
Household International Corp. 102,399 3,782
Huntington Bancshares, Inc. 43,960 1,000
Jefferson-Pilot Corp. 22,075 1,253
KeyCorp 90,398 2,305
Lehman Brothers Holdings, Inc. 25,200 992
Lincoln National Corp. 20,900 1,797
Loews Corp. 24,000 2,025
Marsh & McLennan Cos., Inc. 52,950 2,568
MBIA, Inc. 20,400 1,145
MBNA Corp. 102,755 2,415
Mellon Bank Corp. 54,000 2,808
Mercantile Bancorp, Inc. 32,200 1,415
Merrill Lynch & Co., Inc. 71,600 4,726
MGIC Investment Corp. 24,500 1,017
Morgan (J.P.) & Co., Inc. 37,300 3,469
Morgan Stanley, Dean Witter,
Discover and Co. 124,556 7,232
National City Corp. 68,600 4,030
NationsBank Corp. 198,903 11,337
Northern Trust Corp. 23,700 1,321
Norwest Corp. 157,100 4,674
PNC Bank Corp. 62,400 2,683
Progressive Corp. 15,200 1,481
Provident Companies, Inc. 28,400 1,022
Providian Financial Corp. 19,700 1,264
Regions Financial Corp. 44,800 1,540
Republic of New York Corp. 21,400 883
SAFECO Corp. 29,300 1,187
Schwab (Charles) Corp. 55,600 1,661
SLM Holding Corp. 36,200 1,299
St. Paul Cos., Inc. 48,872 1,494
State Street Corp. 34,300 1,786
Summit Bancorp 37,100 1,266
SunAmerica, Inc. 40,600 2,515
SunTrust Banks, Inc. 43,200 2,419
Synovus Financial Corp. 54,600 993
Torchmark Corp. 30,100 1,076
Transamerica Financial Corp. 13,200 1,354
Travelers, Inc. 238,800 10,597
U.S. Bancorp 153,717 5,245
UNUM Corp. 29,000 1,275
Wachovia Corp. 42,800 3,137
Washington Mutual, Inc. 79,390 2,539
Wells Fargo & Co. 17,766 5,007
----------
262,534
----------
GENERAL BUSINESS - 4.9%
American Greetings Corp. Class A 14,000 513
Automatic Data Processing, Inc. 62,900 4,010
Block (H&R) Co., Inc. 21,800 853
CBS Corp. 150,000 3,900
Cendant Corp. (a) 174,410 2,017
Clear Channel
Communications, Inc. (a) 52,200 2,349
Comcast Corp. Special Class A 75,900 2,879
Computer Sciences Corp. 33,200 1,878
Deluxe Corp. 15,800 458
</TABLE>
Annual Report 13
<PAGE>
SSgA
S&P 500 INDEX FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
Donnelley (R.R.) & Sons Co. 30,400 $ 1,102
Dow Jones & Co., Inc. 18,700 931
Ecolab, Inc. 25,200 701
First Data Corp. 92,700 1,918
Gannett Co., Inc. 59,000 3,481
Harcourt General, Inc. 13,800 670
IMS Health, Inc. 33,800 1,859
Interpublic Group Cos., Inc. 29,000 1,653
Knight-Ridder, Inc. 15,500 738
McGraw-Hill, Inc. 21,100 1,609
MediaOne Group, Inc. (a) 126,200 5,174
Meredith Corp. 10,400 349
Moore Corp., Ltd. 17,300 165
New York Times Co. Class A 39,800 1,154
Nextel Communications, Inc.
Class A (a) 58,300 1,049
Omnicom Group, Inc. 36,100 1,719
SBC Communications, Inc. 381,782 14,508
Service Corp. International 53,200 1,802
Tele-Communications, Inc.
Class A (a) 106,226 3,505
Time Warner, Inc. 122,700 9,862
Times Mirror Co. Series A 18,400 1,053
Tribune Co. 25,500 1,644
Viacom, Inc. Class B (a) 74,511 3,698
----------
79,201
----------
MISCELLANEOUS - 0.5%
Fortune Brands, Inc. 34,300 945
Sealed Air Corp. New (a) 16,243 585
Tenneco, Inc. 36,700 1,163
Waste Management, Inc. (a) 117,059 5,165
----------
7,858
----------
SHELTER - 0.4%
Armstrong World Industries, Inc. 8,100 389
Centex Corp. 11,600 410
Georgia-Pacific Group 19,100 819
Kaufman & Broad Home Corp. 7,400 158
Louisiana Pacific Corp. 22,800 430
Masco Corp. 71,900 1,654
Owens-Corning Fiberglas Corp. 10,300 361
Pulte Corp. 7,700 222
Sherwin-Williams Co. 36,000 860
Weyerhaeuser Co. 40,100 1,507
----------
6,810
----------
TECHNOLOGY - 16.3%
3Com Corp. (a) 74,025 1,753
Adobe Systems, Inc. 13,100 344
Advanced Micro Devices, Inc. (a) 28,100 371
AlliedSignal, Inc. 118,200 4,056
AMP, Inc. 46,532 1,661
Andrew Corp. (a) 17,368 257
Apple Computer, Inc. (a) 26,500 826
Applied Materials, Inc. (a) 76,200 1,872
Ascend Communications, Inc. (a) 40,900 1,437
Autodesk, Inc. 9,400 220
Avery Dennison Corp. 25,100 1,348
Boeing Co. 209,776 6,490
Cabletron Systems, Inc. (a) 30,900 216
Ceridian Corp. (a) 15,900 771
Cisco Systems, Inc. (a) 212,400 17,390
COMPAQ Computer Corp. 343,129 9,586
Computer Associates
International, Inc. 114,462 3,090
Data General Corp. (a) 8,900 67
Dell Computer Corp. (a) 133,700 13,362
EG&G, Inc. 8,300 195
Electronic Data Systems Corp. 101,400 3,397
EMC Corp. (a) 103,300 4,668
Gateway 2000, Inc. (a) 32,400 1,533
General Dynamics Corp. 27,200 1,294
General Instrument Corp. (a) 29,700 590
Guidant Corp. 31,800 1,964
</TABLE>
14 Annual Report
<PAGE>
SSgA
S&P 500 INDEX FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
Harris Corp. 15,700 $ 500
HBO & Co. 89,200 1,896
Hewlett-Packard Co. 215,000 10,441
Honeywell, Inc. 26,800 1,675
Intel Corp. 352,100 25,065
International Business
Machines Corp. 195,700 22,041
KLA Instruments Corp. (a) 16,800 357
Lockheed Martin Corp. 40,623 3,552
LSI Logic Corp. (a) 27,600 338
Lucent Technologies, Inc. 272,336 19,302
Micron Technology, Inc. (a) 46,100 1,049
Microsoft Corp. (a) 511,600 49,082
Motorola, Inc. 123,800 5,331
National Semiconductor Corp. (a) 32,400 296
Northern Telecom, Ltd. 136,280 6,507
Northrop Grumman Corp. 14,500 919
Novell, Inc. (a) 71,000 675
Oracle Systems Corp. (a) 203,337 4,054
Parametric Technology Corp. (a) 60,000 615
Perkin-Elmer Corp. 9,600 556
Pitney Bowes, Inc. 57,600 2,858
Rockwell International Corp. 40,800 1,479
Scientific-Atlanta, Inc. 14,800 262
Seagate Technology (a) 48,300 845
Shared Medical Systems 5,600 299
Silicon Graphics, Inc. (a) 36,300 329
Sun Microsystems, Inc. (a) 79,300 3,132
Tandy Corp. 20,400 1,113
Tektronix, Inc. 9,600 146
Tellabs, Inc. (a) 40,700 1,720
Texas Instruments, Inc. 81,700 3,896
Textron, Inc. 34,700 2,177
Thermo Electron Corp. (a) 31,300 509
Thomas & Betts Corp. 10,800 368
TRW, Inc. 26,200 1,123
Unisys Corp. (a) 50,100 898
United Technologies Corp. 48,000 3,482
Xerox Corp. 67,900 5,961
----------
263,606
----------
TRANSPORTATION - 0.7%
Burlington Northern, Inc. 32,269 3,003
CSX Corp. 46,200 1,744
FDX Corp. (a) 30,620 1,533
Laidlaw, Inc. 64,300 555
Navistar International Corp. (a) 13,950 293
Norfolk Southern Corp. 78,600 2,216
Ryder System, Inc. 14,200 335
Union Pacific Corp. 52,300 2,081
----------
11,760
----------
UTILITIES - 10.0%
Airtouch Communications, Inc. (a) 118,500 6,666
Alltel Corp. 57,900 2,613
Ameren Corp. 29,577 1,170
American Electric Power Co., Inc. 39,900 1,805
Ameritech Corp. 228,500 10,768
AT&T Corp. 376,200 18,857
Baltimore Gas & Electric Co. 32,200 992
Bell Atlantic Corp. 322,264 14,220
BellSouth Corp. 205,500 14,090
Carolina Power & Light Co. 32,400 1,395
Central & Southwest Corp. 44,100 1,152
Cinergy Corp. 32,726 1,137
Coastal Corp. 45,400 1,180
Columbia Gas System, Inc. 17,300 861
Consolidated Edison, Inc. 49,800 2,356
Consolidated Natural Gas Co. 20,800 911
Dominion Resources, Inc. 40,600 1,693
DTE Energy Co. 30,700 1,293
Duke Energy Corp. 74,774 4,664
Eastern Enterprises, Inc. 4,400 174
Edison International 76,700 2,181
</TABLE>
Annual Report 15
<PAGE>
SSgA
S&P 500 INDEX FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
Enron Corp. 68,200 $ 2,886
Entergy Corp. 51,900 1,495
FirstEnergy Corp. 47,900 1,383
FPL Group, Inc. 38,500 2,563
Frontier Corp. 36,200 1,100
GPU, Inc. 27,600 1,037
GTE Corp. 199,800 9,990
Houston Industries, Inc. 61,710 1,778
MCI Communications Corp. 150,400 7,520
MCI WorldCom, Inc. (a) 214,297 8,759
Niagara Mohawk Power Corp.(a) 38,900 603
NICOR, Inc. 9,500 369
Northern States Power Co. 31,600 837
PacifiCorp. 63,600 1,435
Peco Energy Co. 47,600 1,630
Peoples Energy Corp. 6,900 229
PG&E Corp. 79,200 2,544
PP&L Resources, Inc. 34,800 820
Public Service Enterprise Group, Inc. 48,600 1,780
Sonat, Inc. 21,600 585
Southern Co. 144,800 4,073
Sprint Corp. 89,200 5,982
Texas Utilities Co. 57,730 2,454
U.S. West Communications Group 104,659 5,442
Unicom Corp. 45,500 1,621
Williams Cos. (The) 89,480 2,057
----------
161,150
----------
TOTAL COMMON STOCKS
(cost $1,387,245) 1,588,414
----------
PRINCIPAL
AMOUNT
(000)
----------
SHORT-TERM INVESTMENTS - 1.8%
AIM Short Term Investment
Treasury Portfolio (b) $ 24,684 24,684
Federated Investors Prime
Obligations Fund (b) 520 520
United States Treasury Bills
4.945% due 09/17/98 (b)(c)(d) 4,500 4,490
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $29,694) 29,694
----------
TOTAL INVESTMENTS
(identified cost $1,416,939)(e) - 100.1% 1,618,108
OTHER ASSETS AND LIABILITIES,
NET - (0.1%) (2,195)
----------
NET ASSETS - 100.0% $1,615,913
----------
----------
</TABLE>
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) Rate noted is yield-to-maturity (unaudited).
(d) Held as collateral in connection with futures contracts purchased by the
Fund.
(e) See Note 2 for federal income tax information.
ABBREVIATIONS:
NPS - No Par Value
NV - Nonvoting
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, 1998
<TABLE>
<CAPTION>
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
--------- --------------
<S> <C> <C>
FUTURES CONTRACTS
(Notes 2 and 3)
S&P 500 Financial Futures Contracts
Expiration date 09/98 125 $ (4,303)
--------------
Total Unrealized Appreciaiton
(Depreciation) on Open Futures
Contracts Purchased (*) $ (4,303)
--------------
--------------
</TABLE>
(*) At August 31, 1998, United States Treasury Bills valued at $4,490 were held
as collateral 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, 1998
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $1,416,939)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . $ 1,618,108
Receivables:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,857
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 664
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,295
--------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,636,924
LIABILITIES
Payables:
Investments purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,077
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,013
Accrued fees to affiliates and trustees (Note 4) . . . . . . . . . . . . . . . . . 323
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Daily variation margin on futures contracts (Notes 2 and 3). . . . . . . . . . . . 2,522
--------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,011
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,615,913
--------------
--------------
NET ASSETS CONSIST OF:
Undistributed net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,891
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198,644
Unrealized appreciation (depreciation) on:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201,169
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,303)
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,214,429
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,615,913
--------------
--------------
NET ASSET VALUE, offering and redemption price per share:
($1,615,912,587 divided by 83,214,348 shares of $.001 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19.42
--------------
--------------
</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, 1998
Amounts
in thousands
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $133) . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,831
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --------------
Total Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,065
--------------
EXPENSES (Notes 2 and 4):
Advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,553
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 469
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 321
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 690
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 275
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 631
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Amortization of deferred organization expenses . . . . . . . . . . . . . . . . . . 2
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
--------------
Expenses before reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,243
Expense reductions (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,553)
--------------
Expenses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,690
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,375
--------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191,401
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,825 201,226
--------------
Net change in unrealized appreciation or depreciation of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (158,602)
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,072) (163,674)
-------------- --------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,552
--------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . $ 60,927
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 19
<PAGE>
SSgA
S&P 500 INDEX FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS,
For the Fiscal Years Ended August 31,
Amounts in thousands
1998 1997
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23,375 $ 20,159
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201,226 50,186
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . . . . (163,674) 252,917
------------ ------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . 60,927 323,262
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (23,141) (18,416)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . (51,231) (34,690)
------------ ------------
Total Distributions to Shareholders . . . . . . . . . . . . . . . . . . . . . . (74,372) (53,106)
------------ ------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from
Fund share transactions (Note 5). . . . . . . . . . . . . . . . . . . . . . . . 329,787 324,732
------------ ------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . 316,342 594,888
NET ASSETS
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,299,571 704,683
------------ ------------
End of period (including undistributed net investment income of
$5,891 and $5,653, respectively). . . . . . . . . . . . . . . . . . . . . . . . $ 1,615,913 $ 1,299,571
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are in 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
period and other performance information derived from the financial statements.
Year Ended August 31,
------------------------------------------------------------
1998 1997 1996 1995 1994
-------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . $ 18.96 $ 14.41 $ 12.81 $ 10.89 $ 10.72
-------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . .31 .32 .32 .29 .26
Net realized and unrealized gain (loss)
on investments. . . . . . . . . . . . . . . . . . . . 1.18 5.22 1.98 1.95 .29
-------- --------- --------- --------- ---------
Total Income From Investment Operations . . . . . . . 1.49 5.54 2.30 2.24 .55
-------- --------- --------- --------- ---------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . . . (.32) (.32) (.31) (.29) (.26)
Net realized gain on investments . . . . . . . . . . . . (.71) (.67) (.39) (.03) (.07)
In excess of net realized gain on investments. . . . . . -- -- -- -- (.05)
-------- --------- --------- --------- ---------
Total Distributions . . . . . . . . . . . . . . . . . (1.03) (.99) (.70) (.32) (.38)
-------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . $ 19.42 $ 18.96 $ 14.41 $ 12.81 $ 10.89
-------- --------- --------- --------- ---------
-------- --------- --------- --------- ---------
TOTAL RETURN(%). . . . . . . . . . . . . . . . . . . . . . 7.91 40.30 18.46 21.11 5.29
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . . . . . . . 1,615,913 1,299,571 704,683 545,200 361,712
Ratios to average net assets(%):
Operating expenses, net (a) . . . . . . . . . . . . . .17 .16 .18 .19 .15
Operating expenses, gross (a) . . . . . . . . . . . . .27 .26 .28 .29 .25
Net investment income . . . . . . . . . . . . . . . . 1.50 2.00 2.32 2.76 2.69
Portfolio turnover (%) . . . . . . . . . . . . . . . . . 26.17 7.54 28.72 38.56 7.97
</TABLE>
(a) See Note 4 for current period amounts.
Annual Report 21
<PAGE>
SSgA
S&P 500 INDEX FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1998
1. ORGANIZATION
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 21 investment portfolios which are in operation as
of August 31, 1998. 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, 1998
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 fund 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, 1998 are as follows:
<TABLE>
<CAPTION>
NET
UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
---------------- -------------- -------------- ---------------
<S> <C> <C> <C>
$ 1,417,245,104 $ 282,825,554 $ (81,962,658) $ 200,862,896
</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 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.
The following reclassifications have been made at August 31, 1998:
<TABLE>
<CAPTION>
UNDISTRIBUTED ADDITIONAL
NET INVESTMENT PAID-IN
INCOME CAPITAL
-------------- ----------
<S> <C>
$ 4,349 $ (4,349)
</TABLE>
Annual Report 23
<PAGE>
SSgA
S&P 500 INDEX FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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%.
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, 1998, purchases and
sales of investment securities, excluding short-term investments, futures
contracts and repurchase agreements, aggregated to $719,652,678, and
$385,208,583, respectively.
24 Annual Report
<PAGE>
SSgA
S&P 500 INDEX FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
FUTURES TRANSACTIONS: The Fund's transactions in futures contracts for the
year ended August 31, 1998 were as follows:
<TABLE>
<CAPTION>
FUTURES CONTRACTS PURCHASED
---------------------------
AGGREGATE
NUMBER OF FACE VALUE OF
CONTRACTS CONTRACTS (1)
--------- -------------
<S> <C> <C>
Outstanding at August 31, 1997 184 $ 82,893,039
Contracts opened 1,289 366,339,949
Contracts closed (1,348) (415,117,020)
--------- -------------
Outstanding at August 31, 1998 125 $ 34,115,968
--------- -------------
--------- -------------
</TABLE>
(1) The aggregate face value of contracts is computed on the date each
contract was opened.
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,
1998, 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%, for the period
September 1, 1997 to December 31, 1997, and up to a maximum of 5%, for the
period January 1, 1998 to August 31, 1998) of the asset-based fee
determined in (i)); (iii) out-of-pocket expenses; and (iv) start-up costs
for new funds.
On August 10, 1998, Frank Russell Company entered into an agreement with
The Northwestern Mutual Life Insurance Co., an insurance organization,
pursuant to which Northwestern Mutual Life will acquire all of the
outstanding common stock of Frank Russell Company.
Annual Report 25
<PAGE>
SSgA
S&P 500 INDEX FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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 charged 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"), the Adviser's
Metropolitan Division of Commercial Banking ("Commercial Banking") and
State Street Solutions ("Solutions")(collectively the "Agents"), as well as
several unaffiliated service providers. For these services, the Fund pays
.025%, .050%, .050% and .100% to the Adviser, RIS, Commercial Banking, and
Solutions, 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, 1998, the Fund was charged shareholder servicing expenses of $384,903,
$48,028, $194, and $47,719 by the Adviser, RIS, Commercial Banking and
Solutions, 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 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, 1998.
AFFILIATED BROKERAGE: The Fund placed a portion of its portfolio
transactions with State Street Brokerage Services, Inc. ("SSBSI"), an
affiliated broker dealer of the Fund's Adviser. The commissions paid to
SSBSI were $152,786 for the year ended August 31, 1998.
BOARD OF TRUSTEES: The Investment Company pays each Trustee not affiliated
with the Investment Company a retainer of $48,000 annually, $1,500 for each
board meeting attended, an additional $1,500 for attending the
26 Annual Report
<PAGE>
SSgA
S&P 500 INDEX FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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, 1998 were
as follows:
<TABLE>
<S> <C>
Administration fees $ 46,643
Custodian fees 76,370
Distribution fees 47,169
Shareholder servicing fees 144,204
Transfer agent fees 7,665
Trustees' fees 824
---------
$ 322,875
---------
---------
</TABLE>
BENEFICIAL INTEREST: As of August 31, 1998, one shareholder was a record
owner of approximately 11% of the total outstanding shares of the Fund.
5. FUND SHARE TRANSACTIONS
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS)
FOR THE YEARS ENDED AUGUST 31,
-----------------------------------------------------------------------------
1998 1997
------------------------------------- -------------------------------------
SHARES DOLLARS SHARES DOLLARS
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Proceeds from shares sold 60,545 $ 1,239,668 44,662 $ 754,517
Proceeds form reinvestment
of distributions 3,678 71,888 3,360 51,321
Payments for shares redeemed (49,549) (981,769) (28,392) (481,106)
----------------- ----------------- ----------------- -----------------
Total net increase (decrease) 14,674 $ 329,787 19,630 $ 324,732
----------------- ----------------- ----------------- -----------------
----------------- ----------------- ----------------- -----------------
</TABLE>
6. LINE OF CREDIT
The Fund and several affiliated Funds (the "Participants") share in a $50
million revolving credit facility for temporary or emergency purposes,
including the meeting of redemption requests that otherwise might require
the untimely disposition of securities. The Participants are charged an
annual commitment fee of .065% on the average daily unused amount of the
Aggregate commitment, which is allocated among each of the Participants.
Interest, at the Federal Fund Rate plus .50% annually, is calculated based
on the market rates at the time of the borrowing. The Fund may borrow up
to a maximum of 33 1/3 percent of the value of its total assets under the
agreement.
7. DIVIDENDS
On September 1, 1998, the Board of Trustees declared a dividend of $.0705
from net investment income, payable on September 9, 1998 to shareholders of
record on September 2, 1998.
Annual Report 27
<PAGE>
SsgA
S&P 500 INDEX FUND
TAX INFORMATION
August 31, 1998 (Unaudited)
The Fund paid distributions of $42,731,125 from net long-term capital gains
during its taxable year ended August 31, 1998. Pursuant to Section 852 of the
Internal Revenue Code, the Fund designates $29,942,296 as 20% capital gain
dividends for its taxable year ended August 31, 1998.
Please consult a tax advisor for questions about federal or state income tax
laws.
28 Annual Report
<PAGE>
SsgA S&P 500 INDEX FUND
One International Place, 27th 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
Mark E. Swanson, Assistant Secretary and Principal Accounting Officer
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.
One International Place, 27th 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
PricewaterhouseCoopers LLP
One Post Office Square
Boston, Massachusetts 02109
Annual Report 29
<PAGE>
SSgA-Registered Trademark- FUNDS
ACTIVE INTERNATIONAL FUND
Annual Report
August 31, 1998
Table of Contents
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion and Analysis . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . 24
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . 25
Tax Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Fund Management and Service Providers. . . . . . . . . . . . . . . . . 34
"SSgA-Registered Trademark-" IS A REGISTERED TRADEMARK 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, 1998. Over the past year, the Funds have grown to include
twenty-one 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 SSgA Active International Fund. I hope you find
this information a useful tool as you review your overall investment strategy.
The SSgA Funds have also opened four additional funds in fiscal 1998. The
investment objectives for these four new funds are as follows:
The SSgA Special Equity Fund seeks to maximize total return through investment
in mid- and small capitalization US equity securities. This Fund was opened as
an alternative investment strategy for the SSgA Small Cap Fund that closed to
new investors on August 31, 1998.
The SSgA International Growth Opportunities Fund seeks to provide long-term
capital growth by investing primarily in securities of foreign issuers.
The SSgA High Yield Bond Fund seeks to maximize total return by investing
primarily in non investment-grade bonds, including, but not limited to, those
represented by the Lehman Brothers High Yield Bond Index.
The SSgA Real Estate Equity Fund seeks to provide income and capital growth by
investing primarily in publicly traded securities of real estate companies.
During the past fiscal year, the SSgA Funds were proud to announce that the SSgA
S&P 500 Index Fund and the SSgA Yield Plus Fund each achieved five years of
operational history. We are proud of our long term record and look forward to
having additional funds reach their five year anniversary.
SSgA intends to proceed with the evolution of new products and services while
committing to your investment needs. We will continue to develop our
professional expertise by focusing on the expansion of both our global resources
and our diversified product lines.
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. As a result, the portfolios we
manage benefit from the knowledge of the entire team.
Mr. Robert Rubano, Principal, 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]
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
DATES ACTIVE INTERNATIONAL FUND MSCI EAFE Index**
<S> <C> <C>
Inception* $10,000 $10,000
1995 $10,890 $10,933
1996 $11,567 $11,794
1997 $11,703 $12,862
1998 $10,591 $12,844
</TABLE>
YEARLY PERIODS ENDED AUGUST 31
SSgA
ACTIVE INTERNATIONAL FUND
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ------------ ------------ --------
<S> <C> <C>
1 Year $ 9,050 (9.50)%
Inception $ 10,591 1.66%+
</TABLE>
MORGAN STANLEY CAPITAL INTERNATIONAL
EUROPE, AUSTRALIA, FAR EAST INDEX (NET DIVIDEND)
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ------------ ------------ --------
<S> <C> <C>
1 Year $ 10,013 0.13%
Inception $ 12,844 7.41%+
</TABLE>
SEE RELATED NOTES ON THE FOLLOWING PAGE.
PERFORMANCE REVIEW
For the fiscal year ended August 31, 1998, the SSgA Active International Fund
lost 9.50%, compared with the MSCI EAFE Index, which was down 0.13%. The Fund
lagged the benchmark due to the overweight to Singapore, and negative stock
selection within Japan and the entire Asian region. The Fund also reflected
above average emerging markets exposure in Pakistan, Philippines, and Korea.
MARKET AND PORTFOLIO HIGHLIGHTS
Japan, whose economic recovery was already fragile at the outset of the Asian
crises in July 1998, was further weakened by the sharp economic contraction in
Southeast Asia and Korea. Despite several fiscal packages designed to stimulate
domestic demand, the Japanese economy fell into recession for the first time in
25 years, with the Japanese market
6 Annual Report
<PAGE>
SSgA ACTIVE INTERNATIONAL FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
falling nearly 33% in the period. Bankruptcies, financial scandals, and
disappointment at the Obuchi government's policy initiatives all contributed to
undermining investor confidence in the market. In addition, the yen hit an eight
year low, which culminated in intervention by the Bank of Japan and the Federal
Reserve.
While developed non-US markets rallied strongly in the beginning of 1998, the
deflationary consequences of the staggering economies in both Southeast Asia and
Korea increasingly worried investors around the world as the year wore on. As
well, risk premium in emerging markets rose sharply as "currency contagion"
spread from Asia to Russia and other emerging markets. The IFC Investable Index
fell a staggering 47.5%, with only four of 31 markets rising in dollar terms.
There were several factors which strongly influenced developed-market returns
during the period. During the first half of 1998, there was increasing
recognition that European Monetary Union, including Italy and Spain, would be
implemented on schedule. Additionally, very sharp stock market declines in
Malaysia, Singapore and Hong Kong resulted in economic recession by the end of
the period, and Japan suffered from a contraction in economic output and policy
disarray.
Continental European markets, particularly the smaller markets of Europe,
benefited from interest rate and macroeconomic policy convergence over the past
12 months. The MSCI Europe Index rose 23.8%, although the UK, now EAFE's largest
market and a non-EMU participant, did not fare as well as the Bank of England
maintained a restrictive monetary policy during much of the period. Europe as a
whole was relatively flat as the Fund's outperformance within Continental Europe
was offset by its underweight to the United Kingdom.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
(AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31, 1998
<S> <C>
Novartis AG (Regd) 1.9%
Royal Dutch Petroleum Co. 1.6
Allied Irish Banks 1.6
Deutsche Telekom AG 1.3
Roche Holdings Genusscheine AG NPV 1.3
ING Groep NV 1.2
Nokia Oyj Series A 1.1
Bank Austria AG 1.0
Nippon Telegraph & Telephone Corp. 1.0
France Telecom SA 1.0
</TABLE>
- --------------------------------------------------------------------------------
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:
In our opinion, the accompanying statement of assets and liabilities and
statement of net assets, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of SSgA Active International Fund (the "Fund")
at August 31, 1998, the results of its operations for the fiscal year then ended
and 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 7, 1995 (commencement of
operations) to August 31, 1995, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at August 31, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
Boston, Massachusetts
October 8, 1998
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
STATEMENT OF NET ASSETS
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
COMMON STOCKS - 91.8%
AUSTRALIA - 0.0%
National Foods, Ltd. 314 $ 1
Qantas Airways, Ltd. 298 1
Westfield Trust 601 1
----------
3
----------
AUSTRIA - 3.9%
Austrian Airlines Osterreichische
Luftverkehrs AG 6,100 214
Bank Austria AG 14,300 786
Bau Holding AG 3,300 173
Brau-Union Goess-Reininghaus-
Osterreichische Brau AG 3,000 161
BWT AG 200 32
EA-Generali AG 600 126
Oester Elektrizita Class A 3,900 659
OMV AG 3,400 352
VA Technologie AG (BR) 1,400 137
Voest-Alpine Stahl AG 4,100 128
Wienerberger Baustoff 1,100 215
----------
2,983
----------
BELGIUM - 1.1%
Cobepa (Cie Belge) 750 49
Cofinimmo 440 49
Credit Communal Holding Dexia NPV 345 52
Electrabel NPV 200 65
Fortis AG 600 162
KBC Bancassurance Holding NPV 1,610 127
PetroFina SA NPV 180 68
Quick Restaurants SA 1,285 59
Solvay SA NPV 430 27
Tractebel Investments
International NPV 1,100 167
UCB Capital NPV 5 26
----------
851
----------
COLOMBIA - 0.4%
Bancolombia SA - ADR 24,600 178
Carulla Y Compania - ADR 4,900 14
Cementos Diamante
SA - GDR 13,600 97
Cementos Paz del Rio
SA - ADR (a) 1,300 12
Corporacion Financiera Del Valle
Class B - ADR 10,000 13
----------
314
----------
FINLAND - 1.7%
Kemira Ojy 14,000 118
Kesko Oyj 11,300 152
Nokia Oyj Series A 11,300 809
Rautaruukki Oyj 9,400 66
UPM-Kymmene Oyj 6,400 130
----------
1,275
----------
FRANCE - 11.3%
Alstom (a) 2,600 61
AXA - UAP 4,950 571
Banque Nationale Paris 5,822 386
Bongrain SA 550 279
Casino Guich-Perr 2,850 271
Chargeurs International SA 2,900 181
Christian Dior SA 2,250 219
Credit Lyonnais Cert d'Invest. (a) 3,300 296
Eiffage 3,520 274
Elf Aquitaine SA 3,219 319
Elf Gabon SA (a) 300 41
Eridania Beghin-Say SA 250 46
Esso S.A.F. 4,000 320
Eurafrance 106 61
Eurotunnel/Euro SA Units (a) 12,800 12
</TABLE>
Annual Report 9
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
Eurotunnel Warrants 2001/2003
(Units)(a) 182,400 $ 21
France Telecom SA 10,200 750
Galeries Lafayette 450 416
Gascogne 1,141 100
Groupe Andre SA (a) 1,134 118
GTM - Entrepose 3,063 276
L'Oreal (Societe) 950 513
Labinal 800 245
Lafarge SA (BR) 2,190 187
Lyonnais Eaux Dumez 4,075 672
Peugeot SA 1,800 301
Renault 5,100 228
Rhodia SA (a) 425 9
S.A.T. Telecommunications 450 186
Sanofi SA 3,782 426
Schneider SA 2,800 165
Scor SA 4,400 276
Societe Industrielle de Transports
Automobiles SA 700 165
Sommer Allibert 1,400 58
Usinor Sacilor 20,562 218
----------
8,667
----------
GERMANY - 9.8%
AGIV AG fuer Industrie und
Verkehrswesen 9,200 241
Allianz AG (Regd) 1,459 420
AMB Aachener & Muenchener
Beteiligungs AG 2,200 318
Bankgesellschaft Berlin AG 5,600 95
BASF AG 14,000 561
Bayer AG 400 15
Bayer Motoren Werk 100 75
Bayerische Motoren Werke AG (a) 20 15
Bayerische Vereinsbank AG 6,150 470
Commerzbank AG 2,350 68
Daimler-Benz AG 2,350 213
DBV-Winterthur Holding AG 1,050 400
Deutsche Bank AG 4,750 296
Deutsche Lufthansa AG 15,750 390
Deutsche Telekom AG 38,450 1,021
Dyckerhoff AG 500 158
ERGO Versicherungs Gruppe AG 1,450 205
Fried, Krupp AG Hoesch-Krupp 800 116
Holsten Brauere AG 1,000 200
IKB Deutsche Industriebank AG 6,850 138
Muenchener Rueckversicherungs -
Gesellschaft AG 50 12
Rheinmetall AG 11,500 311
SAP AG 1,000 520
Schmalbach Lubeca AG 950 151
Siemens AG 5,000 326
Suedzucker AG 350 181
Thyssen AG 1,400 264
Veba AG 2,350 119
Viag AG 200 126
Volkswagen AG (a) 1,000 72
----------
7,497
----------
HONG KONG - 0.2%
Hong Kong Land
Holdings, Ltd. - ADR (a) 14,173 12
Hong Kong Telecommunications, Ltd. 2,356 4
Jardine Matheson
Holdings, Ltd. - ADR(a) 4,800 9
Jardine Strategic
Holdings, Ltd. - ADR (a) 79,000 92
----------
117
----------
INDIA - 0.4%
Arvind Mills, Ltd. 14,700 11
Ashok Leyland, Ltd. 19,800 13
Bharat Heavy Electricals, Ltd. 3,900 21
</TABLE>
10 Annual Report
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
Bharat Petroleum Corp., Ltd. 1,800 $ 11
Colgate-Palmolive (India) Ltd. 4,800 22
Finolex Cables, Ltd. 10,500 26
Industrial Development
Bank of India, Ltd. 17,700 23
ITC, Ltd. 2,100 31
Madras Refineries, Ltd. 16,100 16
Mahanagar Telephone Nigam, Ltd. 4,300 20
Reliance Industries, Ltd. 10,200 26
Tata Engineering &
Locomotive Co., Ltd. 1,100 3
Tata Iron and Steel Co., Ltd. 7,800 17
Videsh Sanchar Nigam, Ltd. (a) 1,000 20
----------
260
----------
IRELAND - 4.0%
Abbey PLC 43,700 187
Allied Irish Banks 87,399 1,202
Avonmore Waterford Group PLC 15,900 54
Bank of Ireland 8,502 131
CRH PLC 50,372 549
Fyffes PLC 30,800 59
Independent Newspapers PLC 14,268 53
Irish Life PLC 25,505 202
Irish Permanent PLC 7,300 76
Jefferson Smurfit Group PLC 86,200 166
Jurys Hotel Group PLC 20,800 145
Kerry Group PLC Class A 15,300 175
Unidare PLC 3,100 8
----------
3,007
----------
ISRAEL - 1.2%
Africa - Israel Investments, Ltd. (a) 125 61
Agis Industries Ltd. (a) 8,745 55
Bank Hapoalim, Ltd. (a) 61,495 147
Bank Leumi Le-Israel 41,500 66
Bezeq Israeli Telecommunication
Corp., Ltd. 30,950 93
Dor Energy 1988, Ltd. - ADR (a) 3,710 19
ECI Telecom, Ltd. - ADR 4,340 119
Elco Holdings Ltd. 9,030 56
IDB Holding Corp., Ltd. 2,530 58
Israel Chemicals, Ltd. 46,275 52
Koor Industries 620 59
Scitex, Ltd. - ADR (a) 3,560 36
Teva Pharmaceutical
Industries, Ltd. 2,250 83
----------
904
----------
ITALY - 4.7%
Assicurazioni Generali SPA 6,688 227
Banca Pop di Bergamo CV 5,000 106
Banca Pop di Milano 16,000 119
Banco Ambrosiano Veneto di Risp 111,300 272
Burgo (Cartiere) SPA 15,000 91
Compagnia Assicuratrice Unipol
1999 Warrants (a) 15,200 10
Danieli & Co. di Risp 14,000 48
Ente Nazionale Idrocarburi
SPA (Regd) 110,400 584
Fiat SPA di Risp 112,980 206
I.F.I.L. Risp NC 39,600 85
IFIL Finanziaria di Partecipazioni
SPA 2000 Warrants (a) 900 1
Istituto Mobiliane Italiano SPA 16,000 246
Pirelli & Co. di Risp 53,000 84
R.A.S. di Risp 18,500 160
Recordati di Risp 15,000 74
Sirti SPA 20,000 98
Telecom Italia Mobile SPA - di Risp 120,000 435
Telecom Italia SPA 113,825 568
Toro Assicurazioni 5,800 92
</TABLE>
Annual Report 11
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
Toro Assicurazioni
2000 Warrants (a) 1,600 $ 17
Unicem SPA 22,000 86
----------
3,609
----------
JAPAN - 16.4%
Acom Co., Ltd. 6,300 313
Alinco, Inc. 2,000 4
Amada Co., Ltd. 36,000 178
Amada Metrecs Co. 29,000 139
Aoyama Trading Co. 7,400 178
Asahi Optical Co. 78,000 294
Bank of Tokyo - Mitsubishi, Ltd. 28,000 198
Bridgestone Tire Corp. 4,000 88
Brother Industries 51,000 167
Bunka Shutter Co. 54,000 113
Canon, Inc. 7,000 142
Casio Computer Co., Ltd. 15,000 106
Central Glass Co., Ltd. 83,000 151
Chichibu Onoda Cement Corp. 119,000 221
Chiyoda Co., Ltd. 12,000 73
Chugai Pharmaceutical Co., Ltd. 18,000 122
Chugoku Electric Power 9,400 141
Chuo Trust & Banking 11,000 32
Clarion Co., Ltd. 31,000 86
Daiwa Bank 110,000 133
Daiwa Industries, Ltd. 16,000 52
East Japan Railway Co. 12 58
Eiden Sakakiya Co., Ltd. 16,000 65
Fuji Heavy Industries, Ltd. 49,000 260
Fuji Photo Film Co. 1,000 32
Fujitsu, Ltd. 5,000 51
Hisamitsu Pharmaceutical Co. 20,000 188
Hokkai Can Co. 23,000 46
Hokkaido Electric Power Co., Inc. 6,800 94
Hokkaido Takushoku Bank, Ltd. (a) 130,000 1
Honda Motor Co., Ltd. 6,000 207
Inabata & Co. 12,000 36
Industrial Bank of Japan, Ltd. 4,000 15
Ito-Yokado Co., Ltd. 1,000 47
Itochu Fuel Corp. 52,000 153
Japan Energy Corp. 222,000 225
Kamigumi Co., Ltd. 63,000 236
Kansai Electric Power Co., Inc. 1,600 26
Kawasho Corp. 48,000 51
Kayaba Industry Co., Ltd. 95,000 144
Kinseki 14,000 67
Mabuchi Motor Co., Ltd. 2,000 135
Makino Milling Co., Ltd. 21,000 124
Marubeni Corp. 123,000 204
Maruha Corp. 211,000 196
Matsushita Electric
Industrial Co., Ltd. 21,000 303
Mazda Motor Corp. (a) 41,000 137
Minolta Camera Co. 41,000 242
Mitsuboshi Belting 80,000 187
Mitsui Petrochemical Industry 81,000 193
Mitsui Trust & Banking Co., Ltd. 117,000 149
Morita Corp. 23,000 46
Nichia Steel Works 8,800 27
Nichicon Corp. 14,000 171
Nichiei Construction (Azel Corp.) 19,000 36
Nintendo Co., Ltd. 1,900 177
Nippon Carbon Co. (a) 147,000 174
Nippon Chemi-Con Co., Ltd. 45,000 157
Nippon Express Co., Ltd. 8,000 37
Nippon Hodo Co., Ltd. 39,000 148
Nippon Telegraph &
Telephone Corp. 102 775
Nissho Corp. 15,000 104
Nissho Iwai Corp. 106,000 154
Nittoc Construction Co. 19,000 39
Nomura Securities Co., Ltd. 6,000 58
</TABLE>
12 Annual Report
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
NSK, Ltd. 24,000 $ 87
Okabe Co. 21,000 60
Ono Pharmaceutical 10,000 242
Orient Corp. 45,000 89
Ryosan Co. 11,000 173
Sanwa Bank 10,000 57
Sanyo Shinpan Finance Co. 4,000 136
Seino Transportation 24,000 121
Senshukai Co. 32,000 145
Showa Denko 226,000 191
Sintokogio 22,000 66
Sony Corp. 2,400 176
Sumitomo Bank 15,000 107
Taiyo Yuden Co., Ltd. 12,000 130
Takara Standard Co., Ltd. 39,000 236
Takeda Chemical Industries 3,000 79
Toenec Corp. 46,000 134
Tokyo Electric Power 8,800 164
Toyota Motor Corp. 34,000 726
Uniden Corp. 28,000 239
Yakult Honsha Co., Ltd. 30,000 145
Yamaha Motor Co. 23,000 158
----------
12,567
----------
NETHERLANDS - 7.4%
ABN Amro Holdings NV 20,992 476
DSM NV (BR) 1,899 168
Fortis Amev NV 30 2
Hollandsche Beton Groep NV 9,880 161
ING Groep NV 16,096 950
KLM Royal Dutch Airlines NV 5,764 197
Koninklijke Boskalis Westminster NV 12,715 179
Koninklijke Hoogovens NV 4,906 185
Koninklijke KPN NV (a) 11,586 525
Koninklijke Nedlloyd Groep NV 5,157 82
Philips Electronics NV 6,929 453
Royal Dutch Petroleum Co. 27,271 1,212
Stad Rotterdam CVA 633 57
Unilever NV 9,563 662
Van Ommeren (Kon) CVA 4,964 171
Wereldhave NV 3,148 180
----------
5,660
----------
NORWAY - 3.0%
Aker AS Series B 11,280 129
Bergesen DY AS Series B 14,600 197
Christiania Bank OG Kreditkasse 89,600 279
Den Norske Creditbank AS 47,600 171
Dyno Industrier ASA 8,200 119
Elkem ASA Series A 13,500 154
Helikopter Services Group ASA 7,600 58
Kvaerner Industries AS 5,800 119
Kvaerner Industries AS Series B 3,300 59
Norsk Hydro AS 14,800 532
Norske Skogindustrier AS Class A 6,000 165
Orkla ASA Class B (a) 8,100 109
Petroleum Geo-Services ASA (a) 4,200 60
SAS Norske ASA Series B 8,356 104
Storebrand ASA Series A (a) 7,600 46
----------
2,301
----------
PAKISTAN - 0.3%
Cherat Cement Co., Ltd. 21,500 4
Dewan Salmon Fibre 92,575 24
Engro Chemical 14,375 18
Fauji Fertilizer 39,500 37
Hub Power Co. - GDR 143,000 35
ICI Pakistan (a) 117,500 26
Karachi Electric (a) 75,500 10
Muslim Commercial 22,500 6
Pakistan State Oil 15,600 23
</TABLE>
Annual Report 13
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
Pakistan Telecom Corp. Series A 93,000 $ 40
Sui Northern Gas Pipelines (a) 34,385 6
Sui Southern Gas Co., Ltd. (a) 66,125 12
----------
241
----------
PHILIPPINES - 0.0%
Ayala Corp. 28,300 4
----------
4
----------
POLAND - 0.7%
Agros Holdings Series C (a) 1,660 8
Bank Handlowy W. Warszawie 9,715 107
Bank Inicjatyw Gospodarczych 78,855 68
Bank Rozwoju Eksportu SA 1,650 38
Bank Rozwoju Eksportu SA (a) 330 8
Bank Slaski SA 525 25
Banka Przemyslowo 835 47
Debica SA 2,185 31
Elektrim 4,790 40
Huta Szkla Gospodarczego Irena (a) 4,935 5
KGHM Polska Miedz SA 27,520 89
Mostostal Export SA 24,235 18
Okocimskie Zaklady Piwowarskie
SA (a) 4,165 24
Polifarb 2,144 3
ROLIMPEX SA Series A (a) 17,661 23
STALEXPORT SA Series A (a) 5,785 31
Zywiec SA 23 2
----------
567
----------
PORTUGAL - 0.0%
Banco Espirito Santo e Comercial de
Lisboa SA (Regd) 650 19
----------
19
----------
RUSSIA - 0.2%
GAZ (Regd)(a) 200 5
Lukoil Oil Co. - ADR 4,900 72
Mosenergo - ADR 7,200 11
Rostelecom - ADR 5,400 19
Surgutneftegaz - ADR 11,800 36
Unified Energy Systems - ADR 5,600 20
Vimpel-Communications - ADR (a) 1,400 11
----------
174
----------
SINGAPORE - 2.8%
Creative Technology, Ltd. (a) 4,000 39
Development Bank
of Singapore, Ltd. (Alien Market) 41,900 145
Fraser & Neave 35,000 56
Hai Sun Hup Group 153,000 17
Haw Par Brothers International, Ltd. 24,000 16
Hotel Properties, Ltd. 328,000 58
Keppel Bank 182,000 104
Mandarin Oriental
International, Ltd. - ADR (a) 54,464 26
Metro Holdings, Ltd. 56,400 14
Neptune Orient Lines, Ltd. (a) 133,000 27
Overseas Chinese Banking
(Alien Market) 60,672 157
Overseas Union Bank
(Alien Market) 81,000 107
Singapore Airlines, Ltd.
(Alien Market) 65,000 279
Singapore Land 30,000 37
Singapore Press Holdings, Ltd.
(Alien Market) 32,212 227
Singapore Telecommunications, Ltd. 440,000 643
United Engineers 35,000 10
United Industrial Corp., Ltd. 443,000 101
United Overseas Land 324,000 102
----------
2,165
----------
</TABLE>
14 Annual Report
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
SOUTH KOREA - 0.0%
Tongyang Investment &
Finance Corp. (a) 886 $ 3
----------
3
----------
SPAIN - 1.0%
Acerinox SA (a) 1,000 20
Autopistas del Mare Nostrum SA 2,100 42
Banco Bilbao Vizcaya SA (a) 4,200 56
Banco Central Hispanoamericano SA (a) 6,750 64
Banco Santander SA (Regd) 1,900 36
Banco Santander SA - Bonus Rights (a) 1,900 1
Banco Zaragozano SA (Regd) 1,050 33
Bodegas Y Bebidas SA (a) 3,000 40
Compania Espanola de Petroleos SA 600 19
Corporacion Bancaria de Espana
SA (Regd)(a) 3,200 61
Endesa SA 2,350 45
Hidroelectrica del Cantabrico SA 1,050 45
Iberdrola SA 3,300 49
Repsol SA 450 20
Sarrio SA (a) 4,250 16
Telefonica SA 3,600 138
Union Electrica Fenosa SA 5,200 61
Urbis SA (a) 2,300 25
----------
771
----------
SRI LANKA - 0.4%
Aitken Spence & Co., Ltd. (a) 24,133 34
Development Finance Corp.
of Ceylon 37,916 58
Hayleys, Ltd. 19,400 42
John Keells Holdings, Ltd. 52,300 130
National Development Bank, Ltd. 14,000 20
----------
284
----------
SWITZERLAND - 8.2%
Baloise Holding, Ltd. 210 161
Banca del Gottardo Class B 445 315
Banque Cantonale Vaudoise 405 144
Bobst AG (BR) 50 80
Credit Suisse Group (Regd) 1,799 316
Fischer (Georg) AG (Regd) 180 54
Forbo Holding AG (Regd) 630 284
Helvetia Patria Holding Co. (Regd) 320 333
Hero (BR) 425 259
Jelmoli Holding AG (Regd) 710 167
Nestle SA (Regd) 336 625
Novartis AG (Regd) 950 1,482
Pargesa Holdings SA (BR) 135 197
Roche Holdings Genusscheine
AG NPV 95 986
Schweiz Ruckversicher (Regd) 34 75
UBS AG (a) 2,136 692
Zurich Allied AG (a) 230 138
----------
6,308
----------
THAILAND - 0.0%
Finance One Public Co., Ltd.
(Alien Market)(a)(d) 31,600 --
First Bangkok City Bank PLC
(Alien Market)(a) 27,800 1
Siam City Bank Public Co., Ltd.
(Alien Market)(a) 9,520 1
----------
2
----------
UNITED KINGDOM - 12.7%
Abbey National PLC 13,200 248
Amec PLC 61,500 142
Arcadia Group PLC 9,550 51
Arjo, Wiggins, Appleton PLC 78,200 176
ASDA-MFI Group PLC 66,000 188
</TABLE>
Annual Report 15
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
Associated British Foods PLC 7,600 $ 66
Bank of Scotland
Governor & Co. PLC 27,642 284
Barclays Bank PLC 16,722 400
Berisford PLC 57,600 195
British Airways PLC 28,200 212
British Energy PLC 26,800 254
British Land Co. PLC 10,800 93
British Petroleum Co. PLC 43,583 551
British Steel PLC 113,300 203
British Telecom PLC 35,800 482
Cable & Wireless PLC 39,890 406
Christian Salvesen PLC 117,700 185
Commercial Union
Assurance Co. PLC 12,330 180
Courtaulds Textile Co. PLC 29,800 98
Debenhams PLC 14,100 76
English China Clay PLC 63,200 158
Glaxo Wellcome PLC 14,559 439
Greenalls Group PLC 19,800 122
Hanson PLC 13,587 70
HSBC Holdings PLC 3,400 71
Imperial Tobacco Group PLC 28,300 252
Inchcape PLC 67,600 181
Kingfisher PLC (a) 2,400 20
Land Securities PLC 7,500 105
Lex Service PLC 21,700 154
Lloyds TSB Group PLC 16,500 197
Lonrho PLC 48,500 184
Marley, Ltd. PLC 122,100 162
Mirror Group News PLC 13,000 39
Nycomed Amersham PLC (a) 7,238 44
Rank Group PLC 33,300 158
Royal Bank of Scotland Group PLC 26,129 371
Sainsbury (J.) PLC 20,900 180
Sears PLC (a) 22,400 73
Selfridges PLC (a) 22,400 89
Severn Trent PLC 11,314 192
Simon Group PLC 253,000 173
Slough Estates PLC 30,900 158
Smith & Nephew PLC 62,476 151
SmithKline Beecham PLC 22,680 268
South West Water PLC (Pennon Group) 4,900 85
Storehouse PLC 48,500 177
Tarmac, Ltd. PLC 62,900 84
United Assurance Group PLC 12,700 129
Wimpey (George), Ltd. PLC 111,900 182
Yorkshire Water PLC 17,485 140
Zeneca Group PLC 11,200 438
----------
9,736
----------
TOTAL COMMON STOCKS
(cost $75,779) 70,289
----------
PREFERRED STOCKS - 3.0%
AUSTRALIA - 0.0%
News Corp., Ltd. 94 1
----------
1
----------
AUSTRIA - 0.4%
Allgemeine Baugesellschaft 2,400 132
Bau Holdings AG 1,800 87
EA Generali AG 500 79
----------
298
----------
BELGIUM - 0.1%
Cockerill Sambre 7,000 40
----------
40
----------
BRAZIL - 0.0%
Banco Nacional SA NPV (a)(d) 871,000 --
----------
--
----------
</TABLE>
16 Annual Report
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
COLOMBIA - 0.2%
Banco Ganadero SA - ADR 8,400 $ 128
Gran Cadena de Almacenes
Class B - ADR 3,000 12
----------
140
----------
----------
GERMANY - 2.2%
Axa Colonia Konzern AG NV 3,850 324
Draegerwerk AG 9,100 160
Dyckerhoff AG 233 80
Henkel KGAA 1,100 88
ProSieben Media AG NV 2,650 139
Rheinmetall AG 1,150 24
RWE AG 13,400 447
Volkswagen AG (a) 9,000 449
----------
1,711
----------
ITALY - 0.1%
Compagnia Assicuratrice Unipol 36,000 95
----------
95
----------
TOTAL PREFERRED STOCKS
(cost $2,197) 2,285
----------
<CAPTION>
PRINCIPAL
AMOUNT
(000)
----------
<S> <C> <C>
LONG-TERM INVESTMENTS - 0.2%
GERMANY - 0.1%
Deutsche Finance BV (conv.)
1.000% due 05/02/01 DEM 110 85
----------
----------
ITALY - 0.1%
Italy, Republic of (conv.)
5.000% due 06/28/01 $ 35 64
----------
----------
TOTAL LONG-TERM INVESTMENTS
(cost $123) 149
----------
SHORT-TERM INVESTMENTS - 4.7%
UNITED STATES - 4.7%
AIM Short Term Investment
Treasury Portfolio Class A (b) 2,250 2,250
Federated Investors Prime
Obligations Fund (b) 378 378
General Electric Capital Corp.
5.480% due 12/14/98 (e)(f) 1,000 984
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $3,612) 3,612
----------
</TABLE>
Annual Report 17
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
MARKET
VALUE
(000)
----------
<S> <C>
TOTAL INVESTMENTS
(identified cost $81,711)(c) - 99.7% $ 76,335
OTHER ASSETS AND LIABILITIES,
NET - 0.3% 230
----------
NET ASSETS - 100.0% $ 76,565
----------
----------
</TABLE>
(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.
(e) Held as collateral by the custodian in connection with an equity swap
agreement held by the Fund.
(f) Rate noted is yield-to-maturity.
ABBREVIATIONS:
ADR - American Depositary Receipt
BR - Bearer
GDR - Global Depositary Receipt
NPV - No Par Value
NV - Nonvoting
PLC - Public Limited Company
FOREIGN CURRENCY ABBREVIATIONS:
DEM - German mark
CHF - Swiss franc
GBP - British pound
JPY - Japanese yen
SGD - Singapore dollar
USD - US dollar
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, 1998
<TABLE>
<CAPTION>
% OF MARKET
NET VALUE
GEOGRAPHIC DIVERSIFICATION ASSETS (000)
- -------------------------- ---------- ----------
<S> <C> <C>
Europe 59.7% $ 45,659
Japan 16.4 12,567
Latin America 0.6 454
Middle East 1.8 1,405
Pacific Basin 3.4 2,579
Russia 0.2 174
United Kingdom 12.7 9,736
Long-Term Investments 0.2 149
Short-Term Investments 4.7 3,612
---------- ----------
Total Investments 99.7 76,335
Other Assets and Liabilities, Net 0.3 230
---------- ----------
NET ASSETS 100.0% $ 76,565
---------- ----------
---------- ----------
</TABLE>
<TABLE>
<CAPTION>
% OF MARKET
NET VALUE
INDUSTRY DIVERSIFICATION ASSETS (000)
- -------------------------- ---------- ----------
<S> <C> <C>
Basic Industries 7.7% $ 5,858
Capital Goods 4.9 3,739
Consumer Basics 14.2 10,904
Consumer Durables 6.5 4,978
Consumer Non-Durables 3.7 2,867
Consumer Services 1.6 1,214
Energy 6.6 5,091
Finance 24.2 18,491
General Business 2.5 1,889
Miscellaneous 3.3 2,556
Shelter 4.8 3,633
Technology 2.0 1,538
Transportation 1.8 1,365
Utilities 11.0 8,451
Long-Term Investments 0.2 149
Short-Term Investments 4.7 3,612
---------- ----------
Total Investments 99.7 76,335
Other Assets and Liabilities, Net 0.3 230
---------- ----------
NET ASSETS 100.0% $ 76,565
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 19
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
EQUITY SWAPS (Note 2)
UNREALIZED
NOTIONAL APPRECIATION
AMOUNT FLOATING TERMINATION (DEPRECIATION)
UNDERLYING SECURITY (000) RATE DATE (000)
- ------------------------------------ ----------- -------------------------- ----------- --------------
<S> <C> <C> <C> <C>
Korean 200 Stock Price Index (KS200) $ 1,000 USD LIBOR-BBA minus 10.00% 12/14/98 $ 65
------------
------------
</TABLE>
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
(Note 2)
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS TO IN EXCHANGE APPRECIATION
DELIVER FOR SETTLEMENT (DEPRECIATION)
(000) (000) DATE (000)
- ---------------- ------------ ---------- --------------
<S> <C> <C> <C> <C> <C>
USD 2,825 CHF 4,133 09/25/98 $ 49
USD 1,334 CHF 1,971 09/25/98 37
USD 834 CHF 1,262 09/25/98 43
CHF 7,366 USD 4,913 09/25/98 (209)
DEM 2,268 USD 1,264 09/25/98 (28)
USD 9,031 GBP 5,560 09/25/98 277
GBP 608 USD 1,003 09/25/98 (14)
GBP 174 USD 288 09/25/98 (3)
GBP 1,478 USD 2,394 09/25/98 (80)
USD 1,099 JPY 153,310 09/25/98 (7)
USD 1,126 JPY 157,480 09/25/98 (4)
USD 890 JPY 127,713 09/25/98 20
JPY 306,619 USD 2,246 09/25/98 61
JPY 463,938 USD 3,346 09/25/98 41
JPY 75,734 USD 555 09/25/98 15
USD 497 SGD 873 09/25/98 (5)
SGD 1,089 USD 642 09/25/98 28
------------
$ 221
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20 Annual Report
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1998
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $81,711)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . $ 76,335
Foreign currency holdings (identified cost $654) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 658
Forward foreign currency exchange contracts (cost $34,288)(Note 2) . . . . . . . . . . . . . . . . . . . 34,698
Receivables:
Dividends and interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 279
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Foreign taxes recoverable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184
Receivable for equity swap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
--------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112,469
LIABILITIES
Payables:
Investments purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,217
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Accrued fees to affiliates (Note 4). . . . . . . . . . . . . . . . . . . . . . . . 139
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Forward foreign currency exchange contracts (cost $34,288)(Note 2) . . . . . . . . . 34,477
--------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,904
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 76,565
--------------
--------------
NET ASSETS CONSIST OF:
Undistributed net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,331
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,130
Unrealized appreciation (depreciation) on:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,376)
Equity swap. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Foreign currency-related transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77,183
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 76,565
--------------
--------------
NET ASSET VALUE, offering and redemption price per share:
($76,564,890 divided by 8,289,752 shares of $.001 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9.24
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 21
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Ficsal Year Ended August 31, 1998
Amounts
in thousands
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $263). . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,973
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 370
--------------
Total Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,343
EXPENSES (Notes 2 and 4):
Advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 789
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 314
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Amortization of deferred organization expenses . . . . . . . . . . . . . . . . . . 9
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
--------------
Expenses before reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,356
Expense reductions (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . (304)
--------------
Expenses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,052
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,291
--------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (359)
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,223
Foreign currency-related transactions. . . . . . . . . . . . . . . . . . . . . . . 1,356 4,220
--------------
Net change in unrealized appreciation or depreciation of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (802)
Equity swap. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Foreign currency-related transactions. . . . . . . . . . . . . . . . . . . . . . . 151 (586)
-------------- --------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,634
--------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . $ 4,925
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
22 Annual Report
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Fiscal Years Ended August 31,
Amounts in thousands
1998 1997
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,291 $ 770
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,220 3,794
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . . . . (586) (4,930)
-------------- --------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . 4,925 (366)
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,176) (1,078)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . (3,891) (342)
-------------- --------------
Total Distributions to Shareholders . . . . . . . . . . . . . . . . . . . . . . (5,067) (1,420)
-------------- --------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from
Fund share transactions (Note 5). . . . . . . . . . . . . . . . . . . . . . . . (7,223) 31,121
-------------- --------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . (7,365) 29,335
NET ASSETS
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83,930 54,595
-------------- --------------
End of period (including undistributed net investment income of
$2,331 and $382, respectively) . . . . . . . . . . . . . . . . . . . . . . . . $ 76,565 $ 83,930
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 23
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each
period and other performance information derived from the financial statements.
YEAR ENDED AUGUST 31,
-------------------------------------------------
1998 1997 1996 1995*
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . $ 10.85 $ 10.96 $ 10.89 $ 10.00
---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . .16 .10 .36 .03
Net realized and unrealized gain (loss) on investments . (1.13) .03 .28 .86
---------- ---------- ---------- ----------
Total Income From Investment Operations . . . . . . . (.97) .13 .64 .89
---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . . . . . . . . . (.15) (.18) (.57) --
Net realized gain on investments . . . . . . . . . . . . (.49) (.06) -- --
---------- ---------- ---------- ----------
Total Distributions . . . . . . . . . . . . . . . . . (.64) (.24) (.57) --
---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . $ 9.24 $ 10.85 $ 10.96 $ 10.89
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . (9.50) 1.17 6.22 8.90
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . . . . . . . 76,565 83,930 54,595 25,186
Ratios to average net assets (%)(b):
Operating expenses, net (c) . . . . . . . . . . . . . 1.00 1.00 1.00 1.79
Operating expenses, gross (c) . . . . . . . . . . . . 1.29 1.40 1.47 2.56
Net investment income . . . . . . . . . . . . . . . . 1.23 1.12 1.16 1.11
Portfolio turnover (%)(b). . . . . . . . . . . . . . . . 74.79 48.29 22.02 7.17
</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.
24 Annual Report
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1998
1. ORGANIZATION
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 21 investment portfolios which are in operation as
of August 31, 1998. 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 fund 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.
Annual Report 25
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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 $3,869,334 incurred from November 1, 1997 to August 31,
1998, and treat it as arising in fiscal year 1999.
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, 1998 are as follows:
<TABLE>
<CAPTION>
NET
UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
------------ -------------- -------------- ---------------
<S> <C> <C> <C>
$ 82,076,259 $ 10,361,747 $ (16,103,006) $ (5,741,259)
</TABLE>
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 foreign denominated investments, forward contracts, passive
foreign investment companies 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, 1998:
<TABLE>
<CAPTION>
UNDISTRIBUTED ACCUMULATED ADDITIONAL
NET INVESTMENT NET REALIZED PAID-IN
INCOME GAIN (LOSS) CAPITAL
-------------- ------------- -----------
<S> <C> <C>
$ 1,834,070 $ (1,828,974) $ (5,096)
</TABLE>
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.
26 Annual Report
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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.
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
Annual Report 27
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
associated with them may vary widely. These risks are generally categorized
as market risk, liquidity risk and counterparty or credit risk.
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 accompanying 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 foreign contracts at August 31, 1998
are presented on the accompanying Statement of 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%.
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.
EQUITY SWAP: The Fund has entered into an equity swap agreement 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 an agreed upon rate (i.e. USD LIBOR BBA rate). During the term of the
agreement, changes in the underlying value of the swap is recorded as
unrealized gain (loss) and is based on changes in the value of the
underlying index. The underlying index is valued at the published daily
closing price. Accrued interest expense to be paid to the swap counterparty
or accrued interest income to be paid to the Fund, at the agreed upon date,
is recognized as unrealized gain (loss). The amount paid to the swap
counterparty representing capital depreciation on the underlying securities
and accrued interest expense and interest income is recorded as net
realized gain (loss). 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 accompanying Statement of
Net Assets) as collateral for the notional amount and payment of
liabilities under the equity swap agreement.
28 Annual Report
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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, 1998, purchases and
sales of investment securities, excluding short-term investments and
futures contracts, aggregated to $71,872,356 and $78,749,015,
respectively.
FUTURES TRANSACTIONS: The Fund's transactions in futures contracts for the
year ended August 31, 1998, were as follows:
<TABLE>
<CAPTION>
FUTURES CONTRACTS PURCHASED
---------------------------
AGGREGATE
NUMBER OF FACE VALUE OF
CONTRACTS CONTRACTS (1)
---------- -------------
<S> <C> <C>
Outstanding at August 31, 1997 -- $ --
Contracts opened 424 51,924,727
Contracts closed (424) (51,924,727)
---------- -------------
Outstanding at August 31, 1998 -- $ --
---------- -------------
---------- -------------
</TABLE>
(1) The aggregate face value of contracts is computed on the date each
contract was opened.
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,
1998, the Adviser voluntarily agreed to waive up to the full amount of its
advisory fee to the extent that total expenses exceeded 1.00% 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 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 29
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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% for the period
September 1, 1997 to December 31, 1997 and up to a maximum of 5% for the
period January 1, 1998 to August 31, 1998 of the asset-based fee determined
in (i)); (iii) out-of-pocket expenses; and (iv) start-up costs for new
funds.
On August 10, 1998, Frank Russell Company entered into an agreement with
The Northwestern Mutual Life Insurance Co., an insurance organization,
pursuant to which Northwestern Mutual Life will acquire all of the
outstanding common stock of Frank Russell Company.
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"), the
Adviser's Metropolitan Division of Commercial Banking ("Commercial
Banking") and State Street Solutions ("Solutions")(collectively the
"Agents"), as well as several unaffiliated service providers. For these
services, the Fund pays .025%, .175%, .175%, .175% and .175%, to the
Adviser, SSBSI, RIS, Commercial Banking, and Solutions, 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, 1998, the Fund was charged
shareholder servicing expenses of $21,628, $474, $672, $274, and $8,121, by
the Adviser, SSBSI, RIS, Commercial Banking, and Solutions, 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 shall terminate at the end of two years following the year
in which the expenditure was incurred. The
30 Annual Report
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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, 1998.
BOARD OF TRUSTEES: The Investment Company pays each Trustee not affiliated
with the Investment Company a retainer of $48,000 annually, $1,500 for each
board meeting attended, an additional $1,500 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, 1998 WERE
AS FOLLOWS:
<TABLE>
<S> <C>
Advisory fees $ 46,465
Administration fees 4,770
Custodian fees 75,231
Distribution fees 1,099
Shareholder servicing fees 2,018
Transfer agent fees 9,525
Trustees' fees 331
-----------
$ 139,439
-----------
-----------
</TABLE>
BENEFICIAL INTEREST: As of August 31, 1998, two shareholders were record
owners of approximately 15% and 12%, respectively, of the total outstanding
shares of the Fund.
5. FUND SHARE TRANSACTIONS
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS)
FOR THE YEARS ENDED AUGUST 31,
-------------------------------------------------------
1998 1998
------------------------- -------------------------
SHARES DOLLARS SHARES DOLLARS
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Proceeds from shares sold 15,836 $ 153,450 7,392 $ 81,716
Proceeds from reinvestment
of distributions 405 4,150 95 1,032
Payments for share redeemed (15,685) (164,823) (4,736) (51,627)
---------- ---------- ---------- ----------
Total net increase (decrease) 556 $ (7,223) 2,751 $ 31,121
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
Annual Report 31
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
6. LINE OF CREDIT
The Fund and several affiliated Funds (the "Participants") share in a $50
million revolving credit facility for temporary or emergency purposes,
including the meeting of redemption requests that otherwise might require
the untimely disposition of securities. The Participants are charged an
annual commitment fee of .065% on the average daily unused amount of the
aggregate commitment, which is allocated among each of the Participants.
Interest, at the Federal Fund Rate plus .50% annually, is calculated based
on the market rates at the time of the borrowing. The Fund may borrow up to
a maximum of 33 1/3 percent of the value of its total assets under the
agreement.
32 Annual Report
<PAGE>
SSgA
ACTIVE INTERNATIONAL FUND
TAX INFORMATION
August 31, 1998 (Unaudited)
The Fund paid distributions of $2,862,292 from net long-term capital gains
during its taxable year ended August 31, 1998. Pursuant to Section 852 of the
Internal Revenue Code, the Fund designates $1,430,356 as 20% capital gain
dividends for its taxable year ended August 31, 1998.
The Fund paid foreign taxes of $263,163 and recognized $2,002,802 of foreign
source income during the taxable year ended August 31, 1998. Pursuant to Section
853 of the Internal Revenue Code, the Fund designates $.0317 per share of
foreign taxes paid and $.2416 of gross income earned from foreign sources in the
taxable year ended August 31, 1998.
Please consult a tax advisor for questions about federal or state income tax
laws.
Annual Report 33
<PAGE>
SSgA ACTIVE INTERNATIONAL FUND
One International Place, 27th 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
Mark E. Swanson, Assistant Secretary and Principal Accounting Officer
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.
One International Place, 27th 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
PricewaterhouseCoopers LLP
One Post Office Square
Boston, Massachusetts 02109
34 Annual Report
<PAGE>
SSgA-Registered Trademark- Funds
TAX FREE MONEY MARKET FUND
Annual Report
August 31, 1998
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
Chairman's Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion and Analysis . . . . . . . . . . . . . . . 6
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . 21
Fund Management and Service Providers . . . . . . . . . . . . . . . . . . 25
</TABLE>
"SSgA-Registered Trademark- " IS A REGISTERED TRADEMARK 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, 1998. Over the past year, the Funds have grown to
include twenty-one 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 SSgA Tax Free Money Market Fund. I
hope you find this information a useful tool as you review your overall
investment strategy.
The SSgA Funds have also opened four additional funds in fiscal 1998. The
investment objectives for these four new funds are as follows:
The SSgA Special Equity Fund seeks to maximize total return through investment
in mid- and small capitalization US equity securities. This Fund was opened as
an alternative investment strategy for the SSgA Small Cap Fund that closed to
new investors on August 31, 1998.
The SSgA International Growth Opportunities Fund seeks to provide long-term
capital growth by investing primarily in securities of foreign issuers.
The SSgA High Yield Bond Fund seeks to maximize total return by investing
primarily in non investment-grade bonds, including, but not limited to, those
represented by the Lehman Brothers High Yield Bond Index.
The SSgA Real Estate Equity Fund seeks to provide income and capital growth by
investing primarily in publicly traded securities of real estate companies.
During the past fiscal year, the SSgA Funds were proud to announce that the SSgA
S&P 500 Index Fund and the SSgA Yield Plus Fund each achieved five years of
operational history. We are proud of our long term record and look forward to
having additional funds reach their five year anniversary.
SSgA intends to proceed with the evolution of new products and services while
committing to your investment needs. We will continue to develop our
professional expertise by focusing on the expansion of both our global resources
and our diversified product lines.
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
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. As a result, 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
working 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]
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
DATES TAX FREE MONEY MARKET FUND
<S> <C>
Inception* $10,000
1995 $10,254
1996 $10,568
1997 $10,884
1998 $11,219
</TABLE>
YEARLY PERIODS ENDED AUGUST 31
PERFORMANCE REVIEW
For the fiscal year ended August 31, 1998, the SSgA Tax Free Money Market Fund
had a return of 3.08%. The Fund's annualized return was 3.12% since its
inception in December 1994.
The Fund received a AA rating from the Standard & Poor's Corporation. Standard &
Poor's assigns a AA 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 preservations 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
SSgA
TAX FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ---------------------------- ----------------- ----------------
<S> <C> <C>
1 Year $ 10,308 3.08%
Inception $ 11,219 3.12%+
</TABLE>
*The Fund commenced operations on December 1, 1994.
+Annualized.
6 Annual Report
<PAGE>
SSgA TAX FREE MONEY MARKET FUND
PORTFOLIO MANAGEMENT DISCUSS AND ANALYSIS
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.
MARKET AND PORTFOLIO HIGHLIGHTS
Stability was the prevailing theme for fiscal 1998. The Federal Open Market
Committee held rates stable throughout the period, and as a result, with the
exception of predictable periods such as tax payment dates and coupon dates, the
slope of the short term yield curve remained flat. The only noticeable movement
in yields occurred in August 1998, when a combination of world economic crises
and the political uncertainties in Washington drove investor cash into money
market funds.
Throughout the fiscal year, the Fund continued to adhere to its strategy by
remaining primarily in short-term instruments. This gives the Fund flexibility
to switch with ease to longer-term fixed notes if conditions warrant. The Fund
will continue to invest only in the highest quality investments.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
TOP TEN ISSUERS
(AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31, 1998
<S> <C>
Kentucky Economic Development Finance Authority 4.1%
Michigan Municipal Bond Authority 3.9
Iowa Finance Authority Hospital Facility Revenue 3.9
Missouri, State of, Health & Educational Facilities Authority Revenue 3.6
Massachusetts, State of, Health & Educational Facilities Authority 3.6
Franklin County, Ohio Hospital Revenue 3.5
University of Illinois, Health Services Facilities Revenue Series B 3.4
St. Lucie County, Florida Pollution Control Revenue 3.3
Houston, Texas Tax & Revenue Anticipation Notes 3.1
Platte County, Wyoming Pollution Control Revenue Series B 3.0
- --------------------------------------------------------------------------------------
</TABLE>
------------------------
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:
In our opinion, the accompanying statement of assets and liabilities and
statement of net assets, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of SSgA Tax Free Money Market Fund (the "Fund")
at August 31, 1998, the results of its operations for the fiscal year then ended
and 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, 1994 (commencement of
operations) to August 31, 1995, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at August 31, 1998 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
Boston, Massachusetts
/s/ PricewaterhouseCoopers LLP
October 8, 1998
8 Annual Report
<PAGE>
SSgA
TAX FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
August 31, 1998
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY* (000)
-------------------------------------------------------
<S> <C> <C> <C> <C>
ALABAMA - 1.4%
Montgomery, Alabama Special Care Facilities Financing
Authority Revenue Series E, weekly demand (a). . . . . . . . . . . $ 3,600 3.250%(2) 12/01/30 $ 3,600
----------
ARIZONA - 0.2%
Maricopa County, Arizona Pollution Control Corporate Pollution
Control Revenue Series C, daily demand . . . . . . . . . . . . . . 600 3.250(1) 05/01/29 600
----------
ARKANSAS - 1.0%
Arkansas, State of, Development Financial Authority Health
Care Facilities Revenue Series B, weekly demand. . . . . . . . . . 2,600 3.250(2) 06/01/12 2,600
----------
COLORADO - 1.4%
Jefferson County, Colorado School District Number R-001
Series B (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,500 5.000 12/15/98 3,514
----------
DISTRICT OF COLUMBIA - 2.8%
District of Columbia, General Obligation Series SGA 62,
daily demand (a) . . . . . . . . . . . . . . . . . . . . . . . . . 7,350 3.450(1) 06/01/17 7,350
----------
FLORIDA - 6.6%
Dade County, Florida Industrial Development Authority Revenue
Series A, weekly demand. . . . . . . . . . . . . . . . . . . . . . 500 3.250(2) 01/01/16 500
Dade County, Florida Industrial Development Authority Revenue
Series B, weekly demand. . . . . . . . . . . . . . . . . . . . . . 900 3.250(2) 01/01/16 900
Dade County, Florida Industrial Development Authority Revenue
Series C, weekly demand. . . . . . . . . . . . . . . . . . . . . . 500 3.250(2) 01/01/16 500
Dade County, Florida Industrial Development Authority Revenue
Series D, weekly demand. . . . . . . . . . . . . . . . . . . . . . 1,800 3.250(2) 01/01/16 1,800
Jacksonville, Florida Electric Authority Revenue Series SGA17,
weekly demand. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000 3.450(2) 10/01/20 2,000
Putnam County, Florida Development Authority Pollution
Control Revenue Series H-4, semiannual demand. . . . . . . . . . . 3,000 3.500(4) 03/15/14 3,000
St. Lucie County, Florida Pollution Control Revenue, daily demand. . 8,500 3.350(1) 01/01/26 8,500
----------
17,200
----------
GEORGIA - 5.8%
Burke County, Georgia Development Authority Pollution Control
Revenue, daily demand (a). . . . . . . . . . . . . . . . . . . . . 5,500 3.850(1) 07/01/24 5,500
</TABLE>
Annual Report 9
<PAGE>
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TAX FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
AUGUST 31, 1998
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY* (000)
-------------------------------------------------------
<S> <C> <C> <C> <C>
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 Series D, weekly demand 4,000 3.250(2) 01/01/22 4,000
----------
15,000
----------
ILLINOIS - 4.5%
Illinois Student Assistance Common Student Loan Revenue Series A,
weekly demand (a). . . . . . . . . . . . . . . . . . . . . . . . . 3,000 3.350(2) 09/01/32 3,000
University of Illinois, Health Services Facilities Revenue Series B,
weekly demand. . . . . . . . . . . . . . . . . . . . . . . . . . . 8,800 3.250(2) 10/01/26 8,800
----------
11,800
----------
INDIANA - 1.2%
Indianapolis, Indiana Local Public Improvement Bond Bank Notes
Series C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,175 4.250 01/11/99 3,182
----------
IOWA - 3.8%
Iowa Finance Authority Hospital Facility Revenue Series B,
weekly demand (a). . . . . . . . . . . . . . . . . . . . . . . . . 10,000 3.250(2) 01/01/28 10,000
----------
KANSAS - 0.8%
Kansas City, Kansas General Obligation Series A (a). . . . . . . . . 2,175 5.250 09/01/98 2,175
----------
KENTUCKY - 7.7%
Daviess County, Kentucky Solid Waste Disposal Facility Revenue
Series A, daily demand . . . . . . . . . . . . . . . . . . . . . . 3,400 3.400(1) 12/01/23 3,400
Daviess County, Kentucky Solid Waste Disposal Facility Revenue
Series B, daily demand . . . . . . . . . . . . . . . . . . . . . . 800 3.400(1) 05/01/24 800
Kentucky Asset and Liability Common General Fund Revenue
Tax and Revenue Anticipation Notes Series A. . . . . . . . . . . . 5,000 4.500 06/25/99 5,035
Kentucky Economic Development Finance Authority Medical
Center Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . 750 4.250 02/01/99 752
Kentucky Economic Development Finance Authority Revenue
Pooled Hospital Loan, weekly demand. . . . . . . . . . . . . . . . 10,000 3.450(2) 08/01/18 10,000
----------
19,987
----------
</TABLE>
10 Annual Report
<PAGE>
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TAX FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
AUGUST 31, 1998
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY* (000)
-------------------------------------------------------
<S> <C> <C> <C> <C>
LOUISIANA - 0.3%
Ascension Parish, Louisiana Pollution Control Revenue, weekly demand $ 700 3.220%(2) 12/01/09 $ 700
----------
MAINE - 0.4%
Maine Municipal Bond Series C (a). . . . . . . . . . . . . . . . . . 1,000 4.100 11/01/98 1,000
----------
MASSACHUSETTS - 6.0%
Massachusetts Municipal Wholesale Electric Company Power
Supply System Revenue Series C, weekly demand (a). . . . . . . . . 5,435 3.050(2) 07/01/19 5,435
Massachusetts, State of, Health & Educational Facilities
Authority Revenue Series G-1, weekly demand (a). . . . . . . . . . 1,000 3.000(2) 01/01/19 1,000
Massachusetts, State of, Health & Educational Facilities
Authority Revenue Series SGA 65, daily demand. . . . . . . . . . . 8,400 3.450(1) 07/01/26 8,400
Massachusetts, State of, Housing Finance Agency Series A (a) . . . . 800 3.700 12/01/98 800
----------
15,635
----------
MICHIGAN - 3.9%
Michigan Municipal Bond Authority Revenue Series D-2 . . . . . . . . 10,000 4.250 08/27/99 10,064
----------
MINNESOTA - 0.4%
Anoka County, Minnesota Solid Waste Disposal Facilities Revenue. . . 1,000 6.000 12/01/98 1,006
----------
MISSOURI - 4.9%
Kansas City, Missouri Industrial Development Authority
Multifamily Housing Revenue, monthly demand. . . . . . . . . . . . 2,220 3.600(3) 12/01/15 2,220
Missouri, State of, Development Finance Board Infrastructure
Facilities Revenue Series C, daily demand. . . . . . . . . . . . . 1,070 3.850(1) 12/01/03 1,070
Missouri, State of, Health & Educational Facilities Authority Revenue
Series A, weekly demand. . . . . . . . . . . . . . . . . . . . . . 2,000 3.250(2) 09/01/10 2,000
Missouri, State of, Health & Educational Facilities Authority Revenue
Series A, weekly demand. . . . . . . . . . . . . . . . . . . . . . 1,000 3.250(2) 12/01/19 1,000
Missouri, State of, Health & Educational Facilities Authority Revenue
Series B, weekly demand. . . . . . . . . . . . . . . . . . . . . . 910 3.250(2) 06/01/14 910
Missouri, State of, Health & Educational Facilities Authority Revenue
Series C, weekly demand. . . . . . . . . . . . . . . . . . . . . . 3,200 3.250(2) 06/01/19 3,200
</TABLE>
Annual Report 11
<PAGE>
SSgA
TAX FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
AUGUST 31, 1998
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY* (000)
-------------------------------------------------------
<S> <C> <C> <C> <C>
Missouri, State of, Health & Educational Facilities Authority Revenue
Series C, weekly demand. . . . . . . . . . . . . . . . . . . . . . $ 1,300 3.250%(2) 12/01/19 $ 1,300
Missouri, State of, Health & Educational Facilities Authority Revenue
Series D, weekly demand. . . . . . . . . . . . . . . . . . . . . . 1,000 3.250(2) 06/01/19 1,000
----------
12,700
----------
NEBRASKA - 2.4%
Lancaster County, Nebraska Hospital Authority Number 1 Hospital
Revenue, weekly demand (a) . . . . . . . . . . . . . . . . . . . . 6,200 3.150(2) 06/01/12 6,200
----------
NEW JERSEY - 0.2%
Brigantine, New Jersey General Obligation (a). . . . . . . . . . . . 590 3.850 09/01/98 590
----------
NEW YORK - 5.8%
Nassau County, New York Industrial Development Agency Civic
Facilities Revenue, daily demand . . . . . . . . . . . . . . . . . 1,600 3.250(1) 07/01/19 1,600
New York, New York General Obligation Series B, daily demand (a) . . 2,800 3.750(1) 10/01/20 2,800
New York, New York General Obligation Series B-8, weekly demand. . . 500 2.850(2) 08/15/24 500
New York, New York Municipal Series SGB-36, weekly demand. . . . . . 3,600 3.500(2) 06/01/22 3,600
New York, State of, Local Assistance Corporation Series A,
weekly demand. . . . . . . . . . . . . . . . . . . . . . . . . . . 6,585 2.850(2) 04/01/22 6,585
----------
15,085
----------
NORTH CAROLINA - 1.2%
Charlotte, North Carolina Airport Revenue Series A, weekly demand (a) 800 3.150(2) 07/01/16 800
University of North Carolina School of Medicine Ambulatory Care
Clinic Revenue, weekly demand. . . . . . . . . . . . . . . . . . . 2,200 3.450(2) 07/01/12 2,200
----------
3,000
----------
OHIO - 9.7%
Clermont County, Ohio Hospital Facilities Revenue Series B,
weekly demand. . . . . . . . . . . . . . . . . . . . . . . . . . . 980 3.250(2) 09/01/21 980
Cuyahoga County, Ohio Hospital Revenue (pre-refunded 01/15/99)(b). . 4,735 6.875 01/15/19 4,885
Franklin County, Ohio Hospital Revenue, weekly demand. . . . . . . . 9,100 3.350(2) 06/01/16 9,100
</TABLE>
12 Annual Rerport
<PAGE>
SSgA
TAX FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
AUGUST 31, 1998
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY* (000)
-------------------------------------------------------
<S> <C> <C> <C> <C>
Ohio, State of, Environmental Improvement Revenue, weekly demand . . $ 4,200 3.150%(2) 05/01/11 $ 4,200
Ohio, State of, Major New State Infrastructure Revenue . . . . . . . 3,775 4.250 12/15/98 3,781
Toledo, Ohio Sewer System Revenue Series B
(pre-refunded 11/15/98)(a)(b). . . . . . . . . . . . . . . . . . . 1,225 7.750 11/15/17 1,260
University of Toledo, Ohio General Revenue Series A (a). . . . . . . 1,000 5.000 06/01/99 1,010
----------
25,216
----------
OKLAHOMA - 1.9%
Muskogee, Oklahoma Industrial Pollution Control Revenue
Series A, weekly demand. . . . . . . . . . . . . . . . . . . . . . 5,000 3.300(2) 01/01/25 5,000
----------
PENNSYLVANIA - 4.3%
Dauphin County, Pennsylvania General Obligation Series B,
weekly demand. . . . . . . . . . . . . . . . . . . . . . . . . . . 7,000 3.350(2) 10/01/27 7,000
Geisinger Authority, Pennsylvania Health Systems Revenue Series B,
daily demand . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,200 3.350(1) 08/15/28 3,200
Pennsylvania Commonwealth, Turnpike Revenue Series D,
(pre-refunded 12/01/98)(a)(b). . . . . . . . . . . . . . . . . . . 1,000 7.100 12/01/01 1,028
----------
11,228
----------
TENNESSEE - 1.7%
Knox County, Tennessee Health Education & Housing Facilities
Board Hospital Facilities Revenue Series B, weekly demand. . . . . 2,900 3.250(2) 09/01/14 2,900
Metropolitan Government Nashville and Davidson County,
Tennessee Water and Sewer Revenue Series B (a) . . . . . . . . . . 1,420 3.600 01/01/99 1,420
----------
4,320
----------
TEXAS - 7.6%
Dallas-Fort Worth, Texas Regional Airport Revenue Series SGA 49,
daily demand (a) . . . . . . . . . . . . . . . . . . . . . . . . . 855 3.450(1) 11/01/23 855
Dallas, Texas General Obligation . . . . . . . . . . . . . . . . . . 3,000 5.375 02/15/99 3,024
Harris County, Texas Development Corporation
Pollution Control Revenue, daily demand. . . . . . . . . . . . . . 2,100 3.250(1) 03/01/24 2,100
Houston, Texas Tax and Revenue Anticipation Notes. . . . . . . . . . 8,000 4.250 06/30/99 8,045
Lower Neches Valley, Texas Authority Revenue, semiannual demand. . . 1,000 3.450(4) 02/15/17 1,000
</TABLE>
Annual Report 13
<PAGE>
SSgA
TAX FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
AUGUST 31, 1998
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY* (000)
-------------------------------------------------------
<S> <C> <C> <C> <C>
Panhandle Plains, Texas Higher Education Authority Revenue
Series A, weekly demand. . . . . . . . . . . . . . . . . . . . . . $ 1,500 3.300%(2) 06/01/21 $ 1,500
Texas A&M University Revenue Series SGA 21, weekly demand (a). . . . 3,330 3.450(2) 05/15/16 3,330
----------
19,854
----------
UTAH - 1.3%
Intermountain Power Agency, Utah Power Supply Revenue Series E,
semi-annual demand (a) . . . . . . . . . . . . . . . . . . . . . . 2,000 3.750(4) 07/01/14 2,000
Salt Lake City, Utah Revenue Class A, weekly demand. . . . . . . . . 1,400 3.250(2) 01/01/20 1,400
----------
3,400
----------
VIRGINIA - 0.9%
Metropolitan Washington D.C. Airports Authority, Virginia General
Airport Revenue Series C, weekly demand. . . . . . . . . . . . . . 700 3.250(2) 10/01/27 700
Roanoke, Virginia Industrial Development Authority Hospital Revenue
Series B, daily demand . . . . . . . . . . . . . . . . . . . . . . 1,600 3.350(1) 07/01/19 1,600
----------
2,300
----------
WASHINGTON - 0.6%
King County, Washington General Obligation Series B
(pre-refunded 12/01/98)(b) . . . . . . . . . . . . . . . . . . . . 1,500 7.250 12/01/03 1,514
----------
WEST VIRGINIA - 1.4%
West Virginia, State of, General Obligation. . . . . . . . . . . . . 1,600 4.750 11/01/98 1,603
West Virginia, State of, Water Development Authority Water
Development Revenue (pre-refunded 11/01/98)(b) . . . . . . . . . . 2,015 8.125 11/01/29 2,070
----------
3,673
----------
WISCONSIN - 4.6%
University of Wisconsin Hospitals & Clinics Authority Revenue,
weekly demand (a). . . . . . . . . . . . . . . . . . . . . . . . . 4,400 3.250(2) 04/01/26 4,400
Wisconsin, State of, Revenue Notes . . . . . . . . . . . . . . . . . 7,500 4.500 06/15/99 7,555
----------
11,955
----------
</TABLE>
14 Annual Report
<PAGE>
SSgA
TAX FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
AUGUST 31, 1998
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY* (000)
-------------------------------------------------------
<S> <C> <C> <C> <C>
WYOMING - 3.0%
Platte County, Wyoming Pollution Control Revenue Series B,
daily demand . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,800 3.850%(1) 07/01/14 7,800
----------
TOTAL INVESTMENTS (amortized cost $259,248)(c) - 99.7% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 259,248
OTHER ASSETS AND LIABILITIES, NET - 0.3% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 836
----------
NET ASSETS - 100.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 260,084
----------
----------
</TABLE>
(a) Bond is insured by AMBAC, FGIC, or MBIA.
(b) Pre-refunded: These bonds are collateralized by U.S. Government
Obligations, 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) Monthly
(4) Semiannual
The accompanying notes are an integral part of the financial statements.
Annual Report 15
<PAGE>
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TAX FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
AUGUST 31, 1998
QUALITY RATINGS AS A % OF MARKET VALUE (Unaudited)
VMIG1, SP-1 or equivalent ++ . . . . . . . 100%
ECONOMIC SECTOR EMPHASIS AS A % OF MARKET VALUE (Unaudited)
<S> <C>
General Obligation . . . . . . . . . . . . 23%
Healthcare Revenue . . . . . . . . . . . . 22
Education Revenue. . . . . . . . . . . . . 12
Electricity & Power Revenue. . . . . . . . 12
Pollution Control Revenue. . . . . . . . . 8
Housing Revenue. . . . . . . . . . . . . . 7
Bond Bank. . . . . . . . . . . . . . . . . 6
Pre-refunded . . . . . . . . . . . . . . . 4
Utility Revenue. . . . . . . . . . . . . . 2
Public Agency Revenue. . . . . . . . . . . 1
Student Loan Revenue . . . . . . . . . . . 1
Miscellaneous. . . . . . . . . . . . . . . 2
-----
100%
-----
-----
</TABLE>
++ 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 LIABLILITIES
AUGUST 31, 1998
AMOUNTS IN
THOUSANDS (EXCEPT
PER SHARE AMOUNT)
ASSETS
<S> <C> <C>
Investments at amortized cost which approximates market (Note 2) . . . . . . . . . . . . . . . . . . . . $ 259,248
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 245
Interest receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,395
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
--------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260,901
LIABILITIES
Payables:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 614
Accrued fees to affiliates and trustees (Note 4) . . . . . . . . . . . . . . . . . . 173
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
--------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 817
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 260,084
--------------
--------------
NET ASSETS CONSIST OF:
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (28)
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 259,852
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 260,084
--------------
--------------
NET ASSET VALUE, offering and redemption price per share:
($260,083,799 divided by 260,116,407 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>
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TAX FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED AUGUST 31, 1998
AMOUNTS
IN THOUSANDS
<S> <C> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,044
EXPENSES (Notes 2 and 4):
Advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 560
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Amortization of deferred organization expenses . . . . . . . . . . . . . . . . . . 10
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
--------------
Total Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,244
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,800
--------------
REALIZED GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
--------------
Net increase in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,808
--------------
--------------
</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
1998 1997
----------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,800 $ 3,548
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . 8 (19)
------------- ---------------
Net increase in net assets resulting from operations. . . . . . . . . . . . . . 6,808 3,529
------------- ---------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,800) (3,548)
------------- ---------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from
Fund share transactions (Note 5). . . . . . . . . . . . . . . . . . . . . . . . 96,574 118,460
------------- ---------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . 96,582 118,441
NET ASSETS
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163,502 45,061
------------- ---------------
End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 260,084 $ 163,502
------------- ---------------
------------- ---------------
</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
period and other performance information derived from the financial statements.
Year Ended August 31,
-------------------------------------------------------
1998 1997 1996 1995*
----------- -------------- ------------- -----------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . . $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . .0304 .0295 .0302 .0251
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . (.0304) (.0295) (.0302) (.0251)
----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . . $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . . 3.08 2.99 3.07 2.54
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . . . . . . . . . . . 260,084 163,502 45,061 42,607
Ratios to average net assets(%)(b):
Operating expenses, net. . . . . . . . . . . . . . . . . . . . . .56 .58 .57 .59
Operating expenses, gross. . . . . . . . . . . . . . . . . . . . .56 .58 .57 .60
Net investment income. . . . . . . . . . . . . . . . . . . . . . 3.04 2.98 3.01 3.40
</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, 1998
1. ORGANIZATION
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 21 investment portfolios which are in operation as
of August 31, 1998. 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
which 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 fund 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, 1998, the Fund had a net tax basis capital loss carryovers of
$5,580, $10,856 and $11,279, which may be applied against any realized net
taxable gains in each succeeding year or until their expiration dates of
August 31, 2004, 2005 and 2006, respectively, whichever occurs first.
Annual Report 21
<PAGE>
SSgA
TAX FREE MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS CONTINUED
AUGUST 31, 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, 1998, purchases,
sales and maturities of tax-exempt obligations were $1,424,375,662,
$1,168,233,692, and $158,505,000, 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 Company's
Distributor on behalf of the Fund (up to a maximum of 10%, for the period
September 1, 1997 to December 31, 1997, and up to a maximum of 5%, for the
period January 1, 1998 to August 31, 1998 of the asset-based fee determined
in (i)); (iii) out-of-pocket expenses; and (iv) start-up costs for new
funds.
22 Annual Report
<PAGE>
SSgA
TAX FREE MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS CONTINUED
AUGUST 31, 1998
On August 10, 1998, Frank Russell Company entered into an agreement with
The Northwestern Mutual Life Insurance Co., an insurance organization,
pursuant to which Northwestern Mutual Life will acquire all of the
outstanding common stock of Frank Russell Company.
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"), the
Adviser's Metropolitan Division of Commercial Banking ("Commercial
Banking") and State Street Solutions ("Solutions")(collectively the
"Agents"), as well as other non-related party service providers. For these
services, the Fund pays .025%, .175%, .175%, .050%, and .175% to the
Adviser, SSBSI, RIS, Commercial Banking, and Solutions, 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, 1998, the Fund was charged
shareholder servicing expenses of $55,981 and $27,754, by the Adviser and
Commercial Banking, respectively. The Fund did not incur any expenses from
SSBSI, RIS, or Solutions 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, 1998.
Annual Report 23
<PAGE>
SSgA
TAX FREE MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS CONTINUED
AUGUST 31, 1998
BOARD OF TRUSTEES: The Investment Company pays each Trustee not affiliated
with the Investment Company a retainer of $48,000 annually, $1,500 for each
board meeting attended, an additional $1,500 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, 1998 WERE
AS FOLLOWS:
<TABLE>
<S> <C>
Advisory fees $ 103,015
Administration fees 6,807
Custodian fees 14,293
Distribution fees 28,386
Shareholder servicing fees 8,166
Transfer agent fees 11,668
Trustees' fees 868
----------
$ 173,203
----------
----------
</TABLE>
Beneficial Interest: As of August 31, 1998, three shareholders (two of
which were also affiliates of the Investment Company) were record owners of
approximately 52%, 20% and 15%, respectively, of the total outstanding
shares of the Fund.
5. Fund Share Transactions (On a Constant Dollar Basis:)
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS)
FOR THE YEARS ENDED AUGUST 31,
-----------------------------------
1998 1997
------------- --------------
<S> <C> <C>
Proceeds from shares sold $ 963,989 $ 607,205
Proceeds from reinvestment
of distributions 3,846 1,735
Payments for shares redeemed (871,261) (490,480)
--------- -----------
Total net increase (decrease) $ 96,574 $ 118,460
--------- -----------
--------- -----------
</TABLE>
24 Annual Report
<PAGE>
SSgA TAX FREE MONEY MARKET FUND
One International Place, 27th 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
Mark E. Swanson, Assistant Secretary and Principal Accounting Officer
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.
One International Place, 27th 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
PricewaterhouseCoopers LLP
One Post Office Square
Boston, Massachusetts 02109
Annual Report 25
<PAGE>
SSgA-Registered Trademark- FUNDS
US GOVERNMENT MONEY MARKET FUND
Annual Report
August 31, 1998
Table of Contents
Page
Chairman's Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion and Analysis . . . . . . . . . . . . . . . 6
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . 15
Fund Management and Service Providers . . . . . . . . . . . . . . . . . . 19
"SSgA-Registered Trademark- " IS A REGISTERED TRADEMARK 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, 1998. Over the past year, the Funds have grown to include
twenty-one 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 SSgA US Government Money Market Fund. I hope
you find this information a useful tool as you review your overall investment
strategy.
The SSgA Funds have also opened four additional funds in fiscal 1998. The
investment objectives for these four new funds are as follows:
The SSgA Special Equity Fund seeks to maximize total return through investment
in mid- and small capitalization US equity securities. This Fund was opened as
an alternative investment strategy for the SSgA Small Cap Fund that closed to
new investors on August 31, 1998.
The SSgA International Growth Opportunities Fund seeks to provide long-term
capital growth by investing primarily in securities of foreign issuers.
The SSgA High Yield Bond Fund seeks to maximize total return by investing
primarily in non investment-grade bonds, including, but not limited to, those
represented by the Lehman Brothers High Yield Bond Index.
The SSgA Real Estate Equity Fund seeks to provide income and capital growth by
investing primarily in publicly traded securities of real estate companies.
During the past fiscal year, the SSgA Funds were proud to announce that the SSgA
S&P 500 Index Fund and the SSgA Yield Plus Fund each achieved five years of
operational history. We are proud of our long term record and look forward to
having additional funds reach their five year anniversary.
SSgA intends to proceed with the evolution of new products and services while
committing to your investment needs. We will continue to develop our
professional expertise by focusing on the expansion of both our global resources
and our diversified product lines.
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. As a result, the portfolios we
manage benefit from the knowledge of the entire team.
Ms. Lisa Hatfield, Principal, 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]
<TABLE>
<CAPTION>
GROWTH OF A $10,000 INVESTMENT
DATES US GOVERNMENT MONEY SALOMON BROTHERS 3-MONTH
MARKET FUND TREASURY-BILL INDEX
<S> <C> <C>
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
1998 $14,094 $14,109
YEARLY PERIODS ENDED AUGUST 31
</TABLE>
SSgA US GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- -------------------- ----------- --------
<S> <C> <C>
1 Year $ 10,533 5.33%
5 Years $ 12,696 4.89%+
Inception $ 14,094 4.68%+
</TABLE>
SALOMON BROTHERS 3-MONTH TREASURY BILL INDEX
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- -------------------- ----------- --------
<S> <C> <C>
1 Year $ 10,522 5.22%
5 Years $ 12,757 4.99%+
Inception $ 14,109 4.70%+
</TABLE>
SEE RELATED NOTES ON THE FOLLOWING PAGE.
PERFORMANCE REVIEW
The Fund had a one-year total return of 5.33% for the fiscal year ended August
31, 1998. This compares favorably to the return of 5.22% 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.
Effects of the Asian crisis, which began in October 1997, had many economists
predicting a global slowdown in growth and increased deflationary pressures.
Viewed as a "safe haven", yields on US Treasury securities flattened, with the
two-year, 10-year and 30-year falling 13, 36, and 48 basis points, respectively,
during the fourth quarter. Although the Federal Reserve Open Market Committee
(FOMC) maintained a "tightening bias" throughout the second half of 1997,
turmoil in the Asian region reduced the need to raise the Federal Funds rate in
response to
6 Annual Report
<PAGE>
SSgA US GOVERNMENT MONEY MARKET FUND
PORTFOLIO MANAGEMENT DISUSSION AND ANALYSIS
strong domestic growth. Market participants, as well as the Federal Reserve,
were forced to take a wait-and-see approach on the economic situation. As year
end approached, signs were already appearing that some slowdown in growth would
reach American soil.
In the first quarter of 1998, GDP advanced at an annualized rate of 5.4% while
the unemployment rate stood at 4.6%. Domestic economic releases confirmed strong
growth and a non-inflationary environment. Although the domestic backdrop showed
signs of an overheating economy, rising uncertainty of the Asian epidemic served
to keep the Fed on hold. Chairman Greenspan confirmed this dichotomy in
testimonies before Congress, praising the economy's performance but warned
against impending fallout from Asia. These comments made by the Federal Reserve
set the markets in a trading range which has persisted throughout the rest of
the fiscal year. For the year, one- and 30-year Treasuries fell 29 and 115 basis
points, respectively. During the second quarter of 1998, impact from Asian trade
drag came full force as GDP advanced only 1.6%. Underlying fundamentals for
domestic growth persisted. High levels of consumer confidence and strong
consumer and capital spending, combined with unemployment of 4.3% inspired a
tightening bias.
MARKET AND PORTFOLIO HIGHLIGHTS
In the last year, the SSgA US Government 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's net assets have trended higher, increasing by 4.5% over the past year,
with new cash flows invested in a combination of fixed and floating rate
securities. During this period, the Manager felt the Fed was on hold and that
the flatness of the yield curve would persist, making floating rate securities
more attractive. The Fund's investment strategy concentrated primarily on
indices such as one- and three-month LIBOR (London Interbank Offering Rate),
with a small allocation based on Fed Funds and Prime rates. The average maturity
of the Fund ranged from 49 to 54 days over the last year, as the Fund
selectively purchased one-year securities to extend its average days to
maturity.
----------------------------------
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:
In our opinion, the accompanying statement of assets and liabilities and
statement of net assets, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of SSgA US Government Money Market Fund (the
"Fund") at August 31, 1998, the results of its operations for the fiscal year
then ended and 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. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at August 31, 1998 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
Boston, Massachusetts
October 8, 1998
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
US GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
August 31, 1998
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY (000)
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
UNITED STATES GOVERNMENT AGENCIES - 66.0%
Federal Farm Credit Bank . . . . . . . . . . . . . . . . . . . . . $ 25,000 5.650% 10/01/98 $ 24,997
Federal Home Loan Bank . . . . . . . . . . . . . . . . . . . . . . 20,000 5.690 09/24/98 20,002
Federal Home Loan Bank . . . . . . . . . . . . . . . . . . . . . . 3,600 5.755 12/23/98 3,599
Federal Home Loan Bank . . . . . . . . . . . . . . . . . . . . . . 1,000 5.735 12/23/98 1,000
Federal Home Loan Bank . . . . . . . . . . . . . . . . . . . . . . 25,000 5.570 08/03/99 24,987
Federal Home Loan Mortgage Corp. (a) . . . . . . . . . . . . . . . 50,000 5.448 01/26/99 49,986
Federal Home Loan Mortgage Corp. (a) . . . . . . . . . . . . . . . 75,000 5.398 08/27/99 74,895
Federal Home Loan Mortgage Corp. Discount Notes. . . . . . . . . . 25,000 5.440 09/21/98 24,924
Federal Home Loan Mortgage Corp. Discount Notes. . . . . . . . . . 40,000 5.420 10/08/98 39,777
Federal Home Loan Mortgage Corp. Discount Notes. . . . . . . . . . 75,290 5.410 10/09/98 74,860
Federal National Mortgage Association. . . . . . . . . . . . . . . 15,000 6.600 06/24/99 15,107
Federal National Mortgage Association Discount Notes . . . . . . . 50,000 5.450 09/18/98 49,871
Federal National Mortgage Association Discount Notes . . . . . . . 15,000 5.410 10/08/98 14,917
Federal National Mortgage Association (MTN). . . . . . . . . . . . 15,000 5.400 02/02/99 14,993
Federal National Mortgage Association (MTN). . . . . . . . . . . . 35,000 5.650 05/26/99 34,992
Federal National Mortgage Association (MTN) (a). . . . . . . . . . 50,000 5.448 06/15/99 49,965
Federal National Mortgage Association (MTN) (a). . . . . . . . . . 55,000 5.458 07/30/99 54,961
Student Loan Marketing Association (MTN) (a) . . . . . . . . . . . 5,000 5.790 09/16/98 5,000
Student Loan Marketing Association (MTN) . . . . . . . . . . . . . 20,000 5.740 12/17/98 19,996
Student Loan Marketing Association (MTN) . . . . . . . . . . . . . 25,000 5.400 02/10/99 24,988
----------
TOTAL UNITED STATES GOVERNMENT AGENCIES (cost $623,817). . . . . . . . . . . . . . . . . . . . . . . . . . . . 623,817
----------
TOTAL INVESTMENTS (amortized cost $623,817) - 66.0% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 623,817
----------
REPURCHASE AGREEMENTS - 34.2%
Agreement with Bear Stearns & Co., Inc. of $48,783
acquired August 31, 1998 at 5.960% to be repurchased at $48,791
on September 1, 1998, collateralized by:
$11,500 United States Treasury Bills
due 09/17/98 valued at $11,742
$12,605 United States Treasury Bills
due 01/07/99 valued at $12,388
$18,477 United States Treasury Bills
due 02/25/99 valued at $18,039
$7,740 United States Treasury Note
5.250% due 08/15/03 valued at $7,867. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,783
</TABLE>
Annual Report 9
<PAGE>
SSgA
US GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
VALUE
(000)
----------
<S> <C>
Agreement with Lehman Brothers Inc. of $75,000
acquired August 31, 1998 at 5.850% to be repurchased at $75,012
on September 1, 1998, collateralized by:
$73,900 United States Treasury Notes
5.625% due 05/15/01 valued at $76,506 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 75,000
Agreement with Swiss Bancorp of $200,000
acquired August 31, 1998 at 5.830% to be repurchased at $200,032
on September 1, 1998, collateralized by:
$150,000 United States Treasury Notes
6.000% due 08/15/99 valued at $151,500
$50,122 United States Treasury Notes
7.750% due 11/30/99 valued at $52,503 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000
----------
TOTAL REPURCHASE AGREEMENTS (identified cost $323,783) . . . . . . . . . . . . . . . . . . . . . . . 323,783
----------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS
(cost $947,600)(b) - 100.2%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 947,600
OTHER ASSETS AND LIABILITIES, NET - (0.2%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,703)
----------
NET ASSETS - 100.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 945,897
----------
----------
</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>
STATEMENTS OF ASSETS AND LIABILITIES
August 31, 1998
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at amortized cost which approximates market (Note 2) . . . . . . . . . . . . . . . . . . . . $ 623,817
Repurchase agreements (identified cost $323,783) (Note 2). . . . . . . . . . . . . . . . . . . . . . . . 323,783
Interest receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,498
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
--------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 951,101
LIABILITIES
Payables:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,518
Accrued fees to affiliates and trustees (Note 4) . . . . . . . . . . . . . . . . . 643
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
--------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,204
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 945,897
--------------
--------------
NET ASSETS CONSIST OF:
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 946
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 944,924
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 945,897
--------------
--------------
NET ASSET VALUE, offering and redemption price per share:
($945,896,795 divided by 945,869,610 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, 1998
Amounts
in thousands
<S> <C> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 48,531
EXPENSES (Notes 2 and 4):
Advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,156
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 309
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 455
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
--------------
Total Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,662
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,869
--------------
REALIZED GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
--------------
Net increase in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . . . . . . . $ 44,894
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 Annual Report
<PAGE>
SSgA
US GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
for the Fiscal Years Ended August 31,
Amounts in thousands
1998 1997
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 44,869 $ 42,503
Net realized gain (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 41
------------ ------------
Net increase in net assets resulting from operations. . . . . . . . . . . . . . 44,894 42,544
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (44,869) (42,503)
------------ ------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from
Fund share transactions (Note 5). . . . . . . . . . . . . . . . . . . . . . . . 41,389 221,232
------------ ------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS . . . . . . . . . . . . . . . . . . . . 41,414 221,273
NET ASSETS
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 904,483 683,210
------------ ------------
End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 945,897 $ 904,483
------------ ------------
------------ ------------
</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
period and other performance information derived from the financial statements.
YEAR ENDED AUGUST 31,
-----------------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
------------ ----------- ----------- ----------- ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . .0500 .0500 .0515 .0528 .0324
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . (.0500) (.0500) (.0515) (.0528) (.0324)
------------ ----------- ----------- ----------- ------------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
------------ ----------- ----------- ----------- ------------
------------ ----------- ----------- ----------- ------------
TOTAL RETURN (%) . . . . . . . . . . . . . . . . . . . 5.33 5.19 5.27 5.38 3.30
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . . . . . 945,897 904,483 683,210 490,138 251,165
Ratios to average net assets (%):
Operating expenses, net . . . . . . . . . . . . . .42 .44 .40 .42 .38
Operating expenses, gross . . . . . . . . . . . . .42 .44 .40 .42 .39
Net investment income . . . . . . . . . . . . . . 5.20 5.08 5.12 5.37 3.27
</TABLE>
14 Annual Report
<PAGE>
SSgA
US GOVERNMENT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1998
1. ORGANIZATION
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 21 investment portfolios which are in operation as
of August 31, 1998. 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 fund 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, 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.
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, 1998, purchases,
sales, and maturities of US Government and Agency obligations, excluding
repurchase agreements aggregated to $2,096,111,946, $231,395,084 and
$1,919,715,000, 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, 1998
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%, for the period September 1, 1997 to December 31, 1997,
and up to a maximum of 5%, for the period January 1, 1998 to August 31,
1998 of the asset-based fee determined in (i)); (iii) out-of-pocket
expenses; and (iv) start-up costs for new funds.
On August 10, 1998, Frank Russell Company entered into an agreement with
The Northwestern Mutual Life Insurance Co., an insurance organization,
pursuant to which Northwestern Mutual Life will acquire all of the
outstanding common stock of Frank Russell Company.
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 charged 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"), the
Adviser's Metropolitan Division of Commercial Banking ("Commercial
Banking") and State Street Solutions ("Solutions") (collectively the
"Agents"), as well as other non-related party service providers. For these
services, the Fund pays .025%, .175%, .175%, .175%, and .175% to the
Adviser, SSBSI, RIS, Commercial Banking, and Solutions, 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, 1998, the Fund was charged
shareholder servicing expenses of $179,094, $14,549, and $192,714, by the
Adviser, RIS and Commercial Banking, respectively. The Fund did not incur
any expenses from SSBSI or Solutions 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
Annual Report 17
<PAGE>
SSgA
US GOVERNMENT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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, 1998.
BOARD OF TRUSTEES: The Investment Company pays each Trustee not affiliated
with the Investment Company a retainer of $48,000 annually, $1,500 for each
board meeting attended, an additional $1,500 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, 1998 WERE
AS FOLLOWS:
<TABLE>
<S> <C>
Advisory fees $ 438,240
Administration fees 28,777
Custodian fees 49,395
Distribution fees 5,073
Shareholder servicing fees 109,927
Transfer agent fees 8,073
Trustees' fees 3,807
---------
$ 643,292
---------
---------
</TABLE>
BENEFICIAL INTEREST: As of August 31, 1998, two shareholders (one of which
was also an affiliate of the Investment Company) were record owners of
approximately 27% and 12%, respectively, of the total outstanding shares of
the Fund.
5. FUND SHARE TRANSACTIONS (ON A CONSTANT DOLLAR BASIS):
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS)
FOR THE YEARS ENDED AUGUST 31,
------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Proceeds from shares sold $ 8,260,765 $ 7,924,123
Proceeds from reinvestment
of distributions 32,317 26,342
Payments for shares redeemed (8,251,693) (7,729,233)
------------ ------------
Total net increase (decrease) $ 41,389 $ 221,232
------------ ------------
------------ ------------
</TABLE>
18 Annual Report
<PAGE>
SSgA US GOVERNMENT MONEY MARKET FUND
One International Place, 27th 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
Mark E. Swanson, Assistant Secretary and Principal Accounting Officer
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.
One International Place, 27th 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
PricewaterhouseCoopers LLP
One Post Office Square
Boston, Massachusetts 02109
Annual Report 19
<PAGE>
SSgA-Registered Trademark- FUNDS
GROWTH AND INCOME FUND
Annual Report
August 31, 1998
Table of Contents
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion and Analysis . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . 15
Tax Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Fund Management and Service Providers. . . . . . . . . . . . . . . . . . 22
"SSgA-Registered Trademark- " IS A REGISTERED TRADEMARK 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, 1998. Over the past year, the Funds have grown to include
twenty-one 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 SSgA Growth and Income Fund. I hope you find
this information a useful tool as you review your overall investment strategy.
The SSgA Funds have also opened four additional funds in fiscal 1998. The
investment objectives for these four new funds are as follows:
The SSgA Special Equity Fund seeks to maximize total return through investment
in mid- and small capitalization US equity securities. This Fund was opened as
an alternative investment strategy for the SSgA Small Cap Fund that closed to
new investors on August 31, 1998.
The SSgA International Growth Opportunities Fund seeks to provide long-term
capital growth by investing primarily in securities of foreign issuers.
The SSgA High Yield Bond Fund seeks to maximize total return by investing
primarily in non investment-grade bonds, including, but not limited to, those
represented by the Lehman Brothers High Yield Bond Index.
The SSgA Real Estate Equity Fund seeks to provide income and capital growth by
investing primarily in publicly traded securities of real estate companies.
During the past fiscal year, the SSgA Funds were proud to announce that the SSgA
S&P 500 Index Fund and the SSgA Yield Plus Fund each achieved five years of
operational history. We are proud of our long term record and look forward to
having additional funds reach their five year anniversary.
SSgA intends to proceed with the evolution of new products and services while
committing to your investment needs. We will continue to develop our
professional expertise by focusing on the expansion of both our global resources
and our diversified product lines.
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. As a result, the portfolios we
manage benefit from the knowledge of the entire team.
Mr. L. Emerson Tuttle, CFA, Principal, is the portfolio manager primarily
responsible for investment decisions regarding the SSgA Growth and Income Fund,
and also provides investment management services for employee benefit plans and
endowments. Mr. Tuttle joined State Street in 1981, and has 19 years of
investment experience. From 1987 to 1989, Mr. Tuttle was portfolio manager of
Private Client Services at State Street Bank in Zurich, Switzerland. Mr. Tuttle
is a magna cum laude from Suffolk Law School. He is a member of the
Massachusetts Bar and the Boston Security Analysts Society. There are four
other portfolio managers working with Mr. Tuttle.
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 $1.2 billion to $300 billion. Stock selection focuses
on individual companies and the strength of their fundamental business
characteristics.
[GRAPH]
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
DATES GROWTH AND INCOME FUND S&P 500-Registered Trademark- INDEX**
<S> <C> <C>
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
1998 $21,818 $23,122
</TABLE>
YEARLY PERIODS ENDED AUGUST 31
SSgA GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ------------ ------------ ------------
<S> <C> <C>
1 Year $ 11,093 10.93%
5 Years $ 21,818 16.89%
Inception $ 21,818 16.89%+
</TABLE>
STANDARD & POOR'S-Registered Trademark- 500 COMPOSITE
STOCK PRICE INDEX
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ------------ ------------ ------------
<S> <C> <C>
1 Year $ 10,809 8.09%
5 Years $ 23,122 18.25%
Inception $ 23,122 18.25%+
</TABLE>
SEE RELATED NOTES ON THE FOLLOWING PAGE.
PERFORMANCE REVIEW
For the fiscal year ended August 31, 1998, the SSgA Growth and Income Fund's
total return was 10.9%, compared to 8.1% for the S&P 500 Index. During the first
eight months of calendar 1998, the Fund gained 0.5%, versus a loss of 0.4% for
the Index. Fund performance is net of operating expenses, whereas Index results
do not include expenses of any kind.
The Fund's results continued to benefit from overweight positions in health care
and financial service companies, and from a shift in focus over the past several
months away from volatile technology stocks toward the communications sector of
the market. As of August 31, 1998, the Fund's allocation to health care and
financial services was 14.8% and 20.5%, respectively. The Fund's exposure to
foreign securities, which have continued to lag the US market, has been reduced
significantly over
6 Annual Report
<PAGE>
SSgA GROWTH AND INCOME FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
the past year, from 8.2% to only 1.4% of Fund assets as of the fiscal year-end.
MARKET AND PORTFOLIO HIGHLIGHTS
Despite the difficulties experienced by many Pacific Rim economies last fall and
winter, the US stock market rose strongly for most of the fiscal year. At its
peak on July 17, the S&P 500 Index was up 22.3% in 1998 and stood 31.9% higher
compared to August 31, 1997. This rise reflected high levels of consumer
confidence, falling interest rates, and continued benign levels of inflation at
both the producer and consumer levels. During this time period, the Fund
benefited from its exposure to large, well recognized companies with brand name
franchises, such as Microsoft Corp. and Wal-Mart Stores, Inc., as both US
investors and foreign investors in the US market focused their attention on this
segment. In the first half of 1998 the ten largest stocks in the S&P 500 Index
returned an average of 67%; eight of these issues were owned by the Fund,
representing 20.0% of Fund assets.
However, as the economic crises in Japan and Russia have deepened, the US market
has corrected broadly and severely for the first time since 1990, with the S&P
500 Index falling over 19% from its July 17 high. Fund performance has tracked
that of the market during the correction, and as a result, for the fiscal year
the Fund outperformed the S&P 500 Index by 2.8% after expenses.
The Fund is well diversified, with exposure to all 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. Improved
control of portfolio risk has been achieved by diversification across a larger
number of individual stock positions (50 as of August 31, 1998, versus 36 on
August 31, 1997).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
(AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31, 1998
<S> <C>
Philip Morris Cos., Inc. 4.3%
Mobil Corp. 4.2
Duke Power Co. 4.1
Alltel Corp. 3.9
Microsoft Corp. 3.8
General Electric Co. 3.6
Wal-Mart Stores, Inc. 3.4
Bristol-Myers Squibb Co. 3.2
Air Products & Chemicals, Inc. 3.1
Cisco Systems, Inc. 3.0
</TABLE>
- --------------------------------------------------------------------------------
-------------------
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:
In our opinion, the accompanying statement of assets and liabilities and
statement of net assets, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of SSgA Growth and Income Fund (the
"Fund") at August 31, 1998, the results of its operations for the fiscal year
then ended and 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 September 1, 1993
(commencement of operations) to August 31, 1994, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at August 31, 1998 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
Boston, Massachusetts
October 8, 1998
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
GROWTH AND INCOME FUND
STATEMENT OF NET ASSETS
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
COMMON STOCKS - 99.4%
BASIC INDUSTRIES - 6.1%
Air Products & Chemicals, Inc. 112,000 $ 3,423
du Pont (E.I.) de Nemours & Co. 10,000 577
Illinois Tool Works, Inc. 59,000 2,858
----------
6,858
----------
CAPITAL GOODS - 3.6%
General Electric Co. 50,000 4,000
----------
4,000
----------
CONSUMER BASICS - 22.0%
Abbott Laboratories 32,000 1,232
American Home Products Corp. 40,000 2,005
Bristol-Myers Squibb Co. 37,000 3,621
Gillette Co. 30,000 1,234
Lilly (Eli) & Co. 17,000 1,114
Merck & Co., Inc. 25,000 2,898
Panamerican Beverages, Inc.
Class A 65,000 1,036
Pfizer, Inc. 25,000 2,325
Philip Morris Cos., Inc. 115,000 4,780
Procter & Gamble Co. 13,000 995
Warner-Lambert Co. 50,000 3,262
----------
24,502
----------
CONSUMER NON-DURABLES - 8.6%
Dayton Hudson Corp. 38,000 1,368
Home Depot, Inc. (The) 56,000 2,156
Staples, Inc. (a) 82,500 2,238
Wal-Mart Stores, Inc. 65,000 3,819
----------
9,581
----------
CONSUMER SERVICES - 4.0%
Carnival Corp. Class A 83,000 2,397
Disney (Walt) Co. 75,000 2,057
----------
4,454
----------
ENERGY - 6.8%
Anadarko Petroleum Corp. 42,000 1,208
Baker Hughes, Inc. 65,300 1,192
Mobil Corp. 68,000 4,701
Royal Dutch Petroleum Co. 12,000 476
----------
7,577
----------
FINANCE - 16.8%
American Express Co. 25,000 1,950
American International
Group, Inc. 29,250 2,261
Associates First Capital Corp.
Class A 45,221 2,674
First Union Corp. 55,000 2,668
Franklin Resources, Inc. 58,000 1,871
Northern Trust Corp. 43,100 2,403
Norwest Corp. 105,000 3,123
Price (T. Rowe) &
Associates, Inc. 60,000 1,822
----------
18,772
----------
GENERAL BUSINESS - 7.1%
Automatic Data Processing, Inc. 45,000 2,869
First Data Corp. 15,500 321
MediaOne Group, Inc. (a) 46,500 1,907
Time Warner, Inc. 35,000 2,812
----------
7,909
----------
TECHNOLOGY - 12.1%
Applied Materials, Inc. (a) 43,000 1,056
Cisco Systems, Inc. (a) 40,500 3,316
EMC Corp. (a) 38,000 1,717
Intel Corp. 15,000 1,068
Linear Technology Corp. 19,300 907
Lucent Technologies, Inc. 18,000 1,276
Microsoft Corp. (a) 44,000 4,221
----------
13,561
----------
</TABLE>
Annual Report 9
<PAGE>
SSgA
GROWTH AND INCOME FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
UTILITIES - 12.3%
Alltel Corp. 97,000 $ 4,377
AT&T Corp. 19,000 952
Century Telephone Enterprises, Inc. 10,000 454
Duke Energy Corp. 73,000 4,553
MCI WorldCom, Inc. (a) 50,000 2,044
TECO Energy, Inc. 52,500 1,395
----------
13,775
----------
TOTAL COMMON STOCKS
(cost $98,991) 110,989
----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
<S> <C> <C>
SHORT-TERM INVESTMENTS - 0.8%
AIM Short Term Investment
Prime Portfolio (b) $ 430 $ 430
Federated Investors Prime
Obligations Fund (b) 400 400
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $830) 830
----------
TOTAL INVESTMENTS
(identified cost $99,821)(c) - 100.2% 111,819
OTHER ASSETS AND LIABILITIES,
NET - (0.2%) (193)
----------
NET ASSETS - 100.0% $ 111,626
----------
----------
</TABLE>
(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.
10 Annual Report
<PAGE>
SSgA
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED
August 31, 1998
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $99,821)(Note 2). . . . . . . . . . . . . . . . . . . . . . . . . $ 111,819
Receivables:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289
--------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112,254
LIABILITIES
Payables:
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 426
Accrued fees to affiliates and trustees (Note 4) . . . . . . . . . . . . . . . . . 180
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
--------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 628
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 111,626
--------------
--------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 166
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,225
Unrealized appreciation (depreciation) on investments. . . . . . . . . . . . . . . . . . . . . . . . . . 11,998
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83,231
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 111,626
--------------
--------------
NET ASSET VALUE, offering and redemption price per share:
($111,625,763 divided by 6,167,495 shares of $.001 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18.10
--------------
--------------
</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, 1998
Amounts
in thousands
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $6). . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,504
EXPENSES (Notes 2 and 4):
Advisory fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 842
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Amortization of deferred organization expenses . . . . . . . . . . . . . . . . . . 9
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
--------------
Expenses before reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,131
Expense reductions (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . (190)
--------------
Expenses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 941
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 563
--------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,224
Net change in unrealized appreciation or depreciation of investments . . . . . . . . . . . . . . . . . . (12,525)
--------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,699
--------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . . . $ 4,262
--------------
--------------
</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 Year Ended August 31, 1998
Amounts in thousands
1998 1997
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 563 $ 553
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,224 7,387
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . . . . (12,525) 14,677
------------ ------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . 4,262 22,617
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (530) (606)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . (7,384) (2,131)
------------ ------------
Total Distributions to Shareholders . . . . . . . . . . . . . . . . . . . . . . (7,914) (2,737)
------------ ------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from
Fund share transactions (Note 5). . . . . . . . . . . . . . . . . . . . . . . . 43,542 (3,967)
------------ ------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . 39,890 15,913
NET ASSETS
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,736 55,823
------------ ------------
End of period (including undistributed net investment income of
$166 and $118, respectively). . . . . . . . . . . . . . . . . . . . . . . . . . $ 111,626 $ 71,736
------------ ------------
------------ ------------
</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
period and other performance information derived from the financial statements.
YEAR ENDED AUGUST 31,
----------------------------------------------------------
1998 1997 1996 1995 1994*
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . $ 18.08 $ 13.36 $ 11.95 $ 10.51 $ 10.00
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . .11 .12 .15 .18 .15
Net realized and unrealized gain (loss) on investments. . . . 1.83 5.18 1.46 1.44 .47
---------- ---------- ---------- ---------- ----------
Total Income From Investment Operations. . . . . . . . . . 1.94 5.30 1.61 1.62 .62
---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . (.11) (.14) (.16) (.18) (.11)
Net realized gain on investments. . . . . . . . . . . . . . . (1.81) (.44) (.04) -- --
---------- ---------- ---------- ---------- ----------
Total Distributions. . . . . . . . . . . . . . . . . . . . (1.92) (.58) (.20) (.18) (.11)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . $ 18.10 $ 18.08 $ 13.36 $ 11.95 $ 10.51
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . 10.93 40.95 13.57 15.66 6.23
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted). . . . . . . . . . . 111,626 71,736 55,823 43,884 26,747
Ratios to average net assets (%)(b):
Operating expenses, net (c). . . . . . . . . . . . . . . . .95 .95 .95 .95 .95
Operating expenses, gross (c). . . . . . . . . . . . . . . 1.14 1.21 1.40 1.61 1.44
Net investment income. . . . . . . . . . . . . . . . . . . .57 .82 1.15 1.72 1.75
Portfolio turnover (%)(b) . . . . . . . . . . . . . . . . . . 66.44 29.88 38.34 39.32 36.48
</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, 1998
1. ORGANIZATION
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 21 investment portfolios which are in operation as
of August 31, 1998. 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.
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 accredited for both tax and financial reporting
purposes. All short- and long-term market premiums/discounts are
amortized/accredited for both tax and financial reporting purposes.
Annual Report 15
<PAGE>
SSgA
GROWTH AND INCOME FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
FEDERAL INCOME TAXES: Since the Investment Company is a Massachusetts
business trust, each fund 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, 1998 are as follows:
<TABLE>
<CAPTION>
NET
UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
------------- ------------- ------------- -------------
<S> <C> <C> <C>
$ 99,821,000 $ 21,624,862 $ (9,626,862) $ 11,998,000
</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 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.
The following reclassifications have been made at August 31, 1998:
<TABLE>
<CAPTION>
UNDISTRIBUTED ACCUMULATED ADDITIONAL
NET INVESTMENT NET REALIZED PAID-IN
INCOME GAIN (Loss) CAPITAL
-------------- -------------- --------------
<S> <C> <C>
$ 15,053 $ (172) $ (14,881)
</TABLE>
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.
16 Annual Report
<PAGE>
SSgA
GROWTH AND INCOME FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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, 1998, purchases and
sales of investment securities, excluding short-term investments aggregated
to $100,827,269, and $63,304,560, 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,
1998, 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, 1998, 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%, for the period
September 1, 1997 to December 31, 1997, and up to a maximum of 5%, for the
period January 1, 1998 to August 31, 1998, of the asset-based fee
determined in (i)); (iii) out-of-pocket expenses; and (iv) start-up costs
for new funds.
On August 10, 1998, Frank Russell Company entered into an agreement with
The Northwestern Mutual Life Insurance Co., an insurance organization,
pursuant to which Northwestern Mutual Life will acquire all of the
outstanding common stock of Frank Russell Company.
Annual Report 17
<PAGE>
SSgA
GROWTH AND INCOME FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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 charged 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"), the
Adviser's Metropolitan Division of Commercial Banking ("Commercial
Banking") and State Street Solutions ("Solutions")(collectively the
"Agents"), as well as several unaffiliated service providers. For these
services, the Fund pays .025%, .175%, .175%, .175%, and .175% to the
Adviser, SSBSI, RIS, Commercial Banking, and Solutions, 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, 1998, the Fund was charged
shareholder servicing expenses of $24,756, $3,998, $485, $1,705, and
$42,446, by the Adviser, SSBSI, RIS, Commercial Banking, and Solutions,
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 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, 1998.
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 $96,102, for the year ended August 31,
1998.
BOARD OF TRUSTEES: The Investment Company pays each Trustee not affiliated
with the Investment Company a retainer of $48,000 annually, $1,500 for each
board meeting attended, an additional $1,500 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.
18 Annual Report
<PAGE>
SSgA
GROWTH AND INCOME FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
ACCRUED FEES PAYABLE TO AFFILIATES AND TRUSTEES AS OF AUGUST 31, 1998 WERE
AS FOLLOWS:
<TABLE>
<S> <C>
Advisory fees $ 148,624
Administration fees 3,397
Custodian fees 8,157
Distribution fees 2,041
Shareholder servicing fees 8,920
Transfer agent fees 8,008
Trustees' fees 471
----------
$ 179,618
----------
----------
</TABLE>
BENEFICIAL INTEREST: As of August 31, 1998, two shareholders (one of which
was also an affiliate of the Investment Company) were record owners of
approximately 26% and 25%, respectively, of the total outstanding shares of
the Fund.
5. FUND SHARE TRANSACTIONS
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS)
FOR THE YEARS ENDED AUGUST 31,
------------------------------------------------------
1998 1997
------------------------ ------------------------
SHARES DOLLARS SHARES DOLLARS
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Proceeds from shares sold 2,967 $ 59,090 2,426 $ 36,961
Proceeds from reinvestment
of distributions 429 7,666 193 2,708
Payments for shares redeemed (1,196) (23,214) (2,832) (43,636)
--------- --------- --------- ---------
Total net increase (decrease) 2,200 $ 43,542 (213) $ (3,967)
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
6. LINE OF CREDIT
The Fund and several affiliated Funds (the "Participants") share in a $50
million revolving credit facility for temporary or emergency purposes,
including the meeting of redemption requests that otherwise might require
the untimely disposition of securities. The Participants are charged an
annual commitment fee of .065% on the average daily unused amount of the
Aggregate commitment, which is allocated among each of the Participants.
Interest, at the Federal Fund Rate plus .50% annually, is calculated based
on the market rates at the time of the borrowing. The Fund may borrow up
to a maximum of 33 1/3 percent of the value of its total assets under the
agreement.
Annual Report 19
<PAGE>
SSgA
GROWTH AND INCOME FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
7. DIVIDENDS
On September 1, 1998, the Board of Trustees declared a dividend of $.0257
from net investment income, payable on September 9, 1998 to shareholders of
record on September 2, 1998.
20 Annual Report
<PAGE>
SSgA
GROWTH AND INCOME FUND
TAX INFORMATION
August 31, 1998 (Unaudited)
The Fund paid distributions of $7,293,633 from net long-term capital gains
during its taxable year ended August 31, 1998. Pursuant to Section 852 of the
Internal Revenue Code, the Fund designates $2,131,620 as 20% capital gain
dividends for its taxable year ended August 31, 1998.
Please consult a tax advisor for questions about federal or state income tax
laws.
Annual Report 21
<PAGE>
SSgA GROWTH AND INCOME FUND
One International Place, 27th 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
Mark E. Swanson, Assistant Secretary and Principal Accounting Officer
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.
One International Place, 27th 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
PricewaterhouseCoopers LLP
One Post Office Square
Boston, Massachusetts 02109
22 Annual Report
<PAGE>
SSgA-Registered Trademark- Funds
INTERMEDIATE FUND
Annual Report
August 31, 1998
Table of Contents
Page
Chairman's Letter . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion and Analysis . . . . . . . . 6
Report of Independent Accountants . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . 16
Notes to Financial Statements. . . . . . . . . . . . . . . . 17
Tax Information. . . . . . . . . . . . . . . . . . . . . . . 23
Fund Management and Service Providers. . . . . . . . . . . . 24
"SSgA-Registered Trademark-" IS A REGISTERED TRADEMARK 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, 1998. Over the past year, the Funds have grown to include
twenty-one 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 SSgA Intermediate Fund. I hope you find this
information a useful tool as you review your overall investment strategy.
The SSgA Funds have also opened four additional funds in fiscal 1998. The
investment objectives for these four new funds are as follows:
The SSgA Special Equity Fund seeks to maximize total return through investment
in mid- and small capitalization US equity securities. This Fund was opened as
an alternative investment strategy for the SSgA Small Cap Fund that closed to
new investors on August 31, 1998.
The SSgA International Growth Opportunities Fund seeks to provide long-term
capital growth by investing primarily in securities of foreign issuers.
The SSgA High Yield Bond Fund seeks to maximize total return by investing
primarily in non investment-grade bonds, including, but not limited to, those
represented by the Lehman Brothers High Yield Bond Index.
The SSgA Real Estate Equity Fund seeks to provide income and capital growth by
investing primarily in publicly traded securities of real estate companies.
During the past fiscal year, the SSgA Funds were proud to announce that the SSgA
S&P 500 Index Fund and the SSgA Yield Plus Fund each achieved five years of
operational history. We are proud of our long term record and look forward to
having additional funds reach their five year anniversary.
SSgA intends to proceed with the evolution of new products and services while
committing to your investment needs. We will continue to develop our
professional expertise by focusing on the expansion of both our global resources
and our diversified product lines.
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. As a result, the portfolios we
manage benefit from the knowledge of the entire team.
Mr. John Kirby, Principal, has been the portfolio manager primarily responsible
for investment decisions regarding the SSgA Intermediate Fund since November
1995. Prior to joining State Street Bank in 1995, Mr. Kirby was an account
manager with Lowell, Blake & Associates. Prior to that he was 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: Maximize total return by investing in fixed income securities.
INVESTS IN: Investment grade debt instruments including: Us Government
Treasuries, 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 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.
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
DATES INTERMEDIATE FUND LEHMAN INTERMEDIATE
<S> <C> <C>
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
1998 $12,985 $13,466
</TABLE>
YEARLY PERIODS ENDED AUGUST 31
SSgA INTERMEDIATE FUND
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ------------ --------- ------
<S> <C> <C>
1 Year $ 10,864 8.64%
5 Years $ 12,985 5.36%+
Inception $ 12,985 5.36%+
</TABLE>
LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ------------ --------- ------
<S> <C> <C>
1 Year $ 10,898 8.98%
5 Years $ 13,466 6.13%+
Inception $ 13,466 6.13%+
</TABLE>
SEE RELATED NOTES ON THE FOLLOWING PAGE.
PERFORMANCE REVIEW
For the year ended August 31, 1998, the SSgA Intermediate Bond Fund returned
8.64% versus 8.98% for its benchmark, the Lehman Brothers Intermediate
Government/Corporate Bond Index. Deviations from the benchmark were principally
due to payment of operating expenses by the Fund, whereas Index results do not
include expenses of any kind.
The Fund does not pursue active interest exposure. The primary source of risk in
the portfolio is from sector over/underweight versus the Index. This risk
profile is less volatile than one resulting from active duration management.
Over the year, the portfolio's tracking error versus the Index decreased, as the
sector exposure was reduced in anticipation of broadening global financial
crisis.
The interest rate environment was favorable during the fiscal year ended August
1998. The Federal Reserve was diligent in its commitment to moderate growth and
control inflation.
6 Annual Report
<PAGE>
SSgA INTERMEDIATE FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
For the majority of fiscal 1998, the yield difference between short and long
term Treasury narrowed. The Federal Reserve Bank's decision not to lower the Fed
Funds rate anchored short rates, but provided momentum for inflation concerns to
be taken out of long interest rates. This trend prevailed until the global
financial crisis sparked a flight-to-quality rally into US Treasuries. As the
fiscal year ended, US Treasuries yields were approaching new lows.
MARKET AND 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 Intermediate Government/Corporate Bond Index. At August 31, 1998, the
Fund's duration matched the Index at 3.35 years.
As the fiscal year began, the Fund employed a strategy to overweight corporate
debt and mortgage backed securities to provide incremental yield to the
portfolio. However, as the year progressed, the Fund underwent a strategic shift
in its intermediate corporate positions, underweighting both, to reflect a
possible slowing global economy. An overweight exposure in short duration
corporate securities (five years and under) was maintained throughout the
period. Within the corporate allocation, the Fund continued to favor
aerospace/defense, cable media, UK regional electric companies, natural gas
pipelines/distribution, Canadian provinces, and selected bank, finance, and
insurance companies. The mortgage market was pressured from falling Treasury
yields and the increased risk premium built into swap spreads, which caused them
to widen on an option-adjusted basis. Although mortgage securities are not in
the Lehman Brothers Intermediate Government/Corporate Index, the Fund chose to
hold these instruments in order to provide yield to the portfolio. The Fund held
an overweight for the majority of the year and benefited from an underweight in
premium pass-through securities.
The heightened risk in financial markets has widened the risk premium demanded
in all credit spread markets and substantively reduced the overall liquidity of
global non-government markets. The current weightings reflect a cautious
exposure to the global financial economy and markets.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP TEN ISSUERS
(AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31, 1998
<S> <C>
United States Government Treasuries 36.4%
Federal National Mortgage Association 8.0
Manitoba, Province of 2.7
International Lease Finance Corp. 2.6
Premier Auto Trust 2.5
Ford Credit Auto Loan Master Trust 2.5
Ontario, Province of 2.1
Sun Co., Inc. 1.9
Quebec, Province of 1.7
Branch Banking & Trust Co. 1.6
</TABLE>
- -------------------------------------------------------------------------------
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:
In our opinion, the accompanying statement of assets and liabilities and
statement of net assets, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of SSgA Intermediate Fund (the "Fund") at
August 31, 1998, the results of its operations for the fiscal year then ended
and 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 September 1, 1993 (commencement of
operations) to August 31, 1994, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at August 31, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
Boston, Massachusetts
October 8, 1998
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
INTERMEDIATE FUND
STATEMENT OF NET ASSETS
August 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
<S> <C> <C>
LONG-TERM INVESTMENTS - 97.8%
ASSET-BACKED SECURITIES - 6.8%
Chase Manhattan Auto Owner Trust
Series 1998-A Class A3
5.700% due 09/17/01 $ 500 $ 502
Series 1998-B Class A3
5.750% due 09/15/00 200 201
CIT RV Trust
6.400% due 02/15/07 247 249
Citibank Credit Card Master Trust I
Series 1998-6 Class A
5.850% due 04/10/03 830 845
Ford Credit Auto Loan Master Trust
Series 1996-1 Class A
5.500% due 02/15/03 370 370
Ford Credit Auto Owner Trust
Series 1996-B Class A4
6.300% due 01/15/01 500 503
Series 1998-A Class A3
5.650% due 10/15/01 370 370
Premier Auto Trust
Series 1996-2 Class A4
6.575% due 10/06/00 1,000 1,006
Series 1997-1 Class A4
6.350% due 04/06/02 250 253
Series 1997-2 Class A4
6.250% due 06/06/01 200 202
Series 1998-1 Class A3
5.630% due 08/06/01 500 500
USAA Auto Loan Grantor Trust
Series 1998-1 Class A
5.800% due 01/15/05 242 243
----------
5,244
----------
CORPORATE BONDS AND NOTES - 31.6%
A.H. Belo Corp.
6.875% due 06/01/02 550 564
Anadarko Petroleum Corp.
8.250% due 11/15/01 1,000 1,074
B.F. Goodrich Co.
6.450% due 04/15/08 500 503
Banc One, Milwaukee, N.A.
6.625% due 04/15/03 500 511
Branch Banking & Trust Co.
6.200% due 09/15/99 1,000 1,003
5.700% due 02/01/01 250 249
Burlington Northern Santa Fe Corp.
6.375% due 12/15/05 500 501
CIT Group Holdings, Inc. (MTN)
6.250% due 10/04/99 500 502
6.400% due 01/28/00 500 502
Continental Cablevision Inc.
9.000% due 09/01/08 200 231
Enron Corp.
9.650% due 05/15/01 150 163
6.500% due 08/01/02 750 755
Equitable Companies, Inc.
9.000% due 12/15/04 250 284
Equitable Life Assurance Society
6.950% due 12/01/05 500 522
Finova Capital Corp.
6.375% due 05/15/05 250 252
Fleet Financial Group
7.250% due 09/01/99 500 507
Ford Motor Credit Co. (MTN)
6.110% due 12/28/01 700 706
Gatx Capital Corp.
6.500% due 11/01/00 500 506
General Motors Acceptance Corp.
6.625% due 04/24/00(MTN) 200 203
5.625% due 02/15/01 1,000 997
GTE Corp.
9.375% due 12/01/00 800 858
Integra Bank (MTN)
6.550% due 06/15/00 500 508
</TABLE>
Annual Report 9
<PAGE>
SSgA
INTERMEDIATE FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
<S> <C> <C>
International Lease Finance Corp.
6.125% due 11/01/99 $ 1,000 $ 1,004
6.375% due 01/18/00 500 504
6.625% due 08/15/00 500 509
Kemper Corp.
6.875% due 09/15/03 500 515
KN Energy, Inc.
6.650% due 03/01/05 250 248
Lehman Brothers Holdings, Inc. (MTN)
6.150% due 03/15/00 850 858
6.000% due 02/26/01 300 304
Lockheed Martin Corp.
6.850% due 05/15/01 800 815
Mellon Bank NA
7.000% due 03/15/06 600 620
Merrill Lynch & Co., Inc. (MTN)
6.050% due 03/06/01 1,000 1,011
Nationsbank Corp.
7.625% due 04/15/05 900 960
News America Holdings, Inc.
7.450% due 06/01/00 200 205
Norwest Financial, Inc.
Series B (MTN)
6.375% due 10/01/99 500 504
6.050% due 11/19/99 500 503
Raytheon Co.
6.450% due 08/15/02 500 507
Sola International, Inc.
6.875% due 03/15/08 100 99
Sun Co., Inc.
7.950% due 12/15/01 1,365 1,453
Tele-Communications, Inc.
8.250% due 01/15/03 500 538
Time Warner, Inc.
8.110% due 08/15/06 275 296
Travelers Group, Inc.
7.250% due 05/01/01 250 258
USA Waste Services, Inc.
6.500% due 12/15/02 500 500
Worldcom, Inc.
6.400% due 08/15/05 100 100
----------
24,212
----------
EURODOLLAR BONDS - 4.5%
American Express Master Trust
5.375% due 07/15/01 500 497
Hyder PLC
6.750% due 12/15/04 1,000 1,027
Ontario, Province of
7.375% due 01/27/03 500 531
7.625% due 06/22/04 1,000 1,090
Yorkshire Power Finance, Ltd.
6.154% due 02/25/03 300 303
----------
3,448
----------
MORTGAGE-BACKED SECURITIES - 3.9%
Federal Home Loan Mortgage Corp.
5.950% due 01/19/06 500 513
Federal Home Loan Mortgage Corp.
Participation Certificate Group
4.500% due 04/01/01 341 330
Federal National Mortgage
Association Pool
6.000% due 2009 488 490
Federal National Mortgage Association (c)
5.500% 15 Year TBA 270 265
7.000% 30 Year TBA 650 662
Government National
Mortgage Association Pools (d)
7.000% due 2022 368 374
6.880% due 2023 353 360
----------
2,994
----------
</TABLE>
10 Annual Report
<PAGE>
SSgA
INTERMEDIATE FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
<S> <C> <C>
UNITED STATES GOVERNMENT
AGENCIES - 8.1%
Federal Home Loan Bank
7.310% due 06/16/04 $ 500 $ 543
6.995% due 04/02/07 300 329
Federal National Mortgage Association
5.450% due 10/14/05 500 502
Federal National Mortgage
Association (MTN)
6.790% due 06/02/04 500 530
6.480% due 06/28/04 650 680
6.210% due 11/07/07 250 261
6.550% due 11/21/07 1,000 1,029
6.170% due 01/15/08 320 323
6.270% due 02/05/08 220 224
6.270% due 02/13/08 500 508
6.480% due 04/02/08 750 764
State of Israel United States Government
Guaranteed Notes
Series 7-B
5.700% due 02/15/03 500 504
----------
6,197
----------
UNITED STATES GOVERNMENT
TREASURIES - 36.8%
United States Treasury Bonds
12.000% due 08/15/13 450 682
United States Treasury Notes
5.625% due 12/31/99 250 252
5.500% due 05/31/00 2,540 2,562
5.375% due 07/31/00 350 353
5.625% due 11/30/00 1,000 1,014
5.375% due 02/15/01 1,435 1,448
6.500% due 05/31/01 350 363
6.625% due 07/31/01 500 521
6.500% due 08/31/01 950 988
6.250% due 10/31/01 770 797
6.125% due 12/31/01 1,420 1,467
6.250% due 01/31/02 2,000 2,074
6.500% due 05/31/02 1,500 1,574
6.250% due 06/30/02 470 489
5.500% due 05/31/03 3,500 3,574
5.375% due 06/30/03 750 764
7.250% due 05/15/04 1,100 1,219
7.500% due 02/15/05 1,300 1,472
6.500% due 05/15/05 915 990
6.500% due 08/15/05 500 543
7.000% due 07/15/06 1,750 1,961
6.625% due 05/15/07 1,000 1,104
6.125% due 08/15/07 1,500 1,606
5.625% due 05/15/08 425 444
----------
28,261
----------
YANKEE BONDS - 6.1%
Ireland, Republic of
7.125% due 07/15/02 300 315
Manitoba, Province of
8.000% due 04/15/02 500 536
6.875% due 09/15/02 1,000 1,039
Manitoba, Province of
Series CK
9.000% due 12/15/00 500 535
National Bank of Hungary
7.950% due 11/01/03 380 401
Quebec, Province of
9.125% due 03/01/00 1,275 1,330
Tyco International Group S.A.
6.125% due 06/15/01 500 500
----------
4,656
----------
TOTAL LONG-TERM INVESTMENTS
(cost $73,953) 75,012
----------
</TABLE>
Annual Report 11
<PAGE>
SSgA
INTERMEDIATE FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
<S> <C> <C>
SHORT-TERM INVESTMENTS - 3.4%
Dreyfus Cash Management Plus, Inc.
Money Market Fund (a) $ 2,591 $ 2,591
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $2,591) 2,591
----------
TOTAL INVESTMENTS
(identified cost $76,544)(b) - 101.2% 77,603
OTHER ASSETS AND LIABILITIES,
NET - (1.2%) (912)
----------
NET ASSETS - 100.0% $ 76,691
----------
----------
</TABLE>
(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.
12 Annual Report
<PAGE>
SSgA
INTERMEDIATE FUND
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1998
<TABLE>
<CAPTION>
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $76,544)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . $ 77,603
Receivables:
Dividends and interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,074
Investments sold (delayed settlement)(Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 661
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 452
--------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79,790
LIABILITIES
Payables:
Investments purchased (regular settlement) . . . . . . . . . . . . . . . . . . . . $ 1,119
Investments purchased (delayed settlement)(Note 2) . . . . . . . . . . . . . . . . 1,584
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316
Accrued fees to affiliates and trustees (Note 4) . . . . . . . . . . . . . . . . . 59
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
--------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,099
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 76,691
--------------
--------------
NET ASSETS CONSIST OF:
Undistributed net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 992
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 656
Unrealized appreciation (depreciation) on investments. . . . . . . . . . . . . . . . . . . . . . . . . . 1,059
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Additional paid--in capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73,976
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 76,691
--------------
--------------
NET ASSET VALUE, offering and redemption price per share:
($76,690,703 divided by 7,639,104 shares of $.001 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10.04
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 13
<PAGE>
SSgA
INTERMEDIATE FUND
<TABLE>
<CAPTION>
STATEMENT OPERATIONS
For the Fiscal Year Ended August 31, 1998
Amounts
in thousands
<S> <C> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,911
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
--------------
Total Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,023
EXPENSES (Notes 2 and 4):
Advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 527
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Amortization of deferred organization expenses . . . . . . . . . . . . . . . . . . 9
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
--------------
Expenses before reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 744
Expense reductions (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . (349)
--------------
Expenses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 395
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,628
--------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 835
Net change in unrealized appreciation or depreciation of investments . . . . . . . . . . . . . . . . . . 941
--------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,776
--------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . $ 5,404
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 Annual Report
<PAGE>
SSgA
INTERMEDIATE FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the Fiscal Year Ended August 31,
Amounts in thousands
1998 1997
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,628 $ 2,695
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 835 95
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . . . . 941 790
------------ ------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . 5,404 3,580
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,382) (2,564)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . (10) --
------------ ------------
Total Distributions to Shareholders . . . . . . . . . . . . . . . . . . . . . . (3,392) (2,564)
------------ ------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from
Fund share transactions (Note 5). . . . . . . . . . . . . . . . . . . . . . . . 20,845 11,300
------------ ------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . 22,857 12,316
NET ASSETS
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,834 41,518
------------ ------------
End of period (including undistributed net investment income
of $992 and $733, respectively) . . . . . . . . . . . . . . . . . . . . . . . . $ 76,691 $ 53,834
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 15
<PAGE>
SSgA
INTERMEDIATE FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each
period and other performance information derived from the financial statements.
YEAR ENDED AUGUST 31,
------------------------------------------------------------
1998 1997 1996 1995 1994*
--------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . $ 9.76 $ 9.57 $ 9.72 $ 9.37 $ 10.00
--------- --------- --------- --------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . 53 .54 .53 .56 .42
Net realized and unrealized gain (loss) on investments . . . . 28 .20 (.14) .34 (.76)
--------- --------- --------- --------- ----------
Total Income From Investment Operations . . . . . . . . . . 81 .74 .39 .90 (.34)
--------- --------- --------- --------- ----------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . (.53) (.55) (.54) (.55) (.29)
--------- --------- --------- --------- ----------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . $ 10.04 $ 9.76 $ 9.57 $ 9.72 $ 9.37
--------- --------- --------- --------- ----------
--------- --------- --------- --------- ----------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . 8.64 8.00 4.12 10.05 (3.42)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . . . . . . . . . 76,691 53,834 41,518 33,893 19,963
Ratios to average net assets (%)(b):
Operating expenses, net (c) . . . . . . . . . . . . . . . . 60 .60 .60 .60 .60
Operating expenses, gross (c) . . . . . . . . . . . . . . 1.13 1.30 1.38 1.67 1.51
Net investment income . . . . . . . . . . . . . . . . . . 5.51 5.78 5.57 6.29 5.11
Portfolio turnover (%)(b). . . . . . . . . . . . . . . . . . 251.17 242.76 221.73 26.31 15.70
</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, 1998
1. ORGANIZATION
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 21 investment portfolios which are in operation as
of August 31, 1998. 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.
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.
Annual Report 17
<PAGE>
SSgA
INTERMEDIATE FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
FEDERAL INCOME TAXES: Since the Investment Company is a Massachusetts
business trust, each fund 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, 1998 are as follows:
<TABLE>
<CAPTION>
NET
UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
-------------- ------------ -------------- --------------
<S> <C> <C> <C>
$ 76,559,543 $ 1,074,213 $ (30,756) $ 1,043,457
</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 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.
The following reclassifications have been made at August 31, 1998:
<TABLE>
<CAPTION>
UNDISTRIBUTED ACCUMULATED ADDITIONAL
NET INVESTMENT NET REALIZED PAID-IN
INCOME GAIN (LOSS) CAPITAL
-------------- ------------ -------------
<S> <C> <C>
$ 13,525 $ 1,356 $ (14,881)
</TABLE>
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.
18 Annual Report
<PAGE>
SSgA
INTERMEDIATE FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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, 1998, purchases and
sales of investment securities, excluding US Government and Agency
obligations and short-term investments, aggregated to $39,055,074, and
$42,979,026, respectively.
For the year ended August 31, 1998 purchases and sales of US Government and
Agency obligations, excluding short-term investments, aggregated to
$141,465,970, and $117,326,539, 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 .80% of its average daily net assets. For the year ended August 31,
1998, 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, 1998, the receivable due from the
Annual Report 19
<PAGE>
SSgA
INTERMEDIATE FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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% for the period
September 1, 1997 to December 31, 1997, and up to a maximum of 5% for the
period January 1, 1998 to August 31, 1998 of the asset-based fee determined
in (i)); (iii) out-of-pocket expenses; and (iv) start-up costs for new
funds.
On August 10, 1998, Frank Russell Company entered into an agreement with
The Northwestern Mutual Life Insurance Co., an insurance organization,
pursuant to which Northwestern Mutual Life will acquire all of the
outstanding common stock of Frank Russell Company.
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 charged 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"), the
Adviser's Metropolitan Division of Commercial Banking ("Commercial
Banking") and State Street Solutions ("Solutions")(collectively the
"Agents"), as well as several unaffiliated service providers. For these
services, the Fund pays .025%, .175%, .175%, .175%, and .175% to the
Adviser, SSBSI, RIS, Commercial Banking, and Solutions, respectively, based
upon the average daily value of all Fund shares held
20 Annual Report
<PAGE>
SSgA
INTERMEDIATE FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
by or for customers of these Agents. For the year ended August 31, 1998,
the Fund was charged shareholder servicing expenses of $13,342, $475,
$1,869, $1,485, and $19,183, by the Adviser, SSBSI, RIS, Commercial
Banking, and Solutions, 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 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, 1998.
BOARD OF TRUSTEES: The Investment Company pays each Trustee not affiliated
with the Investment Company a retainer of $48,000 annually, $1,500 for each
board meeting attended, an additional $1,500 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, 1998 WERE
AS FOLLOWS:
<TABLE>
<S> <C>
Advisory fees $ 32,954
Administration fees 2,052
Custodian fees 11,407
Distribution fees 1,819
Shareholder servicing fees 4,038
Transfer agent fees 6,702
Trustees' fees 271
----------
$ 59,243
----------
----------
</TABLE>
BENEFICIAL INTEREST: As of August 31, 1998, two shareholders (one was also
an affiliate of the Investment Company) were record owners of approximately
15% and 10%, respectively, of the total outstanding shares of the Fund.
Annual Report 21
<PAGE>
SSgA
INTERMEDIATE FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
5. FUND SHARE TRANSACTIONS
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS)
FOR THE YEARS ENDED AUGUST 31,
------------------------------------------------------
1998 1997
------------------------- --------------------------
SHARES DOLLARS SHARES DOLLARS
------------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Proceeds from shares sold 3,663 $ 35,837 3,454 $ 33,329
Proceeds from reinvestment
of distributions 305 2,980 242 2,313
Payments for shares redeemed (1,842) (17,972) (2,519) (24,342)
------------ --------- ---------- -----------
Total net increase (decrease) 2,126 $ 20,845 1,177 $ 11,300
------------ --------- ---------- -----------
------------ --------- ---------- -----------
</TABLE>
6. DIVIDENDS
On September 1, 1998, the Board of Trustees declared a dividend of $.1379
from net investment income, payable on September 9, 1998 to shareholders of
record on September 2, 1998.
22 Annual Report
<PAGE>
SSgA
INTERMEDIATE FUND
TAX INFORMATION
August 31, 1998 (Unaudited)
The Fund paid distributions of $9,876 from net long-term capital gains during
its taxable year ended August 31, 1998. Pursuant to Section 852 of the Internal
Revenue Code, the Fund designates $9,876 as 20% capital gain dividends for its
taxable year ended August 31, 1998.
Please consult a tax advisor for questions about federal or state income tax
laws.
Annual Report 23
<PAGE>
SSgA INTERMEDIATE FUND
One International Place, 27th 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
Mark E. Swanson, Assistant Secretary
and Principal Accounting Officer
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.
One International Place, 27th 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
PricewaterhouseCoopers LLP
One Post Office Square
Boston, Massachusetts 02109
24 Annual Report
<PAGE>
SSgA-Registered Trademark- FUNDS
EMERGING MARKETS FUND
Annual Report
August 31, 1998
Table of Contents
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion and Analysis . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . 26
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . 27
Tax Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Fund Management and Service Providers. . . . . . . . . . . . . . . . . 36
"SSgA-Registered Trademark- " IS A REGISTERED TRADEMARK 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 DISTRIBUTERS, 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, 1998. Over the past year, the Funds have grown to include
twenty-one 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 SSgA Emerging Markets Fund. I hope you find
this information a useful tool as you review your overall investment strategy.
The SSgA Funds have also opened four additional funds in fiscal 1998. The
investment objectives for these four new funds are as follows:
The SSgA Special Equity Fund seeks to maximize total return through investment
in mid- and small capitalization US equity securities. This Fund was opened as
an alternative investment strategy for the SSgA Small Cap Fund that closed to
new investors on August 31, 1998.
The SSgA International Growth Opportunities Fund seeks to provide long-term
capital growth by investing primarily in securities of foreign issuers.
The SSgA High Yield Bond Fund seeks to maximize total return by investing
primarily in non investment-grade bonds, including, but not limited to, those
represented by the Lehman Brothers High Yield Bond Index.
The SSgA Real Estate Equity Fund seeks to provide income and capital growth by
investing primarily in publicly traded securities of real estate companies.
During the past fiscal year, the SSgA Funds were proud to announce that the SSgA
S&P 500 Index Fund and the SSgA Yield Plus Fund each achieved five years of
operational history. We are proud of our long term record and look forward to
having additional funds reach their five year anniversary.
SSGA intends to proceed with the evolution of new products and services while
committing to your investment needs. We will continue to develop our
professional expertise by focusing on the expansion of both our global resources
and our diversified product lines.
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 Executive
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. As a result, the portfolios we
manage benefit from the knowledge of the entire team.
Mr. Josh Feuerman, Principal, has been the portfolio manager primarily
responsible for investment decisions regarding the SSgA Emerging Markets Fund
since November 1997. Mr. Feuerman joined State Street in 1987, and is a
portfolio manager in SSgA's Global Active Equities Group responsible for
emerging markets portfolios. He also assists in marketing SSgA's equity
products to existing and prospective clients, as well as to the consultant
community. There are seven other portfolio managers working with Mr.
Feuerman.
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: The Fund invests in emerging market countries with prospects for
sustained macro and micro economic growth. Through the use of proprietary
evaluation models, 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.
GROWTH OF A $10,000 INVESTMENT
[GRAPH]
<TABLE>
<CAPTION>
DATES EMERGING MARKETS FUND IFC INVESTABLE COMPOSITE
<S> <C> <C>
Inception* $10,000 $10,000
1994 $11,450 $10,529
1995 $10,387 $8,357
1996 $11,201 $8,881
1997 $12,895 $9,190
1998 $7,045 $4,830
</TABLE>
SSgA
EMERGING MARKETS FUND
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ------------ ------------ ------------
<S> <C> <C>
1 Year $ 5,464 (45.36)%
Inception $ 7,045 (7.49)%+
</TABLE>
INTERNATIONAL FINANCE CORPORATION
INVESTABLE COMPOSITE INDEX
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ------------ ------------ ------------
<S> <C> <C>
1 Year $ 5,255 (47.45)%
Inception $ 4,830 (14.93)%+
</TABLE>
SEE RELATED NOTES ON THE FOLLOWING PAGE.
PERFORMANCE REVIEW
For the fiscal year ended August 31, 1998, the SSgA Emerging Markets Fund posted
a loss of 45.4%. This compared favorably relative to the Fund's benchmark, the
International Finance Corporation Investable (IFCI) Index, which was off 47.5%
for same period.
MARKET AND PORTFOLIO HIGHLIGHTS
While the Fund outperformed its benchmark, it suffered as a participant in the
emerging markets meltdown. The crisis, which began in July 1997 with Thailand's
currency devaluation, quickly spread through the Asian region and continued to
plague foreign economies for the next twelve months. As of August 1998, the
crisis still has not abated, as Russia is now in the midst of its own financial
problems.
Asia was the hardest hit region over the past twelve months, as these markets
lost over 60%. The Fund benefited from
6 Annual Report
<PAGE>
SSgA EMERGING MARKETS FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
being underweight to the region and overweight to India, which outperformed its
Asian peers by almost 27%. While the Asian currency situation is currently
stabilized, the financial trauma continues, as these countries work to rebuild
their banking sectors which were decimated as a result of the crisis. The impact
from these currency devaluations will weigh heavily on these economies for years
to come.
Latin America was hit twice during the year. In addition to being caught in the
Asian crossfire, oil prices hit historic lows. Consequently, as oil prices
dropped, governments in Argentina, Mexico, and Venezuela scrambled to cover
fiscal shortfalls. These revenue shortfalls led to government cut-backs on
infrastructure projects, which would have boosted economic growth. Additionally,
many of the currencies came under attack as speculators were looking for the
next domino to fall after Asia. To defend their currencies, Latin American
central banks raised interest rates. While this supported their currencies, it
curtailed economic growth, as real interest rates reached unsustainable levels.
The Fund was, and continues to be, underweight to Latin America as there does
not appear to be either a short-term upside in oil prices, or an end to the high
interest rate environment.
The best region on a relative basis was the Europe/Mideast/Africa (EMEA) region,
which was down 33%. The Fund was overweight to this region primarily through its
exposure to Israel, which was 36% ahead of the IFCI Index, and Portugal, the
star emerging market country, posting a 50% gain over the period. The year ended
with Russia defaulting on its debt and eliminating the convertibility of its
currency. Russia, which had been a top emerging market performer last year, was
the worst market this year as it fell almost 86%. The Fund was neutral to Russia
and further reduced allocation to an underweight position as the crisis
unfolded.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
(AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31, 1998
<S> <C>
Telecomunicacoes Brasileiras NPV 3.2%
Bank Hapoalim, Ltd. 1.7
Banco Comercial Portuguese SA (Regd) 1.4
Telefonos de Mexico SA Series L - ADR 1.1
Koor Industries 0.9
YPF SA Class D 0.9
Teva Pharmaceutical Industries, Ltd. - ADR 0.8
Bank Handlowy W. Warszawie 0.8
Liberty Life Association of Africa 0.8
Electricidade de Portugal SA 0.7
</TABLE>
- --------------------------------------------------------------------------------
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:
In our opinion, the accompanying statement of assets and liabilities and
statement of net assets, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of SSgA Emerging Markets Fund (the "Fund") at
August 31, 1998, the results of its operations for the fiscal year then ended
and 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 March 1, 1994 (commencement of
operations) to August 31, 1994, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at August 31, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
Boston, Massachusetts
October 8, 1998
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
COMMON STOCKS - 74.3%
ARGENTINA - 2.5%
Acindar Industria Argentina
de Aceros SA Class B (a) 220,257 $ 198
Alpargatas (a) 728,007 73
Banco de Galicia 175,357 517
Celulosa Argentina (a) 232,719 46
Dalmine Siderca SA 313,796 309
Ledesma 359,967 220
Naviera Perez Companc
Class B 233,690 926
Siderar SA Series A 11,700 22
Telecom Argentina Class B 114,329 515
Telefonica de Argentina Class B 200,250 451
YPF SA Class D 81,002 1,815
----------
5,092
----------
BRAZIL - 4.2%
Centrais Geradoras do Sul
do Brasil SA NPV (a) 66,847,000 68
Companhia Cervejaria Brahma 910,200 425
Companhia Siderurgica
de Tubarao NPV 13,300,000 197
Eletrobras (centrais) NPV 66,847,000 954
Sider Nacional cia NPV 7,355,700 116
Telecomunicacoes
Brasileiras NPV 136,572,192 6,846
----------
8,606
----------
CHILE - 3.1%
Banco de A. Edwards
Series A - ADR 12,200 128
Banco Santander Chile
Series A - ADR 34,800 327
Chile Fund, Inc. 130,700 1,250
Chilquinta SA - ADR 4,550 37
Compania de Telecomunicaciones
de Chile SA - ADR 88,300 1,352
Embotelladora Andina SA
Series A- ADR 51,000 628
Enersis SA - ADR 56,100 1,017
Five Arrows Chile Investment
Trust (PTG)(a) 550,000 825
Gener SA - ADR 31,300 413
Laboratorio Chile SA - ADR 4,450 49
Madeco SA - ADR 22,700 109
Santa Isabel SA - ADR 2,725 23
Sociedad Quimica Y Minera
de Chile Class B SA - ADR 4,800 103
Vina Concha Y Toro SA - ADR 4,800 97
----------
6,358
----------
CHINA - 0.7%
Beijing Yanhua
Petrochemical Co., Ltd. Class H 1,330,000 71
Beiren Printing Class H 60,000 3
China International Marine
Containers, Ltd. Series B 110,000 45
China Shipping Development
Co., Ltd. Class H (a) 1,509,000 105
China Telecom
(Hong Kong), Ltd. - ADR (a) 5,700 131
Dong Fang Electric
Machinery, Ltd. Class H 64,000 2
Eastern Communications Co., Ltd.
Class B (a) 240,000 88
Guangshen Railway Company, Ltd. 34,000 142
Guangzhou Shipyard Class H 122,000 6
Harbin Power Equipment Class H 316,000 13
Huaneng Power International, Inc.
Series N - ADR (a) 23,900 155
Jilin Chemical Industrial
Company, Ltd. Class H 166,000 6
</TABLE>
Annual Report 9
<PAGE>
SSgA
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
Luoyang Glasswork Class H (a) 268,000 $ 7
Maanshan Iron & Steel Class H (a) 2,662,000 74
Qingling Motors Co. Class H 837,000 101
Shandong Huaneng Power Co., Ltd.
Series N - ADR 16,500 60
Shanghai Dazhong Taxi Class B (a) 264,000 100
Shanghai Lujiazui Finance and Trade
Zone Development Co., Ltd.
Class B - ADR (a) 645,000 200
Shanghai
Petrochemical Co., Ltd. - ADR 15,000 81
Tan Chong International, Ltd. (a) 3,213,000 53
Tsingtao Brewery Class H (a) 151,000 14
Wuxi Little Swan Co., Ltd.
Series B 101,160 42
Yizheng Chemical Fibre
Class H (a) 1,308,000 62
Zhenhai Refining
& Chemical Co., Ltd. Series H 110,000 9
----------
1,570
----------
COLOMBIA - 3.4%
Banco de Bogota NPV 206,274 612
Banco Ganadero SA Class B - ADR 38,100 724
Banco Industrial Colombiano 606,126 714
Bancolombia SA - ADR 21,000 152
Bavaria 382,470 1,472
Cadenalco SA NPV 325,699 201
Cementos Argos 384,231 932
Cementos Diamante SA - GDR 49,300 353
Cia Nacional de Chocolates 199,007 593
Coltabaco SA 249,614 295
Promigas SA 64,354 286
Suramericana de Inversiones SA 108,100 163
Valores Bavaria SA 482,100 546
----------
7,043
----------
CZECH REPUBLIC - 0.3%
CEZ (a) 7,224 $ 127
CKD Praha Holding (a) 2,379 40
Skoda Koncern Plzen AG (a) 6,942 54
SPT Telecom AS (a) 29,980 333
Unipetrol AS 33,408 64
----------
618
----------
EGYPT - 2.4%
Al Watany Bank of Egypt 13,000 142
Ameriyah Cement Co. 16,400 254
Commercial International Bank 31,070 248
Eastern Tobacco Co. 9,800 218
EFG Hermes Securities
Brokerage SAE - GDR (a) 7,300 85
Egypt American Bank 10,500 161
Egypt International Pharmaceutical
Industries Co. 4,700 234
Heliopolis Housing 5,100 424
Helwan Portland Cement 12,200 181
Madinet NASR for Housing
& Development 6,270 260
MISR International Bank
SAE - GDR 50,400 461
MISR International Bank
SAE - GDR (144A)(a) 125,500 1,180
National Societe Generale Bank 19,625 332
Paints & Chemicals
Industry Co. SAE 9,900 213
Suez Cement Co. - GDR (144A) 22,700 308
Suez Cement Co. (Regd) - GDR 22,700 305
----------
5,006
----------
GREECE - 5.0%
A.G. Petzetakis SA (a) 2,228 11
Aegek SA 61,420 266
</TABLE>
10 Annual Report
<PAGE>
SSgA
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
Alpha Leasing SA (Regd) 19,946 $ 290
Aluminum Co. of Greece Industrial
and Commercial (Regd) 3,420 178
Commercial Bank of Greece (Regd) 12,660 911
Credit Bank (Regd) 16,200 1,197
Ergo Bank (Regd) 13,240 1,059
ETBA Leasing SA (Regd)(a) 45,180 409
Hellenic Bottling 25,120 555
Hellenic Petroleum SA (a) 43,742 388
Hellenic Telecommunication
Organization SA 44,492 1,031
Heracles General Cement Co. 19,300 497
Intracom SA (a) 18,960 641
Ionian Bank SA (Regd)(a) 3,060 117
Loulis Flour Mills SA (Regd) 45,567 235
Naoussa Spinning Mills 39,800 299
National Bank of Greece (Regd) 5,058 679
National Mortgage Bank 4,407 294
Nikas SA 49,280 592
Petzetakis SA (a) 22,281 114
Shelman SA 23,550 162
Shelman SA - Bonus Issue (a) 2,580 18
Strintzis Shipping 59,560 289
Titan Cement Co. 3,160 195
----------
10,427
----------
HUNGARY - 1.2%
Danubius Hotel (Regd)(a) 9,935 168
Egis Gyogyszergyar 4,708 104
Fotex Rt. (Regd) 240,294 110
Magyar Olaj Es Gas 16,599 326
Magyar Tavkozlesi Rt. (Regd) 287,984 1,190
Mol Magyar Olay-Es
Gazipari - GDS (a) 10,300 199
Pick Szeged Rt. 4,268 147
Richter Gedeon, Ltd. - GDR 6,300 213
Tisza Vegyi Kombinat Rt. 6,901 86
----------
2,543
----------
INDIA - 2.4%
Andhra Valley Power
Supply Co., Ltd. 74,200 $ 133
Arvind Mills, Ltd. 34,300 26
Bajaj Auto, Ltd. 18,800 283
Bharat Heavy Electricals, Ltd. 34,200 185
Bharat Petroleum Corp., Ltd. 18,400 110
Bombay Fund NPV (a) 147,223 856
CESC, Ltd. 123,300 81
Crompton Greaves, Ltd. 51,500 31
Dr. Reddy's Laboratories, Ltd. 5,500 54
Finolex Cables, Ltd. 28,700 70
Gujarat State Fertilisers
& Chemicals, Ltd. 72,200 107
Hindustan Lever, Ltd. 25,600 974
Industrial Development
Bank of India, Ltd. 124,100 160
ITC, Ltd. 27,400 406
Madras Refineries, Ltd. 105,300 107
Mahanagar Telephone Nigam, Ltd. 25,100 119
Mahindra & Mahindra, Ltd. 12,500 46
Reliance Industries, Ltd. 96,200 244
Reliance Industries Ltd. - GDS (a) 50,000 225
State Bank of India 28,100 121
Tata Engineering
& Locomotive Co., Ltd. 72,850 221
Tata Iron and Steel Co., Ltd. 64,700 140
Videsh Sanchar Nigam, Ltd. (a) 16,900 330
----------
5,029
----------
ISRAEL - 9.6%
Africa - Israel Investments, Ltd. (a) 1,251 609
Agis Industries Ltd. (a) 121,812 759
Bank Hapoalim, Ltd. (a) 1,473,492 3,534
Bank Leumi Le-Israel 855,718 1,366
Bezeq Israeli
Telecommunication Corp., Ltd. 449,193 1,346
Clal Industries, Ltd. 121,344 632
Clal Israel, Ltd. (a) 23,070 555
</TABLE>
Annual Report 11
<PAGE>
SSgA
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
Dead Sea Works, Ltd. 126,103 $ 284
Delek Israel Fuel Corp., Ltd. 22,118 652
Discount Investment Corp. (Regd) 12,902 358
Dor Energy 1988, Ltd. - ADR (a) 33,820 173
ECI Telecom, Ltd. 29,100 800
Elco Holdings Ltd. 134,240 826
Electric Wire & Cable 14,000 41
Electrochemical
Industries 1952, Ltd. (a) 39,713 34
IDB Development Corp., Ltd. 5,780 134
Industrial Buildings Corp. 225,544 331
Israel Chemicals, Ltd. 271,375 303
Koor Industries 19,959 1,911
Leumi Insurance Holdings (a) 385,830 209
Makhteshim-Agan Industries, Ltd. (a) 310,584 765
Osem Investment, Ltd. 93,925 436
Supersol, Ltd. 367,126 1,007
Tadiran, Ltd. 13,958 463
Tadiran, Ltd. - ADR 15,200 487
Teva Pharmaceutical
Industries, Ltd. - ADR 49,800 1,783
----------
19,798
----------
MALAYSIA - 1.7% (f)
Affin Holdings Berhad 251,000 46
Amalgamated Steel Mills (a) 546,000 33
AMMB Holdings Berhad 305,000 106
Arab Malaysian Corp. Berhad 95,000 10
Arab-Malaysian Development Berhad 333,000 22
Bandar Raya Developments 989,000 116
Cahya Mata Sarawak Berhad 460,000 143
Cement Industries 146,000 45
Cold Storage 24,000 6
Diversified Resources Berhad 545,000 95
Faber Group Berhad (a) 445,600 24
Golden Hope Plantation 25,000 14
Highlands & Lowlands 250,000 114
IGB Corp. Berhad 450,000 65
Kuala Lumpur Kepong 141,000 140
Kumpulan Guthrie 297,000 120
LARUT Consolidated Berhad 251,000 44
Lion Land Berhad 1,308,000 88
Malayan Banking Berhad 286,000 202
Malayan Banking Berhad (a) 286,000 188
Malaysia Mining Corp. 544,000 78
Malaysian Airline System 175,000 64
Malaysian Helicopter Services 170,000 11
Malaysian Residential Corp. 240,000 31
MBF Capital Berhad 328,000 29
Metroplex Berhad 382,000 31
Perlis Plantations 164,250 137
Perusahaan Otomobl Nasional
Berhad 160,000 77
Petronas Gas Berhad 155,000 185
Public Bank Berhad 105,600 22
Public Bank Berhad (Alien Market) 92,799 19
Rashid Hussain Berhad 93,000 32
Renong Berhad (a) 806,000 65
RHB Captial Berhad 186,000 40
Rothmans of Pall Mall (Malaysia)
Berhad 38,000 173
Sime Darby Berhad 79,800 32
Tan Chong Motor Holdings 1,071,000 137
Technical Resource Industries
Berhad 170,000 24
Telekom Malaysia 105,500 136
Tenaga Nasional Berhad 34,000 18
UMW Holdings Berhad 378,000 91
Westmont Industries Berhad (a) 1,219,000 259
YTL Corp. Berhad 161,000 96
----------
3,408
----------
</TABLE>
12 Annual Report
<PAGE>
SSgA
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
MEXICO - 7.2%
Alfa SA de CV Class A NPV 211,662 $ 478
Altos Hornos de Mexico
SA - NPV (a) 499,000 491
Carso Global Telecom
Series A1 NPV 307,000 591
Cemex SA de CV Class B NPV 287,737 707
Cemex SA de CV NPV 4,072 8
Cifra SA de CV Series V NPV (a) 838,661 909
Controladora Comercial
Mexicana SA de CV 842,000 466
Cydsa SA Series A NPV 356,000 368
Desc SA de CV NPV 88,931 375
Desc Sociedad de Fomento Industrial
SA de CV Series B NPV 30,000 107
Empresa Nacional de Electric - ADR 103,450 938
Empresas ICA Sociedad
Controladora SA de CV (a) 362,000 327
Fomento Economico Mexicano
SA de CV Series B - ADR 19,400 332
Grupo Carso Series A NPV 90,000 221
Grupo Casa Autrey SA de CV NPV 360,000 201
Grupo Cementos Chihuahua
Series B NPV 633,000 267
Grupo Continental SA 273,500 617
Grupo Financiero Banamex
Accival Series B NPV (a) 368,000 310
Grupo Financiero Bancomer
Series B NPV 1,662,000 204
Grupo Gigante SA Series B NPV (a) 2,359,000 563
Grupo Herdez SA Class B NPV 1,408,000 325
Grupo Mexico SA Series B NPV 239,108 429
Grupo Posadas SA Series A NPV (a) 680,000 355
Grupo Simec SA de CV
Series B NPV (a) 620,000 68
Grupo Tribasa SA de CV - ADR (a) 65,000 158
Kimberly-Clark, Mexico
Class A NPV 180,000 395
Sanluis Corporacion
SA de CV - CPO (Units) 202,000 276
Sistema Argos SA Series B NPV 750,000 677
Telefonos de Mexico SA
Series L - ADR 67,800 2,420
Telefonos de Mexico SA
Series L NPV 510,900 907
TV Azteca SA de CV - ADR 7,500 37
Vitro SA NPV 279,000 350
----------
14,877
----------
MOROCCO - 0.6%
Banque Marocaine Du Commerce
Exterieur - GDR 52,500 1,247
----------
1,247
----------
PAKISTAN - 1.1%
Bank of Punjab (a) 251,721 36
Cherat Cement Co., Ltd. 93,000 16
Crescent Textile Mills (f) 49,722 8
Dandot Cement Co. (a) 35,000 1
Dewan Salmon Fibre 183,011 47
DG Kahn Cement (a) 160,000 10
Dhan Fibres, Ltd. (a) 1,027,000 38
Engro Chemical 106,288 131
Fauji Fertilizer 290,800 277
Hub Power Co. - GDR 1,360,800 336
Ici Pakistan (a) 1,244,000 273
Karachi Electric (a) 516,520 71
Lucky Cement Corp. (a) 190,000 12
Muslim Commercial 372,860 109
Pakistan International Air (a) 228,000 15
</TABLE>
Annual Report 13
<PAGE>
SSgA
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
Pakistan State Oil 94,303 $ 138
Pakistan Telecom Corp. Series A 1,466,400 626
Pioneer Cement (a) 61,300 2
Sui Northern Gas Pipelines (a) 162,958 29
Sui Southern Gas Co., Ltd. (a) 424,686 75
----------
2,250
----------
PERU - 0.6%
Banco Wiese 80,610 60
Banco Wiese - ADR 9,100 26
Cementos Lima SA 3,989 67
Cementos Norte Pacasmayo SA
Series T 31,151 39
Cerveceria Backus & Johnston SA 230,470 95
Compania de Minas Buenaventura
Series B - ADR 6,400 49
Credicorp, Ltd. 46,200 442
Minas Buenaventura Series B 16,600 63
Minsur SA 55,599 70
Telefonica Del Peru SA
Class B - ADR 30,500 392
----------
1,303
----------
PHILIPPINES - 1.0%
Aboitiz Equity Ventures (a) 4,918,500 112
Alsons Cement Corp. 656,250 24
Ayala Corp. 706,570 100
Belle Corp. (a) 2,233,200 41
C & P Homes, Inc. (a) 1,071,000 19
EEI Corp. (a) 840,800 13
Far East Bank & Trust Co. 90,200 72
Filinvest Development Corp. 463,100 16
Filinvest Land (a) 1,598,000 37
JG Summit Holdings, Inc.
Series B (a) 2,197,300 51
Manila Electric Co. Class B 118,980 195
Metro Pacific Corp. Class A (a) 1,042,720 15
Metropolitan Bank & Trust Co. 37,406 114
Petron Corp. (a) 1,405,040 85
Philippine Long Distance
Telephone Co. - ADR 38,200 597
Robinson's Land Corp.
Class B (a) 2,264,400 78
San Miguel Corp. Class B 197,220 173
Security Bank Corp. (a) 254,686 60
SM Prime Holdings 1,309,900 158
Universal Robina 657,100 32
----------
1,992
----------
POLAND - 4.0%
Agros Holdings Series C (a) 14,175 70
Bank Handlowy W. Warszawie 150,410 1,657
Bank Inicjatyw Gospodarczych 1,246,261 1,071
Bank Rozwoju Eksportu SA 22,775 520
Bank Rozwoju
Eksportu SA - Bonus Issue (a) 4,555 104
Bank Slaski SA 17,835 860
Budimex SA Series B (a) 79,775 294
Debica SA 42,707 608
Exbud SA (a) 17,362 139
Jelfa 11,865 89
KGHM Polska Miedz SA 317,590 1,024
KGHM Polska Miedz SA - GDR 9,000 58
Mostostal Export SA 119,235 90
Okocimskie Zaklady Piwowarskie
SA (a) 91,223 534
Polifarb 121,658 160
ROLIMPEX SA Series A (a) 103,682 137
Sokolowskie Zaklady Miesne SA (a) 93,324 49
STALEXPORT SA Series A (a) 100,295 544
WBK 21,500 132
Wolczanka SA (a) 27,970 88
Zywiec SA (Austrian Shares) 110 11
----------
8,239
----------
</TABLE>
14 Annual Report
<PAGE>
SSgA
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
PORTUGAL - 6.6%
Banco Comercial
Portuguese SA (Regd) 103,971 $ 2,895
Banco International
do Funchal SA Rights (a) 31,357 4
Banco Portugues
de Atlantico (Regd)(a) 15,350 316
Banif Banco International do Funchal 34,492 408
BPI-SGPS SA (Regd) 32,883 1,068
Brisa - Auto Estradas de Portugal SA 8,838 399
Cimpor Cimentos de Portugal 20,900 632
Companhia de Celulose do Caima SA 11,500 168
Corticeira Amorim SGPS 28,800 492
Electricidade de Portugal SA 63,650 1,487
Empresa Fabril de Maquinas
Electricas - Efacec 38,066 380
Inparsa Industria e Participacoes SA (a) 8,050 276
Jeronimo Martins SGPS 24,100 952
Lusotur Societe Finance
de Turismo (a) 9,800 112
Mague Gestao e Partipacoes 12,600 451
Modelo Continente-SGPS
Sociais SA - Bonus Issue 6,500 159
Modelo Continente-SGPS
Sociais SA New (a) 9,900 236
Portucel Industrial SA 35,600 233
Portugal Telecom SA 29,200 1,337
Salvador Caetano Industrias
Metalurgicas Veiculos
de Transporte SA 2,464 68
Sonae Investimentos SA 5,100 232
Soporcel SA (a) 12,900 526
Telecel-Comunicacaoes Pessoaissa 4,400 720
----------
13,551
----------
RUSSIA - 1.0%
AO Mosenergo - ADR 42,600 64
AO Tatneft - ADR 21,000 52
GAZ (Regd)(a) 2,200 62
Lukoil Oil Co. - ADR 54,200 791
Megionneftegaz (Regd)(a) 24,300 3
Mosenergo - ADR 52,500 79
Surgutneftegaz - ADR 256,400 782
Unified Energy Systems - GDR 83,400 292
----------
2,125
----------
SOUTH AFRICA - 7.8%
AECI, Ltd. 217,202 668
Amalgamated Banks of South Africa 262,867 733
Anglo America Corp. SA 58,173 1,465
Anglo American Industrial Corp. 11,744 128
Angloglold, Ltd. 30,542 1,044
Anglovaal Holdings, Ltd. 79,000 308
Billiton PLC 123,712 202
De Beers Centenary AG 90,944 1,098
Del Monte Royal Food, Ltd. (a) 1,008,639 266
Gencor, Ltd. 380,200 552
Impala Platinum Holdings, Ltd. 34,600 328
Investec Group, Ltd. 37,400 870
Iscor 4,219,951 833
Liberty Life Association of Africa 139,900 1,631
Liberty Life Strategic 92,707 147
Malbak, Ltd. NPV 277,950 95
Nedcor, Ltd. 51,600 670
Persetel Holdings, Ltd. 97,500 674
Rembrandt Group, Ltd. 272,894 1,221
Reunert, Ltd. 527,500 369
Sappi, Ltd. (a) 189,132 589
Sasol NPV 151,646 636
South African Breweries 53,752 756
Standard Bank
Investment Corp., Ltd. 196,500 412
Sun International
(South Africa), Ltd. 695,000 116
Tongaat-Hulett Group, Ltd. 34,819 233
----------
16,044
----------
</TABLE>
Annual Report 15
<PAGE>
SSgA
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
SOUTH KOREA - 0.0%
Korea Long-Term Credit Bank (a) 2,248 $ 3
Seoul Horizon Trust (a) 5,000 22
SK Telecommunications Co., Ltd. 15 5
----------
30
----------
SRI LANKA - 1.2%
Aitken Spence & Co., Ltd. 117,200 165
Asian Hotel Corp. (a) 176,200 9
Blue Diamond Jewel NPV 260,136 6
Central Finance Co. 25,600 58
Colombo Drydocks 114,700 24
Development Finance Corp.
of Ceylon 393,866 604
Hayleys, Ltd. 139,305 304
John Keells Holdings, Ltd. 431,343 1,070
Lanka Ceramic (a) 46,300 14
Lanka Milk Food (a) 21,600 1
Lanka Orix Leasing Co., Ltd. 14,880 11
Merchant Bank of Sri Lanka (a) 162,800 12
National Development Bank, Ltd. 94,000 136
Richard Pieris & Co., Ltd. 2,260 2
United Motor 32,160 14
----------
2,430
----------
TAIWAN - 2.5%
Acer, Inc. (a) 164,791 146
Ambassador Hotel (a) 244,755 170
Cathay Life Insurance 159,336 434
Chia Hsin Flour (a) 32,320 9
China Development Corp. (a) 269,325 456
China Petrochemical
Development Corp. (a) 385,526 225
China Rebar (a) 26,206 8
China Steel Corp. 561,495 319
Ensure Co., Ltd. (a) 125,840 118
Far Eastern Textile 386,861 223
Hua Nan Bank 213,708 299
Hualon Teijran (a) 29,183 8
Kao Hsing Chang Iron & Steel (a) 18,711 11
Kwong Fong Industries (a) 20,556 9
Lealea Enterprise (a) 31,861 15
Lite-On Electronics, Inc. 175,200 392
Pacific Construction (a) 359,316 114
Pacific Electrical Wire & Cable (a) 416,435 292
Prince Housing Development (a) 16,464 6
Taipei Business Bank (a) 59,405 55
Taiwan Semiconductor
Manufacturing Co. (a) 301,600 532
Tatung Co., Ltd. 502,000 288
Teco Electric & Machinery (a) 414,160 345
Tuntex Distinct 926,513 266
Walsin Lihwa Wire (a) 767,033 325
Yue Loong Motor 23,940 28
Yuen Foong Yu Manufacturing (a) 17,405 6
----------
5,099
----------
THAILAND - 0.6%
Advanced Information Services
(Alien Market) 41,200 167
Bangchak Petroleum (Alien Market)(a) 70,300 9
Bangkok Bank (Alien Market) 73,100 52
Bangkok Expressway PLC
(Alien Market)(a) 178,200 82
Bangkok Metropolitan Bank
PLC (Alien Market)(a)(f) 1,052,200 65
Bank of Ayudhya
(Alien Market)(a) 67,150 7
Cogeneration PLC (Alien Market) 26,200 8
Electricity Generating PLC
(Alien Market)(a) 101,100 140
</TABLE>
16 Annual Report
<PAGE>
SSgA
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
Finance One Public Co., Ltd.
(Alien Market)(a)(e) 158,300 $ --
First Bangkok City Bank PLC
(Alien Market)(a) 305,900 7
Industrial Finance Corp.
of Thailand (Alien Market) 135,800 17
Karat Sanitaryware PLC
(Alien Market)(a) 39,150 4
Krung Thai Bank PLC
(Alien Market) 312,800 43
National Finance & Securities
(Alien Market)(a) 122,200 10
National Petrochemical PLC
(Alien Market)(a) 46,800 11
PTT Exploration & Production PLC
(Alien Market)(a) 26,300 173
Saha Union Corp. PLC
(Alien Market) 105,800 29
Shinawatra Computer Co., Ltd.
(Alien Market)(a) 21,600 51
Shinawatra Satellite PLC
(Alien Market)(a) 66,700 21
Siam Cement Co. (Alien Market)(a) 10,300 66
Siam City Bank Public Co., Ltd.
(Alien Market)(a)(f) 46,720 3
Siam Commercial Bank PLC
(Alien Market)(a) 79,200 17
TelecomAsia (Alien Market)(a) 467,800 84
Thai Airways International
(Alien Market) 58,500 43
Thai Farmers Bank
(Alien Market)(a) 26,800 12
Thai Petrochemical Industry PLC
(Alien Market)(a) 686,900 25
Thai Telephone & Communication Co.
(Alien Market)(a) 409,900 32
Tipco Asphalt
Public Co., Ltd. (Alien Market)(a) 17,100 9
Unicord Public Company PLC
(Alien Market)(a)(e) 348,600 --
United Communications Industries
(Alien Market)(a) 68,000 16
Univest Land PLC
(Alien Market)(a)(e) 281,600 --
----------
1,203
----------
TURKEY - 2.5%
Akbank 15,658,436 288
Akbank - Bonus Issue (a) 7,887,653 145
Aselsan Elektronik Sanayi
Ve Ticaret AS (a) 11,523,000 278
Dogan Sirketler Grubu
Holding AS (a) 14,558,000 462
Eczacibasi Ilac Sanayii ve
Ticaret AS (a) 4,126,000 82
Eregli Demir Ve Celik
Fabrikalari (a) 2,951,000 253
Haci Omer Sabanci Holding AS 9,921,200 145
Haci Omer Sabanci
Holding AS Rights (a) 5,836,000 51
Izmir Demir Celik Sanayii AS (a) 27,929,090 68
Kartonsan 4,775,750 258
Kepez Elektrik 193,000 240
Koc Holding AS 2,164,000 223
Mardin Cimento Sanayii Ve
Ticaret 10,235,000 140
Migros 143,000 119
Petrokimya Holdings 805,000 238
Raks Elektronik Sanayi ve
Ticaret AS (a) 510,000 127
T Sise Cam 14,141,212 291
Tofas Turk Otomobil Fabrikasi (a) 9,096,750 243
Turk Hava Yollari A.O. (a) 2,860,000 176
Turkiye Garanti Bankasi AS (a) 14,640,000 343
Turkiye Is Bankasi 18,957,500 554
</TABLE>
Annual Report 17
<PAGE>
SSgA
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
Yapi ve Kredi Bankasi AS 13,916,985 $ 261
Yapi ve Kredi
Bankasi AS - Bonus Issue (a) 10,994,418 206
----------
5,191
----------
VENEZUELA - 1.1%
Banco Provincial SA 200,000 202
Banco Venezolano de Credito 31,126 128
Companhia Anonima Nacional
Telefonos de Venezuela - ADR 31,300 329
Corporacion Venezolana
de Cementos 123,780 29
Electricidad de Caracas (Regd) 3,911,926 940
F.V.I. Fondo de Valores
Inmobiliarios S.A.C.A.
Series B (a) 1,833,607 44
Manufacturas de Papel CA 2,567,930 65
Mavesa SA 4,130,085 165
Siderurgica Venezolana Sivensa
S.A.C.A. - ADR 22,600 89
Venezolana de Cementos S.A.C.A. 928,351 223
----------
2,214
----------
TOTAL COMMON STOCKS
(cost $254,067) 153,293
----------
PREFERRED STOCKS - 3.5%
BRAZIL - 3.3%
Acos Villares SA NPV (a) 1,000,000 51
Banco Bradesco SA NPV 121,077,064 679
Banco do Estado
de Sao Paulo NPV 12,575,600 427
Banco Itau SA (Regd) 1,764,000 749
Banco Nacional SA NPV (a)(e) 19,600,000 --
Caemi Mineracao e Metal (BR) 6,992,000 208
CEMIG SA 27,364,544 511
Centrais Geradoras do Sul
do Brasil SA Series B NPV (a) 6,501,000 7
Ceval Alimentos SA NPV (a) 61,288,800 205
Ceval Participacoes (a) 30,450,000 70
Companhia Energetica
de Sao Paulo NPV 12,983,800 177
Companhia Siderurgica
Belgo-Mineira NPV 10,270,000 445
Companhia Siderurgica
de Tubarao 42,175,232 301
Companhia Vale Do Rio Doce
Series A NPV 88,765 1,177
Copene Petroquimica do Nordestse
Series A (Regd) 1,580,341 269
Electrobras Series B NPV 6,501,000 99
Elektro - Electricidade e Servicos
SA (a) 12,983,800 254
Papel Simao NPV 15,500,000 191
Petroleo Brasileiro SA NPV 6,878,500 701
Telecomunicacoes de Sao Paulo
SA - NPV 596,458 85
Telesp Celular SA Class B NPV (a) 596,458 35
UNIPAR SA Class B 580,226 108
----------
6,749
----------
GREECE - 0.1%
Delta Dairy SA 23,084 219
----------
219
----------
HUNGARY - 0.1%
OTP Bank 8,740 301
----------
301
----------
TOTAL PREFERRED STOCKS
(cost $11,247) 7,269
----------
</TABLE>
18 Annual Report
<PAGE>
SSgA
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
<S> <C> <C>
LONG-TERM INVESTMENTS - 1.4%
NETHERLANDS - 0.6%
BPH Finance BV (conv.)
3.000% due 05/22/02 $ 1,100 $ 1,188
----------
1,188
----------
PHILIPPINES - 0.1%
Ayala Corp. (conv.)
3.000% due 06/08/00 232 251
----------
251
----------
POLAND - 0.7%
Elektrim Spolka Akcyjna
SA (conv.)
2.000% due 05/30/04 DEM 2,435 1,381
----------
1,381
----------
TOTAL LONG-TERM INVESTMENTS
(cost $3,705) 2,820
----------
SHORT-TERM INVESTMENTS - 22.9%
CANADA - 3.9%
Bank of Nova Scotia
5.715% due 10/30/98 (b)(d) 5,000 4,998
CIBC Wood Gundy
5.880% due 09/02/98 (b)(d) 3,000 3,000
----------
7,998
----------
NETHERLANDS - 2.4%
Ing Bank NV
5.750% due 06/01/99 (d) 5,000 5,017
----------
5,017
----------
UNITED STATES - 16.6%
AIM Treasury (b) 3,142 3,142
Caterpillar Financial Services
7.620% due 10/06/98 (b)(d) 2,000 2,003
Caterpillar Financial Services (MTN)
6.530% due 12/11/98 (d) 5,000 5,013
Federated Investors Prime
Obligations Fund (b) 3,307 3,307
Fleet Financial Group, Inc.
6.000% due 10/26/98 (b)(d) 10,000 10,001
General Electric Capital Corp.
Discount Note
5.591% due 12/14/98 (d) 5,000 4,922
Merrill Lynch & Co., Inc.
5.490% due 12/10/98 (d) 6,000 5,909
----------
34,297
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $47,290) 47,312
----------
</TABLE>
Annual Report 19
<PAGE>
SSgA
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
MARKET
VALUE
(000)
----------
<S> <C>
TOTAL INVESTMENTS
(identified cost $316,309)(c) - 102.1% $ 210,694
OTHER ASSETS AND LIABILITIES,
NET - (2.1)% (4,324)
----------
NET ASSETS - 100.0% $ 206,370
----------
----------
</TABLE>
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) See Note 2 for federal income tax information.
(d) Held as collateral by the custodian in connection with an equity swap
agreement held by the Fund.
(e) 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.
(f) The securities have been determined to be illiquid because they are
restricted or because there is an exceptionally low trading volume in their
primary trading market at August 31, 1998.
ABBREVIATIONS:
ADR - American Depositary Receipt
BR - Bearer
GDR - Global Depositary Receipt
GDS - Global Depositary Share
LIBOR - London Interbank Offered Rate
NPV - No Par Value
PLC - Public Limited Company
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, 1998
<TABLE>
<CAPTION>
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
---------- ------------
<S> <C> <C>
FUTURES CONTRACTS
(Notes 2 and 3)
MSCI Index
Futures Contracts (Taiwan)
expiration date 09/98 262 $ (170)
-----------
Total Unrealized Appreciation
(Depreciation) on Open
Futures Contracts Purchased (#) $ (170)
-----------
-----------
</TABLE>
(#) At August 31, 1998, $1,000 was held as collateral in connection with open
futures contracts held by the Fund.
<TABLE>
<CAPTION>
% OF MARKET
NET VALUE
INDUSTRY DIVERSIFICATION ASSETS (000)
- ------------------------ ---------- ----------
<S> <C> <C>
Basic Industries 8.7% $ 17,987
Capital Goods 6.6 13,577
Consumer Basics 6.4 13,230
Consumer Durables 1.8 3,726
Consumer Non-Durables 2.9 5,991
Consumer Services 0.5 976
Consumer Staples 0.1 172
Energy 4.4 9,114
Finance 21.7 44,785
General Business 5.0 10,294
Miscellaneous 5.4 11,186
Shelter 1.6 3,436
Technology 2.2 4,491
Transportation 0.5 967
Utilities 10.0 20,630
Long-Term Investments 1.4 2,820
Short-Term Investments 22.9 47,312
---------- ----------
Total Investments 102.1 210,694
Other Assets and Liabilities, Net (2.1) (4,324)
---------- ----------
NET ASSETS 100.0% $ 206,370
---------- ----------
---------- ----------
<CAPTION>
% OF MARKET
NET VALUE
GEOGRAPHIC DIVERSIFICATION ASSETS (000)
- -------------------------- ---------- ----------
<S> <C> <C>
Europe 18.4% $ 38,023
Latin America 25.3 52,242
Pacific Basin 6.5 13,302
Middle East 17.4 35,945
Africa 10.2 21,050
Long-Term Investments 1.4 2,820
Short-Term Investments 22.9 47,312
---------- ----------
Total Investments 102.1 210,694
Other Assets and Liabilities, Net (2.1) (4,324)
---------- ----------
NET ASSETS 100.0% $ 206,370
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 21
<PAGE>
SSgA
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
EQUITY SWAPS (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 3.00% 09/28/98 $ (3,344)
Kuala Lumpur Composite Index (KLCI) 2,500 3 Month LIBOR minus 5.00% 11/11/98 (104)
Korean 200 Stock Price Index (KS200) 2,500 3 Month LIBOR minus 20.00% 11/11/98 76
Korean 200 Stock Price Index (KS200) 5,000 USD LIBOR-BBA minus 10.00% 11/12/98 (2,415)
MSCI Taiwan Composite Index (MSTW) 5,000 USD LIBOR-BBA minus 11.00% 11/17/98 (1,303)
Korean 200 Stock Price Index (KS200) 3,000 USD LIBOR-BBA minus 14.00% 12/14/98 62
Korean 200 Stock Price Index (KS200) 5,000 6 Month LIBOR minus 11.00% 12/14/98 (8)
Korean 200 Stock Price Index (KS200) 5,000 3 Month LIBOR minus 13.50% 12/26/98 384
Kuala Lumpur Composite Index (KLCI) 3,000 USD LIBOR-BBA minus 8.00% 01/05/99 (1,105)
Kuala Lumpur Composite Index (KLCI) 5,000 USD LIBOR-BBA minus 9.00% 06/04/99 (2,293)
------------
$ (10,050)
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
22 Annual Report
<PAGE>
SSgA
EMERGING MARKETS FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1998
Amounts in
thousands (except
per share amount)
<S> <C>
ASSETS
Investments at market (identified cost $316,309)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . $ 210,694
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,023
Foreign currency holdings (identified cost $1,066) . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,032
Receivables
Dividends and interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,524
Investments sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 317
Fund shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,503
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
---------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218,096
LIABILITIES
Payables:
Investments purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 74
Fund shares redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 855
Accrued fees to affiliates and trustees (Note 4). . . . . . . . . . . . . . . . . 535
Other accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Daily variation margin on futures contracts (Notes 2 and 3) . . . . . . . . . . . 170
Liability for equity swaps (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . 10,050
--------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,726
---------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 206,370
---------------
---------------
NET ASSETS CONSIST OF:
Undistributed net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 912
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16,746)
Unrealized appreciation (depreciation) on:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (105,615)
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (170)
Equity swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,050)
Foreign currency-related transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (52)
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 338,059
---------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 206,370
---------------
---------------
NET ASSET VALUE, offering and redemption price per share:
($206,369,606 divided by 31,663,828 shares of $.001
par value shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . $ 6.52
---------------
---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 23
<PAGE>
SSgA
EMERGING MARKETS FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Fiscal Year Ended August 31, 1998
Amounts
in thousands
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $507) . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,868
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,389
--------------
Total Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,257
EXPENSES (Notes 2 and 4):
Advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,998
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 945
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Amortization of deferred organization expenses . . . . . . . . . . . . . . . . . . 7
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
--------------
Expenses before reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,673
Expense reductions (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . (343)
--------------
Expenses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,330
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,927
--------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13,059)
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (110)
Equity swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,257)
Foreign currency-related transactions. . . . . . . . . . . . . . . . . . . . . . . (1,388) (18,814)
--------------
Net change in unrealized appreciation or depreciation of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (124,945)
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (170)
Equity swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,022)
Foreign currency-related transactions. . . . . . . . . . . . . . . . . . . . . . . (14) (135,151)
-------------- --------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (153,965)
--------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . $ (149,038)
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
24 Annual Report
<PAGE>
SSgA
EMERGING MARKETS FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the Fiscal Year Ended August 31,
Amounts in thousands
1998 1997
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,927 $ 1,954
Net realized gain (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . (18,814) 5,905
Net change in unrealized appreciation or depreciation . . . . . . . . . . . . . . (135,151) 11,846
-------------- --------------
Net increase (decrease) in net assets resulting from operations. . . . . . . (149,038) 19,705
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,219) (1,264)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . -- (702)
In excess of net realized gain on investments . . . . . . . . . . . . . . . . . . (5,502) --
-------------- --------------
Total Distributions to Shareholders. . . . . . . . . . . . . . . . . . . . . (8,721) (1,966)
-------------- --------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from
Fund share transactions (Note 5) . . . . . . . . . . . . . . . . . . . . . . 111,421 114,753
-------------- --------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . . (46,338) 132,492
NET ASSETS
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252,708 120,216
-------------- --------------
End of period (including undistributed net investment income of
of $912 and $1,284, respectively) . . . . . . . . . . . . . . . . . . . . . $ 206,370 $ 252,708
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 25
<PAGE>
SSgA
EMERGING MARKETS FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughour each
period and other performance information derived from the financial statements.
YEAR ENDED AUGUST 31,
---------------------------------------------------------
1998 1997 1996 1995 1994*
---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . $ 12.33 $ 10.87 $ 10.30 $ 11.45 $ 10.00
---------- ---------- ---------- ---------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . .18 .12 .11 .14 .05
Net realized and unrealized gain (loss) on investments . . . . (5.58) 1.51 .68 (1.19) 1.40
---------- ---------- ---------- ---------- ---------
Total Income From Investment Operations . . . . . . . . . . (5.40) 1.63 .79 (1.05) 1.45
---------- ---------- ---------- ---------- ---------
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . (.15) (.11) (.12) (.10) --
Net realized gain on investments . . . . . . . . . . . . . . . -- (.06) (.10) -- --
In excess of net realized gain on investments. . . . . . . . . (.26) -- -- -- --
---------- ---------- ---------- ---------- ---------
Total Distributions . . . . . . . . . . . . . . . . . . . . (.41) (.17) (.22) (.10) --
---------- ---------- ---------- ---------- ---------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . $ 6.52 $ 12.33 $ 10.87 $ 10.30 $ 11.45
---------- ---------- ---------- ---------- ---------
---------- ---------- ---------- ---------- ---------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . (45.36) 15.12 7.83 (9.28) 14.50
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . . . . . . . . . 206,370 252,708 120,216 68,385 27,479
Ratios to average net assets (%)(b):
Operating expenses, net (c) . . . . . . . . . . . . . . . 1.25 1.25 1.28 1.50 1.50
Operating expenses, gross (c) . . . . . . . . . . . . . . 1.38 1.51 1.67 1.90 2.45
Net investment income . . . . . . . . . . . . . . . . . . 1.85 1.07 1.10 1.74 1.31
Portfolio turnover (%) . . . . . . . . . . . . . . . . . . . 38.94 15.00 4.36 19.77 --
</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.
26 Annual Report
<PAGE>
SSgA
EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1998
1. ORGANIZATION
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 21 investment portfolios which are in operation as
of August 31, 1998. 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.
FEDERAL INCOME TAXES: Since the Investment Company is a Massachusetts
business trust, each fund 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.
Annual Report 27
<PAGE>
SSgA
EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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, 1998, the Fund had a net tax
basis capital loss carryover of $62,851, which may be applied against
any realized net taxable gains in each year or until its expiration
date of August 31, 2006, whichever occurs first. As permitted by tax
regulations, the Fund intends to defer a net realized capital loss of
$7,746,217 incurred from November 1, 1997 to August 31, 1998, and treat
it as arising in fiscal year 1999.
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, 1998 are as follows:
<TABLE>
<CAPTION>
NET
UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
-------------- ------------- --------------- ----------------
<S> <C> <C> <C>
$ 313,073,252 $ 11,411,480 $ (113,790,732) $ (102,379,252)
</TABLE>
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 at August 31, 1998:
<TABLE>
<CAPTION>
UNDISTRIBUTED ACCUMULATED ADDITIONAL
NET INVESTMENT NET REALIZED PAID-IN
INCOME GAIN (LOSS) CAPITAL
-------------- ------------ -----------
<S> <C> <C>
$ (2,079,324) $ 2,092,161 $ (12,837)
</TABLE>
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.
28 Annual Report
<PAGE>
SSgA
EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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.
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 thevaluation 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
Annual Report 29
<PAGE>
SSgA
EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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.
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"). 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 accompanying 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 forward contracts at August 31, 1998 are presented on the
accompanying Statement of Net Assets.
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.
EQUITY SWAPS: The Fund has entered into several equity swap agreements
in order to efficiently participate in certain foreign markets.
Pursuant to these agreements, the Fund pays the swap counterparties
based on the notional amount and an agreed upon rate (i.e. the 12-month
USD LIBOR BBA rate). During the terms of the agreements, changes in the
underlying values of the swaps are recorded as unrealized gain (loss)
and are based on changes in the value of the underlying index. The
underlying index is valued at the published daily closing price.
Accrued interest expense to be paid to the swap counterparties or
accrued interest income to be paid to the Fund, at the agreed upon
dates, are recognized as unrealized gain (loss). Amounts paid to the
swap counterparties representing capital depreciation on the underlying
securities and accrued interest expense and interest income are
recorded as net realized gain (loss). The Fund is exposed to credit
risk in the event of non-performance by the swap counterparties;
however, the Fund does not anticipate non-performance by the
counterparties. The Fund has segregated certain short-term investments
(identified on the accompanying Statement of Net Assets) as collateral
for the notional amount and payment of liabilities under the equity
swap agreements.
30 Annual Report
<PAGE>
SSgA
EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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.
3. SECURITIES TRANSACTIONS
INVESTMENT TRANSACTIONS: For the year ended August 31, 1998, purchases and
sales of investment securities, excluding short-term investments and
futures contracts, aggregated to $162,866,591 and $85,134,735,
respectively.
FUTURES TRANSACTIONS: The Fund's transactions in futures contracts for the
year ended August 31, 1998 were as follows:
<TABLE>
<CAPTION>
FUTURES CONTRACTS
---------------------------
AGGREGATE
NUMBER OF FACE VALUE OF
CONTRACTS CONTRACTS (1)
--------- -----------------
<S> <C> <C>
Outstanding at August 31, 1997 -- $ --
Contracts opened 468 12,429,178
Contracts closed (206) (5,970,889)
Outstanding at August 31, 1998 262 $ 6,458,289
</TABLE>
(1) The aggregate face value of contracts is computed on the date each
contract was opened.
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. 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,
1998, 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
Annual Report 31
<PAGE>
SSgA
EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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% for the period September 1, 1997 to
December 31, 1997 and up to a maximum of 5% for January 1, 1998 to
August 31, 1998) of the asset-based fee determined in (i)); (iii)
out-of-pocket expenses; and (iv) start-up costs for new funds.
On August 10, 1998, Frank Russell Company entered into an agreement
with The Northwestern Mutual Life Insurance Co., an insurance
organization, pursuant to which Northwestern Mutual Life will acquire
all of the outstanding common stock of Frank Russell Company.
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 charged 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"), the Adviser's Metropolitan Division of Commercial Banking
("Commercial Banking") and State Street Solutions
("Solutions")(collectively the "Agents"), as well as several
unaffiliated service providers. For these services, the Fund pays
.025%, .175%, .175%, .175% and .175% to the Adviser, SSBSI, RIS,
Commercial Banking, and Solutions, 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, 1998, the Fund was charged
shareholder servicing expenses of $65,328, $2,972, $6,902, $213, and
$4,250, by the Adviser, SSBSI, RIS, Commercial Banking, and Solutions,
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 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
32 Annual Report
<PAGE>
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, 1998.
BOARD OF TRUSTEES: The Investment Company pays each Trustee not
affiliated with the Investment Company a retainer of $48,000 annually,
$1,500 for each board meeting attended, an additional $1,500 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, 1998
WERE AS FOLLOWS:
<TABLE>
<S> <C>
Advisory fees $ 246,232
Administration fees 14,138
Custodian fees 231,460
Distribution fees 15,261
Shareholder servicing fees 6,680
Transfer agent fees 20,400
Trustees' fees 987
-----------
$ 535,158
-----------
-----------
</TABLE>
BENEFICIAL INTEREST: As of August 31, 1998, one shareholder was a record
owner of approximately 46% of the total outstanding shares of the Fund.
5. FUND SHARE TRANSACTIONS
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS)
FOR THE YEARS ENDED AUGUST 31,
----------------------------------------------------
1998 1997
------------------------ ------------------------
SHARES DOLLARS SHARES DOLLARS
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Proceeds from shares sold 24,649 $ 244,575 13,524 $ 165,252
Proceeds from reinvestment
of distributions 663 8,156 171 1,875
Payments for shares redeemed (14,139) (141,310) (4,262) (52,374)
---------- ---------- ---------- ----------
Total net increase (decrease) 11,173 $ 111,421 9,433 $ 114,753
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
Annual Report 33
<PAGE>
SSgA
EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
6. LINE OF CREDIT
The Fund and several affiliated Funds (the "Participants") share in a $50
million revolving credit facility for temporary or emergency purposes,
including the meeting of redemption requests that otherwise might require
the untimely disposition of securities. The Participants are charged an
annual commitment fee of .065% on the average daily unused amount of the
Aggregate commitment, which is allocated among each of the Participants.
Interest, at the Federal Fund Rate plus .50% annually, is calculated based
on the market rates at the time of the borrowing. The Fund may borrow up
to a maximum of 33 1/3 percent of the value of it's total assets under the
agreement.
34 Annual Report
<PAGE>
SSgA
EMERGING MARKETS FUND
TAX INFORMATION
August 31, 1998 (Unaudited)
The Fund paid distributions of $5,502,467 from net long-term capital gains
during its taxable year ended August 31, 1998. Pursuant to Section 852 of the
Internal Revenue Code, the Fund designates $3,762,546 as 20% capital gain
dividends for its taxable year ended August 31, 1998.
The Fund paid foreign taxes of $507,066 and recognized $5,659,459 of foreign
source income during the taxable year ended August 31, 1998. Pursuant to Section
853 of the Internal Revenue Code, the Fund designates $.0160 per share of
foreign taxes paid and $.1787 of gross income earned from foreign sources in the
taxable year ended August 31, 1998.
Please consult a tax advisor for questions about federal or state income tax
laws.
Annual Report 35
<PAGE>
SSgA EMERGING MARKETS FUND
One International Place, 27th 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
Mark E. Swanson, Assistant Secretary and Principal Accounting Officer
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.
One International Place, 27th 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
PricewaterhouseCoopers LLP
One Post Office Square
Boston, Massachusetts 02109
36 Annual Report
<PAGE>
SSgA-Registered Trademark- FUNDS
REAL ESTATE EQUITY FUND
Annual Report
August 31, 1998
Table of Contents
Page
Chairman's Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion and Analysis . . . . . . . . . . . . . . . 6
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . 15
Fund Management and Service Providers . . . . . . . . . . . . . . . . . . 20
"SSgA-Registered Trademark- " IS A REGISTERED TRADEMARK 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 REAL ESTATE 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, 1998. Over the past year, the Funds have grown to include
twenty-one 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 SSgA Real Estate Equity Fund. I hope you find
this information a useful tool as you review your overall investment strategy.
The SSgA Funds have also opened four additional funds in fiscal 1998. The
investment objectives for these four new funds are as follows:
The SSgA Special Equity Fund seeks to maximize total return through investment
in mid- and small capitalization US equity securities. This Fund was opened as
an alternative investment strategy for the SSgA Small Cap Fund that closed to
new investors on August 31, 1998.
The SSgA International Growth Opportunities Fund seeks to provide long-term
capital growth by investing primarily in securities of foreign issuers.
The SSgA High Yield Bond Fund seeks to maximize total return by investing
primarily in non investment-grade bonds, including, but not limited to, those
represented by the Lehman Brothers High Yield Bond Index.
The SSgA Real Estate Equity Fund seeks to provide income and capital growth by
investing primarily in publicly traded securities of real estate companies.
During the past fiscal year, the SSgA Funds were proud to announce that the SSgA
S&P 500 Index Fund and the SSgA Yield Plus Fund each achieved five years of
operational history. We are proud of our long term record and look forward to
having additional funds reach their five year anniversary.
SSgA intends to proceed with the evolution of new products and services while
committing to your investment needs. We will continue to develop our
professional expertise by focusing on the expansion of both our global resources
and our diversified product lines.
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 REAL ESTATE 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. As a result, the portfolios we
manage benefit from the knowledge of the entire team.
Mr. David B. Smith, CFA, Principal, has been the portfolio manager primarily
responsible for investment decisions regarding the SSgA Real Estate Fund since
its inception in April 1998. Mr. Smith joined State Street Global Advisors in
1990, and as a senior equity analyst and portfolio manager, he specializes in
Real Estate Investment Trusts (REITs). Prior to his current responsibilities,
Mr. Smith covered REITs and the financial services market segment, which
includes banks, thrifts, insurance companies, credit card business and asset
management firms. There are two other portfolio managers working with Mr. Smith.
Annual Report 5
<PAGE>
SSgA REAL ESTATE EQUITY FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
OBJECTIVE: Provide income and capital growth by investing primarily in publicly
traded securities of real estate companies.
INVESTS IN: At least 65% of the Fund's total assets in equity interests in Real
Estate Investment Trust securities contained in the Standard & Poor's REIT
Index.
STRATEGY: The Fund will attempt to meet its objective through the active
selection of REIT securities, across different types and regions. The selection
of investments will be made based on the fundamental research that the advisor
conducts through its strategy and research analyst team.
[GRAPH]
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
DATES REAL ESTATE EQUITY FUND S&P-Registered Trademark- REIT INDEX **
<S> <C> <C>
Inception* $10,000 $10,000
1998 $8,201 $8,228
</TABLE>
YEARLY PERIOD ENDED AUGUST 31
SSgA REAL ESTATE EQUITY FUND
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ------------ ------------ ------------
<S> <C> <C>
Inception $ 8,201 (17.99)%+
</TABLE>
STANDARD & POOR'S-Registered Trademark- REIT INDEX
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ------------ ------------ ------------
<S> <C> <C>
Inception $ 8,228 (17.72)%+
</TABLE>
SEE RELATED NOTES ON THE FOLLOWING PAGE.
PERFORMANCE REVIEW
From its inception date of May 1, 1998 through August 31, 1998, the SSgA Real
Estate Equity Fund lost 17.99%. This compares with its benchmark, the S&P REIT
Index, which was off 17.72% for the same period. The defensive characteristics
of REITs were clearly demonstrated in the month of August 1998, as the S&P REIT
Index was down 9.81%, as compared to the S&P 500-Registered Trademark- Index
which lost 14.44% in the same month.
MARKET AND PORTFOLIO HIGHLIGHTS
Due to the run-up of real estate pricing, REIT companies have been forced to
stop, or at least decelerate, their accumulated property acquisitions. As a
result, REIT share prices have been damaged by a decline in the estimated future
growth rate of REIT earnings. Given this reduction, growth oriented investors
are moving out of the REIT group and selling the larger capitalized and more
liquid companies. The subsequent decline in REIT share prices has only
perpetuated the situation by increasing the cost of equity capital for REITs,
and eliminating access to new equity capital. REITs are in the process of a
shift in their shareholder base that may result in a new constituency that will
have more moderate growth expectations for these companies.
The Fund continues to believe that REITs are very attractive
6 Annual Report
<PAGE>
SSgA REAL ESTATE EQUITY FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
on a valuation basis relative to both equities and fixed income securities.
Currently, REITs are yielding approximately 7.2% on average, resulting in a
spread of 220bp over the ten-year Treasury yield of 5.0%, and 190bp over the
thirty-year yield of 5.3%. These spreads are very high by historical standards.
For the first time in the new era of REITs, the majority of these companies are
trading at a discount to the underlying value of their real estate. This is in
contrast to the premiums they have traded at in recent years which range from
10-50% above their net asset values.
The hotel sector performed significantly worse than the overall REIT universe,
posting negative returns of greater than 40% during the period. The poor
performance is attributable to several factors, including confusion about the
legal structure of the two largest companies in this sector, a slowdown in the
estimated growth rate as a result of limited accretive acquisition
opportunities, and concerns about the domestic economy. The current fiscal year
performance of the Fund benefited from its underweight position to the hotel
sector. The Fund's allocation in this sector was 14.0%, as compared to 16.0% for
the Index.
The Fund also had an overweight position in the office sector, with stock
selections concentrated on those companies that have a focus on the central
business districts (CBD), as opposed to those that are more focused on suburban
office space. This position is based on the premise that the CBD office markets
are inherently more supply constrained which should put CBD companies in a
better position relative to the suburban players as newly developed office
supply comes on line. Within the office sector, the Fund had a 27.0% weight as
compared to 24.0% for the Index.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
(AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31, 1998
<S> <C>
Starwood Lodging Hotel and Resorts 6.2%
Spieker Properties, Inc. 3.6
Apartment Investment &
Management Co. Class A 3.6
Manufactured Home Communities, Inc. 3.6
Health Care Property Investors, Inc. 3.5
Equity Office Properties Trust 3.5
Boston Properties, Inc. 3.5
Cousins Properties, Inc. 3.4
Chelsea GCA Realty, Inc. 3.4
Developers Diversified Realty 3.4
</TABLE>
- --------------------------------------------------------------------------------
NOTES: THE FOLLOWING NOTES RELATE TO THE GROWTH OF $10,000 GRAPH AND TABLE ON
THE PRECEDING PAGE.
* The Fund commenced operations on May 1, 1998. Index comparison also began
May 1, 1998.
** The Standard & Poor's-Registered Trademark- REIT Composite Index is
capitalization-weighted index of 100 stocks designed to measure the
performance of Real Estate Investment Trusts, commonly know as REITs. The
Index was developed with a base value of 100 as of December 31, 1996.
+ Total return reflects performance for the period May 1, 1998 to August 31,
1998.
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:
In our opinion, the accompanying statement of assets and liabilities and
statement of net assets, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of SSgA Real Estate Equity Fund (the "Fund") at
August 31, 1998, the results of its operations, the changes in its net assets,
and the financial highlights for the period May 1, 1998 (commencement of
operations) to August 31, 1998, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit, which included
confirmation of securities at August 31, 1998 by correspondence with the
custodian and brokers, provides a reasonable basis for the opinion expressed
above.
Boston, Massachusetts
October 8, 1998
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
REAL ESTATE EQUITY FUND
STATEMENT OF NET ASSETS
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
COMMON STOCKS (b) - 97.1%
APARTMENTS - 14.8%
Apartment Investment &
Management Co. Class A 19,400 $ 665
Archstone Communities Trust 28,200 546
Avalon Bay Communities, Inc. 18,600 614
Equity Residential Properties Trust 13,300 531
Essex Property Trust 2,300 65
Irvine Apartment Communities, Inc. 12,200 311
----------
2,732
----------
HEALTH CARE - 7.4%
Health Care Property Investors, Inc. 20,800 651
Healthcare Realty Trust, Inc. 25,500 584
HRPT Properties Trust 8,400 131
----------
1,366
----------
HOTELS/LEISURE - 14.6%
FelCor Lodging Trust 28,200 575
Innkeepers USA Trust 12,200 118
Patriot American Hospitality, Inc. 25,400 343
Starwood Lodging Hotel and Resorts 31,600 1,153
Sunstone Hotel Investors, Inc. 59,800 508
----------
2,697
----------
LEASING - 4.1%
Captec Net Lease Realty, Inc. 16,500 196
Glenborough Realty Trust, Inc. 25,500 555
----------
751
----------
MANUFACTURED HOMES - 3.6%
Manufactured Home
Communities, Inc. 28,100 662
----------
662
----------
OFFICE/INDUSTRIAL - 32.6%
Arden Realty Group, Inc. 25,800 545
Boston Properties, Inc. 22,700 648
Brandywine Realty Trust 5,700 103
CarrAmerica Realty Corp. 24,300 547
CenterPoint Properties Corp. 7,000 228
Cornerstone Properties, Inc. 10,300 148
Cousins Properties, Inc. 23,100 642
EastGroup Properties, Inc. 1,700 29
Equity Office Properties Trust 28,600 649
Mack-Cali Realty Corp. 21,500 619
ProLogis Trust 8,800 176
SL Green Realty Corp. 20,400 393
Spieker Properties, Inc. 18,700 665
Weeks Corporation 22,700 627
----------
6,019
----------
OUTLET CENTERS - 3.5%
Chelsea GCA Realty, Inc. 18,500 638
----------
638
----------
SELF STORAGE - 2.3%
Storage USA, Inc. 13,900 416
----------
416
----------
SHOPPING CENTERS - 14.2%
Developers Diversified Realty 35,900 631
Equity One, Inc. 40,500 342
Glimcher Realty Trust 33,800 549
Kimco Realty Corp. 12,000 426
Realty Income Corp. 12,700 299
Weingarten Realty Investors, Inc. 9,800 377
----------
2,624
----------
TOTAL COMMON STOCKS 17,905
(cost $22,051) ----------
</TABLE>
Annual Report 9
<PAGE>
SSgA
REAL ESTATE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
<S> <C> <C>
SHORT-TERM INVESTMENTS - 3.9%
AIM Short-Term Investment
Prime Portfolio (c) $ 308 $ 308
Federated Investors Prime
Obligations Fund (c) 421 421
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $729) 729
----------
TOTAL INVESTMENTS
(identified cost $22,780)(d) - 101.0% 18,634
OTHER ASSETS AND LIABILITIES,
NET - (1.0%) (176)
----------
NET ASSETS - 100.0% $ 18,458
----------
----------
</TABLE>
(a) Nonincome-producing security.
(b) All common stocks held are Real Estate Investment
Trusts (REIT).
(c) At cost, which approximates market.
(d) See Note 2 for federal income tax information.
The accompanying notes are an integral part of the financial statements.
10 Annual Report
<PAGE>
SSgA
REAL ESTATE EQUITY FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1998
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $22,780)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . $ 18,634
Receivables:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
--------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,827
LIABILITIES
Payables:
Investments purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 337
Accrued fees to affiliates and trustees (Note 4) . . . . . . . . . . . . . . . . . 16
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
--------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 369
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,458
--------------
--------------
NET ASSETS CONSIST OF:
Undistributed net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 266
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (52)
Unrealized appreciation (depreciation) on investments. . . . . . . . . . . . . . . . . . . . . . . . . . (4,146)
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,388
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,458
--------------
--------------
NET ASSET VALUE, offering and redemption price per share:
($18,457,808 divided by 2,259,092 shares of $.001 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8.17
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 11
<PAGE>
SSgA
REAL ESTATE EQUITY FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Period May 1, 1998
(Commencement of Operations) to August 31, 1998
Amounts
in thousands
<S> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 392
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
---------------
Total Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 405
EXPENSES (Notes 2 and 4):
Advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 42
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
--------------
Expenses before reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Expense reductions (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . (25)
--------------
Expenses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
---------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340
---------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (52)
Net change in unrealized appreciation or depreciation of investments . . . . . . . . . . . . . . . . . . (4,146)
---------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,198)
---------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . $ (3,858)
---------------
---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 Annual Report
<PAGE>
SSgA
REAL ESTATE EQUITY FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the Period May 1, 1998
(Commencement of Operations) to August 31, 1998
Amounts
in thousands
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 340
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (52)
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . . . . . . . . . . . . . . (4,146)
------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . . . . . . . . . . . (3,858)
------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (74)
------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from
Fund share transactions (Note 5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,390
------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,458
NET ASSETS
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --
------------
End of period (including undistributed net investment income of $266) . . . . . . . . . . . . . . . . $ 18,458
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 13
<PAGE>
SSgA
REAL ESTATE EQUITY 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.
1998*
--------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10.00
--------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Net realized and unrealized gain on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.94)
--------------
Total Income From Investment Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.79)
--------------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.04)
--------------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8.17
--------------
--------------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (17.99)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,458
Ratios to average net assets (%)(b):
Operating expenses, net (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.00
Operating expenses, gross (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.38
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.21
Portfolio turnover rate (%)(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.36
</TABLE>
* For the period May 1, 1998 (commencement of operations) to August 31, 1998.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended August 31, 1998 are annualized.
(c) See Note 4 for current period amounts.
14 Annual Report
<PAGE>
SSgA
REAL ESTATE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1998
1. ORGANIZATION
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 21 investment portfolios which are in operation as
of August 31, 1998. These financial statements report on one portfolio, the
SSgA Real Estate 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 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.
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 on the accrual basis. Distributions from Real
Estate Investment Trusts ("REITs") owned by the Real Estate Equity Fund may
have as their components dividend income, capital gains and/or returns of
capital. Distributions that are deemed to be capital gains or returns of
capital by the trusts are treated by the Fund, respectively, as an
adjustment to its realized capital gains or its cost of the investment. The
exact amount to be adjusted can be ascertained only at the end of each
REIT's fiscal year when finally determined and reported by the various
trusts.
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.
Annual Report 15
<PAGE>
SSgA
REAL ESTATE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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 $34,688 incurred from May 1, 1998 to August 31, 1998, and
treat it as arising in fiscal year 1999.
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, 1998 are as follows:
<TABLE>
<CAPTION>
NET
UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
------------ ------------ -------------- --------------
<S> <C> <C> <C>
$ 22,797,414 $ 44 $ (4,163,458) $ (4,163,414)
</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 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 REITs 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.
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
16 Annual Report
<PAGE>
SSgA
REAL ESTATE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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 period from May 1, 1998 (commencement of
operations) to August 31, 1998, purchases and sales of investment
securities, excluding short-term investments, aggregated to $23,205,922 and
$1,103,259, 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 an annual rate of
.65% of its average daily net assets. For the period May 1, 1998
(commencement of operations) to August 31, 1998, 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. 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 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 5% of the
asset-based fee determined in (i)); (iii) out-of-pocket expenses; and (iv)
start-up costs for new funds.
On August 10, 1998, Frank Russell Company entered into an agreement with
The Northwestern Mutual Life Insurance Co., an insurance organization,
pursuant to which Northwestern Mutual Life will acquire all of the
outstanding common stock of Frank Russell Company.
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.
Annual Report 17
<PAGE>
SSgA
REAL ESTATE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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 charged 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"), the
Adviser's Metropolitan Division of Commercial Banking ("Commercial
Banking") and State Street Solutions ("Solutions")(collectively the
"Agents"), as well as several unaffiliated service providers. For these
services, the Fund pays .025%, .175%, .175%, .175% and .175% to the
Adviser, SSBSI, RIS, Commercial Banking, and Solutions, respectively, based
upon the average daily value of all Fund shares held by or for customers of
these Agents. For the period from May 1, 1998 (commencement of operations)
to August 31, 1998, the Fund was charged shareholder servicing expenses of
$1,629, $191 and $239, by the Adviser, SSBSI, and Commercial Banking,
respectively. The Fund did not incur any expenses from RIS and Solutions
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, 1998.
BOARD OF TRUSTEES: The Investment Company pays each Trustee not affiliated
with the Investment Company a retainer of $48,000 annually, $1,500 for each
board meeting attended, an additional $1,500 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.
18 Annual Report
<PAGE>
SSgA
REAL ESTATE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
ACCRUED FEES PAYABLE TO AFFILIATES AND TRUSTEES AS OF AUGUST 31, 1998 WERE
AS FOLLOWS:
<TABLE>
<S> <C>
Advisory fees $ 8,673
Administration fees 495
Custodian fees 3,297
Distribution fees 77
Shareholder servicing fees 544
Transfer agent fees 2,786
Trustees' fees 23
----------
$ 15,895
----------
----------
</TABLE>
BENEFICIAL INTEREST: As of August 31, 1998, one shareholder (who was also
an affiliate of the Investment Company) was a record owner of approximately
24% of the total outstanding shares of the Fund.
5. FUND SHARE TRANSACTIONS
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS)
FOR THE PERIOD MAY 1, 1998
(COMMENCEMENT OF OPERATIONS)
TO AUGUST 31, 1998
---------------------------
SHARES DOLLARS
------------ ------------
<S> <C> <C>
Proceeds from shares sold 2,260 $ 22,403
Proceeds from reinvestment
of distributions 4 34
Payments for shares redeemed (5) (47)
------------ ------------
Total net increase (decrease) 2,259 $ 22,390
------------ ------------
------------ ------------
</TABLE>
6. LINE OF CREDIT
The Fund and several affiliated Funds (the "Participants") share in a $50
million revolving credit facility for temporary or emergency purposes,
including the meeting of redemption requests that otherwise might require
the untimely disposition of securities. The Participants are charged an
annual commitment fee of .065% on the average daily unused amount of the
Aggregate commitment, which is allocated among each of the Participants.
Interest, at the Federal Fund Rate plus .50% annually, is calculated based
on the market rates at the time of the borrowing. The Fund may borrow up to
a maximum of 33 1/3 percent of the value of its total assets under the
agreement.
7. DIVIDEND
On September 1, 1998, the Board of Trustees declared a dividend of $.1175
from net investment income, payable on September 9, 1998 to shareholders of
record on September 2, 1998.
Annual Report 19
<PAGE>
SSgA REAL ESTATE EQUITY FUND
One International Place, 27th 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
Mark E. Swanson, Assistant Secretary and Principal Accounting Officer
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.
One International Place, 27th 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
PricewaterhouseCoopers LLP
One Post Office Square
Boston, Massachusetts 02109
20 Annual Report
<PAGE>
SSgA-Registered Trademark- Funds
INTERNATIONAL GROWTH OPPORTUNITIES FUND
Annual Report
August 31, 1998
Table of Contents
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion and Analysis . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . 15
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . 16
Tax Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Fund Management and Service Providers. . . . . . . . . . . . . . . . . 24
"SSgA-Registered Trademark- " IS A REGISTERED TRADEMARK 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 INTERNATIONAL GROWTH OPPORTUNITIES 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, 1998. Over the past year, the Funds have grown to include
twenty-one 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 SSgA International Growth Opportunities Fund. I
hope you find this information a useful tool as you review your overall
investment strategy.
The SSgA Funds have also opened four additional funds in fiscal 1998. The
investment objectives for these four new funds are as follows:
The SSgA Special Equity Fund seeks to maximize total return through investment
in mid- and small capitalization US equity securities. This Fund was opened as
an alternative investment strategy for the SSgA Small Cap Fund that closed to
new investors on August 31, 1998.
The SSgA International Growth Opportunities Fund seeks to provide long-term
capital growth by investing primarily in securities of foreign issuers.
The SSgA High Yield Bond Fund seeks to maximize total return by investing
primarily in non investment-grade bonds, including, but not limited to, those
represented by the Lehman Brothers High Yield Bond Index.
The SSgA Real Estate Equity Fund seeks to provide income and capital growth by
investing primarily in publicly traded securities of real estate companies.
During the past fiscal year, the SSgA Funds were proud to announce that the SSgA
S&P 500 Index Fund and the SSgA Yield Plus Fund each achieved five years of
operational history. We are proud of our long term record and look forward to
having additional funds reach their five year anniversary.
SSgA intends to proceed with the evolution of new products and services while
committing to your investment needs. We will continue to develop our
professional expertise by focusing on the expansion of both our global resources
and our diversified product lines.
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 INTERNATIONAL GROWTH OPPORTUNITIES FUND
MANAGEMENT OF THE FUNDS
Nicholas A. Lopardo
Chairman and Chief Executive
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. As a result, the portfolios we
manage benefit from the knowledge of the entire team
Mr. Jeffrey Davis, Principal, has been the portfolio manager primarily
responsible for investment decisions regarding the SSgA International Growth
Opportunities Fund since its inception in April 1998. Mr. Davis has been with
State Street since November 1992, primarily involved in international and
emerging markets investing, and worked closely with the International Finance
Committee in launching emerging markets index funds. In early 1997, Mr. Davis
left State Street to work for Schooner Asset Management, managing emerging
market private equity and debt funds, and subsequently returned to State Street
in December 1997 as chief investment strategist and manager of international
global opportunities funds. There are three other portfolio managers working
with Mr. Davis.
Annual Report 5
<PAGE>
SSgA INTERNATIONAL GROWTH OPPORTUNITIES FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
OBJECTIVE: Provide long-term capital growth by investing primarily in
securities of foreign issuers.
INVESTS IN: Securities of foreign issuers.
STRATEGY: The Fund will attempt to meet its objective through the active
selection of equity securities through the fundamental analysis of companies and
investment themes. Quantitative techniques and the use of securities other than
common stock will be used primarily to control risk and to efficiently capture
opportunities of investment themes. Investments will be made in, but not limited
to, countries included in the Morgan Stanley Capital International Europe,
Australia, Far East ("MSCI EAFE") Index, and the Morgan Stanley Capital
International Emerging Markets Free ("MSCI EMF") Index. The Fund's comparative
benchmark, the Morgan Stanley Capital International All Country World Ex-US
Index ("MSCI All Country World Ex-US") is comprised of membership from both
the MSCI EAFE and the MSCI EMF Indices.
[GRAPH]
SSgA INTERNATIONAL GROWTH OPPORTUNITIES FUND
YEARLY PERIOD ENDED AUGUST 31
<TABLE>
<CAPTION>
INTERNATIONAL MSCI
GROWTH ALL COUNTY
DATES OPPORTUNITIES FUND WORLD EX-US**
<S> <C> <C>
INCEPTION* $10,000 $10,000
1998 $ 8,420 $ 8,463
</TABLE>
SSgA
INTERNATIONAL GROWTH OPPORTUNITIES FUND
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ---------------- ----------- ---------
<S> <C> <C>
Inception $ 8,420 (15.80)%+
</TABLE>
MSCI ALL COUNTRY WORLD EX-US
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ---------------- ----------- ---------
<S> <C> <C>
Inception $ 8,463 (15.37)%+
</TABLE>
SEE RELATED NOTES ON THE FOLLOWING PAGE.
PERFORMANCE REVIEW
The SSgA International Growth Opportunities Fund lost 15.80% from its
inception on May 1, 1998, through August 31, 1998. This compares with the
MSCI All Country World Ex-US Index, which was off 15.37% for the same period.
The Fund's performance benefited from selection within core blue-chip
European companies. Additionally, the Fund's emphasis on companies connected
with the development of telecommunications in the newly integrated Europe has
proven volatile, but profitable.
6 Annual Report
<PAGE>
SSgA INTERNATIONAL GROWTH OPPORTUNITIES FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
MARKET AND PORTFOLIO HIGHLIGHTS
During the four-month period since the Fund's inception, global equity markets
have experienced rapid deterioration in their performance, culminating in a
large sell-off at the close of August. The Fund's strategy focuses on
maintaining a diverse portfolio of companies which currently, or will likely,
dominate their respective global industries.
The Fund's emphasis on Japanese exporters benefited its performance over its
short period of existence, although the relative gains were dampened by the
rapid deterioration of Bank of Tokyo-Mitsubishi and Fuji Bank throughout the
summer of 1998. As a result, the Fund has reduced its positions in the Asian
financial services. During the period, the Fund also disposed of its only Asian
company outside of Japan, Sun Hung Kai Properties, as the lack of transparency
of the real estate portfolio of this major Asian property company became
apparent. The Fund was well served by avoiding the markets in Asia (ex-Japan)
which were the worst performers of third quarter 1998.
The Fund has maintained an overweight to attractive and improving financial
services companies whose earnings growth were driven by increasing merger
activity in Europe. This sector was hurt in August by the fall in global
markets, and the questions raised by the default on payments of Russian debt.
The overweighting to European telecommunications proved relatively stable, and
the Fund's 75% weighting in Europe has been a positive relative contributor to
Fund performance, as has been security selection within the region.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
(AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31, 1998
<S> <C>
Istituto Mobiliare Italiano SPA 4.5%
Mannesmann AG - ADR 4.3
Deutsche Lufthansa AG - ADR 3.3
Toyota Motor Corp. - ADR 3.1
Axa - ADR 3.0
Total Co. SA - ADR 3.0
SAP AG - ADR 2.8
Endesa SA - ADR 2.7
Honda Motor Co., Ltd. - ADR 2.7
Kyocera Corp. - ADR 2.6
</TABLE>
- --------------------------------------------------------------------------------
NOTES: THE FOLLOWING NOTES RELATE TO THE GROWTH OF $10,000 GRAPH AND TABLE ON
THE PRECEDING PAGE.
* The Fund commenced operations on May 1, 1998. Index comparison also began
May 1, 1998.
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 Morgan Stanley Capital International All Country World Ex-US Index is a
market capitalization-weighted index that tracks the daily price and total
return performance of international common or ordinary shares in developed
markets worldwide. The Index, which aims to capture 60% of the total market
capitalization at both the participating country and industry level,
includes securities domiciled in 22 development countries in Asia/Pacific,
Europe and North America.
The Morgan Stanley Capital International Emerging Markets Free Global Index
is a market capitalization-weighted index that tracks the daily stock price
and total return performance of unrestricted common stocks or ordinary
shares of emerging markets domiciled in 22 countries generally open to
foreign investment, in local currency and U.S. dollar terms. It aims to
capture 60% of the total market capitalization at both the participating
country and industry level.
+ Total return reflects performance for the period May 1, 1998 to August 31,
1998.
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:
In our opinion, the accompanying statement of assets and liabilities and
statement of net assets, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of SSgA International Growth Opportunities Fund
(the "Fund") at August 31, 1998, the results of its operations, the changes in
its net assets, and the financial highlights for the period May 1, 1998
(commencement of operations) to August 31, 1998, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these financial statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit, which included confirmation of securities at August 31, 1998 by
correspondence with the custodian, provides a reasonable basis for the opinion
expressed above.
Boston, Massachusetts
October 8, 1998
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
INTERNATIONAL GROWTH OPPORTUNITIES FUND
STATEMENT OF NET ASSETS
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
COMMON STOCKS - 98.9%
CANADA - 2.4%
Bank of Montreal 3,260 $ 115
Magna International, Inc. Class A 4,800 288
Royal Bank of Canada 4,150 155
----------
558
----------
DENMARK - 6.4%
Novo-Nordisk AS - ADR 8,700 582
Royal Dutch Petroleum Co. 10,710 426
Tele Danmark Class B - ADR 8,790 453
----------
1,461
----------
FINLAND - 2.3%
Nokia Corp. - ADR 7,800 521
----------
521
----------
FRANCE - 6.0%
Axa - ADR 12,750 692
Total Co. SA - ADR 14,330 689
----------
1,381
----------
GERMANY - 18.2%
Allianz AG (Regd) 1,530 440
Bayer AG - ADR 10,310 388
Deutsche Lufthansa AG - ADR 30,610 755
Mannesmann AG - ADR 10,840 980
Muenchener Rueckversicherungs-
Gesellschaft AG 980 382
SAP AG - ADR 15,520 650
Sodexho Marriott Services, Inc. (a) 9,390 234
Volkswagen AG - ADR 23,890 343
----------
4,172
----------
ITALY - 12.0%
Banco di Roma (a) 143,430 $ 278
Credito Italiano 96,810 466
ENI SPA - ADR 11,030 558
Instituto Nazionale Delle
Assicurazioni - ADR 16,250 414
Istituto Mobiliare Italiano SPA 23,180 1,038
----------
2,754
----------
JAPAN - 19.1%
Bank of Tokyo -
Mitsubishi, Ltd. - ADR 82,540 557
Canon, Inc. - ADR 19,370 387
Fuji Bank, Ltd. (The) - ADR 20,290 573
Fuji Photo Film Co., Ltd. - ADR 16,650 529
Honda Motor Co., Ltd. - ADR 9,140 612
Kyocera Corp. - ADR 6,750 590
Sony Corp. - ADR 6,240 441
Toyota Motor Corp. - ADR 16,790 702
----------
4,391
----------
MEXICO - 0.3%
Panamerican Beverages, Inc. Class A 4,750 76
----------
76
----------
NETHERLANDS - 1.5%
Philips Electronics NV - ADR 5,660 339
----------
339
----------
SPAIN - 4.9%
Endesa SA - ADR 34,830 627
Telefonica de Espana SA - ADR 4,470 488
----------
1,115
----------
</TABLE>
Annual Report 9
<PAGE>
SSgA
INTERNATIONAL GROWTH OPPORTUNITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
SWEDEN - 5.8%
ABB AB - ADR 3,070 $ 324
Astra AB Class A - ADR 25,870 417
Ericsson (LM) Telephone Co.
Class B - ADR 27,040 580
----------
1,321
----------
SWITZERLAND - 2.2%
Roche Holdings AG - ADR 4,900 507
----------
507
----------
UNITED KINGDOM - 17.8%
Barclays PLC - ADR 4,840 436
British Petroleum Co. PLC - ADR 3,510 257
British Telecommunications
PLC - ADR 2,430 311
Diageo PLC - ADR 9,760 369
Elan Corp. PLC - ADR (a) 3,360 197
Imperial Chemical Industries
PLC - ADR 10,630 453
Royal & Sun Alliance
Insurance Group PLC 43,680 368
Smithkline Beecham PLC - ADR 8,690 494
Unilever NV 2,450 155
Unilever PLC - ADR 15,080 528
Vodafone Group PLC - ADR 4,220 529
----------
4,097
----------
TOTAL COMMON STOCKS
(cost $27,603) 22,693
----------
PRINCIPAL
AMOUNT
(000)
---------
SHORT-TERM INVESTMENTS - 1.0%
UNITED STATES - 1.0%
AIM Short Term Investment
Prime Portfolio (b) $ 119 $ 119
Federated Investors Prime
Obligations Fund (b) 119 119
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $238) 238
----------
TOTAL INVESTMENTS
(identified cost $27,841)(c) - 99.9% 22,931
OTHER ASSETS AND LIABILITIES,
NET - 0.1% 35
----------
NET ASSETS - 100.0% $ 22,966
----------
----------
</TABLE>
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) See Note 2 for federal income tax information.
Abbreviations:
ADR - American Depository Receipt
NV - Nonvoting
PLC - Public Limited Company
The accompanying notes are an integral part of the financial statements.
10 Annual Report
<PAGE>
SSgA
INTERNATIONAL GROWTH OPPORTUNITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
% OF MARKET
NET VALUE
INDUSTRY DIVERSIFICATION ASSETS (000)
- -------------------------------- ---------- ----------
<S> <C> <C>
Basic Industries 3.7% $ 841
Capital Goods 7.2 1,643
Consumer Basics 14.5 3,326
Consumer Durables 7.4 1,685
Consumer Non-Durables 2.3 529
Consumer Services 4.3 988
Energy 11.1 2,556
Finance 23.9 5,500
General Business 4.2 974
Miscellaneous 1.8 414
Technology 9.6 2,207
Transportation 3.1 701
Utilities 5.8 1,329
Short-Term Investments 1.0 238
---------- ----------
Total Investments 99.9 22,931
Other Assets and Liabilities, Net 0.1 35
---------- ----------
NET ASSETS 100.0% $ 22,966
---------- ----------
---------- ----------
% OF MARKET
NET VALUE
GEOGRAPHIC DIVERSIFICATION ASSETS (000)
- -------------------------------- ---------- ----------
<S> <C> <C>
Europe 59.1% $ 13,571
Latin America 0.3 76
Canada 2.5 558
Japan 19.1 4,391
UK 17.9 4,097
Short-Term Investments 1.0 238
---------- ----------
Total Investments 99.9 22,931
Other Assets and Liabilities, Net 0.1 35
---------- ----------
NET ASSETS 100.0% $ 22,966
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 11
<PAGE>
SSgA
INTERNATIONAL GROWTH OPPORTUNITIES FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1998
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $27,841)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . $ 22,931
Foreign currency holdings (identified cost $9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Dividends and interest receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
--------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,010
LIABILITIES
Payables:
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1
Accrued fees to affiliates and trustees (Note 4) . . . . . . . . . . . . . . . . . 21
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
--------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 22,966
--------------
--------------
NET ASSETS CONSIST OF:
Undistributed net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 81
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (36)
Unrealized appreciation (depreciation) on investments. . . . . . . . . . . . . . . . . . . . . . . . . . (4,910)
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,828
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 22,966
--------------
--------------
NET ASSET VALUE, offering and redemption price per share:
($22,965,547 divided by 2,727,673 shares of $.001 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8.42
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 Annual Report
<PAGE>
SSgA
INTERNATIONAL GROWTH OPPORTUNITIES FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Period May 1, 1998
(Commencement of Operations) to August 31, 1998
Amounts
in thousands
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $20) . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 133
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
--------------
Total Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
EXPENSES (Notes 2 and 4):
Advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 47
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Tranfer agent fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
--------------
Expenses before reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Expense reductions (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . (36)
--------------
Expenses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
--------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (36)
Foreign currency-related transactions. . . . . . . . . . . . . . . . . . . . . . . 1 (35)
--------------
Net change in unrealized appreciation or depreciation of investments . . . . . . . . . . . . . . . . . . (4,910)
--------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,945)
--------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . $ (4,865)
--------------
--------------
The accompanying notes are an integral part of the financial statements.
Annual Report 13
</TABLE>
<PAGE>
SSgA
INTERNATIONAL GROWTH OPPORTUNITIES FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the Period May 1, 1998
(Commencement of Operations) to August 31, 1998
Amounts
in thousands
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 80
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (35)
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . . . . . . . . . . . . . . (4,910)
--------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . . . . . . . . . . . (4,865)
--------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from
Fund share transactions (Note 5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,831
--------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,966
NET ASSETS
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --
--------------
End of period (including undistributed net investment income of $81) . . . . . . . . . . . . . . . . . $ 22,966
--------------
--------------
The accompanying notes are an integral part of the financial statements.
14 Annual Report
<PAGE>
SSgA
INTERNATIONAL GROWTH OPPORTUNITIES FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout the
period and other performance information derived from the financial statements.
1998*
--------------
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10.00
--------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .03
Net realized and unrealized gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . (1.61)
--------------
Total Income From Investment Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.58)
--------------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8.42
--------------
--------------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15.80)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,966
Ratios to average net assets (%)(b):
Operating expenses, net (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.10
Operating expenses, gross (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.66
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.27
Portfolio turnover (%)(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.24
* For the period May 1, 1998 (commencement of operations) to August 31, 1998.
(a) Period less than one year is not annualized.
(b) The ratios for the period ended August 31, 1998 are annualized.
(c) See Note 4 for current period amounts.
Annual Report 15
</TABLE>
<PAGE>
SSgA
INTERNATIONAL GROWTH OPPORTUNITIES FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1998
1. ORGANIZATION
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 21 investment portfolios which are in operation as
of August 31, 1998. These financial statements report on one portfolio, the
SSgA International Growth Opportunities 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 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 fund 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
16 Annual Report
<PAGE>
SSgA
INTERNATIONAL GROWTH OPPORTUNITIES FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
regulations, the Fund intends to defer a net realized capital loss of
$35,897 incurred from May 1, 1998 to August 31, 1998, and treat it as
arising in fiscal year 1999.
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, 1998 are as follows:
<TABLE>
<CAPTION>
NET
UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
------------ ------------ -------------- --------------
<S> <C> <C> <C>
$ 27,841,326 $ 111,466 $ (5,021,096) $ (4,909,630)
</TABLE>
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 foreign denominated investments, passive foreign investment
companies, foreign currency contracts 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, 1998:
<TABLE>
<CAPTION>
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT NET REALIZED
INCOME GAIN (LOSS)
-------------- ------------
<S> <C>
$ 1,071 $ (1,071)
</TABLE>
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.
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:
Annual Report 17
<PAGE>
SSgA
INTERNATIONAL GROWTH OPPORTUNITIES FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
(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.
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
18 Annual Report
<PAGE>
SSgA
INTERNATIONAL GROWTH OPPORTUNITIES FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
the accompanying 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.
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 period May 1, 1998 (commencement of
operations) to August 31, 1998, purchases and sales of investment
securities, excluding short-term investments, aggregated to $28,790,435 and
$1,150,782, 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 May 1, 1998
(commencement of operations) to August 31, 1998, the Adviser voluntarily
agreed to waive up to the full amount of its advisory fee to the extent
that total expenses exceeded 1.10% 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
Annual Report 19
<PAGE>
SSgA
INTERNATIONAL GROWTH OPPORTUNITIES FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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 5% of the asset-based fee determined in (i)); (iii)
out-of-pocket expenses; and (iv) start-up costs for new funds.
On August 10, 1998, Frank Russell Company entered into an agreement with
The Northwestern Mutual Life Insurance Co., an insurance organization,
pursuant to which Northwestern Mutual Life will acquire all of the
outstanding common stock of Frank Russell Company.
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 charged 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"), the
Adviser's Metropolitan Division of Commercial Banking ("Commercial
Banking") and State Street Solutions ("Solutions")(collectively the
"Agents"), as well as several unaffiliated service providers. For these
services, the Fund pays .025%, .175%, .175%, .175% and .175%, to the
Adviser, SSBSI, RIS, Commercial Banking, and Solutions, respectively, based
upon the average daily value of all Fund shares held by or for customers of
these Agents. For the period May 1, 1998 (commencement of operations) to
August 31, 1998, the Fund was charged shareholder servicing expenses of
$1,578, $39, and $26, by the Adviser, SSBSI, and RIS, respectively. The
Fund did not incur any expenses from Commercial Banking or Solutions 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
20 Annual Report
<PAGE>
SSgA
INTERNATIONAL GROWTH OPPORTUNITIES FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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, 1998.
BOARD OF TRUSTEES: The Investment Company pays each Trustee not affiliated
with the Investment Company a retainer of $48,000 annually, $1,500 for each
board meeting attended, an additional $1,500 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 AUGUST 31, 1998 WERE AS
FOLLOWS:
<TABLE>
<CAPTION>
<S> <C>
Advisory fees $ 11,799
Administration fees 1,450
Custodian fees 4,127
Distribution fees 4
Shareholder servicing fees 581
Transfer agent fees 2,474
Trustees' fees 8
----------
$ 20,443
----------
----------
</TABLE>
BENEFICIAL INTEREST: As of August 31, 1998, one shareholder was a record
owner of approximately 14% of the total outstanding shares of the Fund.
5. FUND SHARE TRANSACTIONS
<TABLE>
<CAPTION>
(AMOUNT IN THOUSANDS)
FOR THE PERIOD MAY 1, 1998
(COMMENCEMNT OF OPERATIONS) TO
AUGUST 31, 1998
------------------------------
SHARES DOLLARS
---------- -----------
<S> <C> <C>
Proceeds from shares sold 2,739 $ 27,935
Proceeds from reinvestment
of distributions -- --
Payments for shares redeemed (11) (104)
---------- -----------
Total net increase (decrease) 2,728 $ 27,831
---------- -----------
---------- -----------
</TABLE>
Annual Report 21
<PAGE>
SSgA
INTERNATIONAL GROWTH OPPORTUNITIES FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
6. LINE OF CREDIT
The Fund and several affiliated Funds (the "Participants") share in a $50
million revolving credit facility for temporary or emergency purposes,
including the meeting of redemption requests that otherwise might require
the untimely disposition of securities. The Participants are charged an
annual commitment fee of .065% on the average daily unused amount of the
Aggregate commitment, which is allocated among each of the Participants.
Interest, at the Federal Fund Rate plus .50% annually, is calculated based
on the market rates at the time of the borrowing. The Fund may borrow up to
a maximum of 33 1/3 percent of the value of it's total assets under the
agreement.
22 Annual Report
<PAGE>
SSgA
INTERNATIONAL GROWTH OPPORTUNITIES FUND
TAX INFORMATION
August 31, 1998 (Unaudited)
The Fund paid foreign taxes of $19,868 and recognized $139,840 of foreign
source income during the taxable year ended August 31, 1998. Pursuant to
Section 853 of the Internal Revenue Code, the Fund designates $.0073 per
share of foreign taxes paid and $.0513 of gross income earned from foreign
sources in the taxable year ended August 31, 1998.
Please consult a tax advisor for questions about federal or state income tax
laws.
Annual Report 23
<PAGE>
SSgA INTERNATIONAL GROWTH OPPORTUNITIES FUND
One International Place, 27th 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
Mark E. Swanson, Assistant Secretary and Principal Accounting Officer
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.
One International Place, 27th 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
PricewaterhouseCoopers LLP
One Post Office Square
Boston, Massachusetts 02109
24 Annual Report
<PAGE>
SSgA-Registered Trademark- FUNDS
HIGH YIELD BOND FUND
Annual Report
August 31, 1998
Table of Contents
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion and Analysis . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . 15
Fund Management and Service Providers. . . . . . . . . . . . . . . . . . 21
"SSgA-Registered Trademark- " IS A REGISTERED TRADEMARK 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 HIGH YIELD BOND 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, 1998. Over the past year, the Funds have grown to include
twenty-one 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 SSgA High Yield Bond Fund. I hope you find
this information a useful tool as you review your overall investment strategy.
The SSgA Funds have also opened four additional funds in fiscal 1998. The
investment objectives for these four new funds are as follows:
The SSgA Special Equity Fund seeks to maximize total return through investment
in mid- and small capitalization US equity securities. This Fund was opened as
an alternative investment strategy for the SSgA Small Cap Fund that closed to
new investors on August 31, 1998.
The SSgA International Growth Opportunities Fund seeks to provide long-term
capital growth by investing primarily in securities of foreign issuers.
The SSgA High Yield Bond Fund seeks to maximize total return by investing
primarily in non investment-grade bonds, including, but not limited to, those
represented by the Lehman Brothers High Yield Bond Index.
The SSgA Real Estate Equity Fund seeks to provide income and capital growth by
investing primarily in publicly traded securities of real estate companies.
During the past fiscal year, the SSgA Funds were proud to announce that the SSgA
S&P 500 Index Fund and the SSgA Yield Plus Fund each achieved five years of
operational history. We are proud of our long term record and look forward to
having additional funds reach their five year anniversary.
SSgA intends to proceed with the evolution of new products and services while
committing to your investment needs. We will continue to develop our
professional expertise by focusing on the expansion of both our global resources
and our diversified product lines.
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 HIGH YIELD BOND 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. As a result, the portfolios we
manage benefit from the knowledge of the entire team
Mr. Bruce Walbridge, Principal, has been the portfolio manager primarily
responsible for investment decisions regarding the SSgA High Yield Bond Fund
since its inception in April 1998. Mr. Walbridge has been with State Street
since March 1987. Before joining the Fixed Income group in July 1993 as a
credit analyst, Mr. Walbridge was an assistant portfolio manager in the
International Equity group. Prior to the launch of the SSgA High Yield Bond
Fund, he managed several domestic bond portfolios including the $4 billion
Flagship Government/Corporate Bond Fund. Utilizing his credit analysis
background, Mr. Walbridge's focus over the last four and a half years has been
on corporate bond analysis and trading. There are three other portfolio working
with Mr. Walbridge.
Annual Report 5
<PAGE>
SSgA HIGH YIELD BOND FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
OBJECTIVE: Maximize total return by investing primarily in non investment
grade corporate bonds.
INVESTS IN: Primarily domestic, non-investment grade corporate bonds.
STRATEGY: Fund managers make investment decisions to seek excess returns
above the Lehman Brothers High Yield Bond Index.
[GRAPH]
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
DATES HIGH YIELD BOND FUND LEHMAN BROTHERS HIGH YIELD BOND INDEX**
<S> <C> <C>
Inception* $10,000 $10,000
1998 $9,941 $9,569
</TABLE>
YEARLY PERIOD ENDED AUGUST 31
SSgA HIGH YIELD BOND FUND
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ------------ ----------- --------
<S> <C> <C>
Inception $ 9,941 (0.59)%+
</TABLE>
LEHMAN BROTHERS HIGH YIELD BOND INDEX
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ------------ ----------- --------
<S> <C> <C>
Inception $ 9,569 (4.31)%+
</TABLE>
SEE RELATED NOTES ON THE FOLLOWING PAGE.
PERFORMANCE REVIEW
The SSgA High Yield Bond Fund performance from its inception on May 5, 1998
through August 31, 1998 was down 0.59%. This compares favorably to the Lehman
Brothers High Yield Bond Index return, which lost 4.31% for the period of May 1,
1998 through August 31, 1998. The Fund's outperformance versus the benchmark was
due to the Fund's higher credit quality compared to the Index, as well as sector
allocation during a difficult negative return environment for the high yield
bond market.
Quality, sector, and security selection are the key determinants of fund
performance versus a high yield benchmark. Belief that the economic turmoil
around the globe would eventually reach the US markets drove the Fund's
investment strategy during the period. The Fund purchased Treasury securities
instead of the lower quality segments of the index, based on the Manager's
belief that Treasuries should outperform the lower quality issues. The
6 Annual Report
<PAGE>
SSgA HIGH YIELD BOND FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
Fund also purchased higher quality (but below investment grade), high coupon
credits to help offset the current yield deficit the Fund experienced versus
the index. Sector selection also contributed to the Fund's performance, as the
portfolio maintained underweights to energy and telecommunications (2.09% and
5.58%, respectively), the market's two worst performing sectors. Individual
issue selection became increasingly critical from May 1998 through the end of
the fiscal year, and companies that failed to produce expected results were
punished in both the equity and high yield markets. The Fund was able to
minimize exposure to such negative situations due to the emphasis on thorough
credit selection.
MARKET AND PORTFOLIO HIGHLIGHTS
The Fund was managed consistent with its objective to maximize total return by
investing in fixed income securities, including those represented in the Lehman
Brothers High Yield Bond Index. The Fund seeks to track the duration of the
index with a minimal level of variance. At August 31, 1998, the Fund's duration
was 4.68, versus 4.78 for the index.
The heightened risk in financial markets has widened the risk premium demanded
in all spread markets and substantively reduced the overall liquidity of global
non-government markets. This trend became most pronounced for the high yield
market in August 1998, with broad high yield indices producing the worst monthly
performance since 1991. As with the Fund's investment grade portfolio strategy,
the current conservative higher quality approach reflects the belief that
further global economic deterioration could result in even less liquidity in the
corporate bond market. These views have been validated as current spreads of the
high yield indices are approaching 600 basis points over Treasuries, which has
historically indicated a recessionary outlook. As of August 31, 1998, yields for
ten year US Treasuries were close to 5.0% as compared to the Lehman Brothers
High Yield Bond Index at 10.5%.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP TEN ISSUERS
(AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31, 1998
<S> <C>
United States Government Treasuries 17.6%
L-3 Communications Corp. 4.4
Federal Mogul Corp. 4.3
Capital One Financial Corp. 4.3
International Comfort Products 4.2
Adelphia Communications Corp. 4.2
CSC Holdings, Inc. 4.1
Nortek, Inc. 4.1
Global Crossing Holdings, Ltd. 4.0
Regal Cinemas, Inc. 4.0
</TABLE>
- --------------------------------------------------------------------------------
NOTES: THE FOLLOWING NOTES RELATE TO THE GROWTH OF $10,000 GRAPH AND TABLE ON
PRECEDING PAGE.
* The High Yield Bond Fund commenced operations on May 5, 1998. Index
comparisons began May 1 1998.
** The Lehman Brothers High Yield Bond Index includes all fixed income
securities having a maximum quality rating of Ba1 (including defaulted
issues), a minimum amount outstanding of $100 million, and at least 1 year
to maturity; PIKs and Eurodollars are excluded.
+ Total return reflects performance for the period May 5, 1998 to August 31,
1998 for the High Yield Bond Fund, and May 1, 1998 to August 31, 1998 for
the Index.
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:
In our opinion, the accompanying statement of assets and liabilities and
statement of net assets, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of SSgA High Yield Bond Fund (the "Fund") at
August 31, 1998, the results of its operations, the changes in its net assets,
and the financial highlights for the period May 5, 1998 (commencement of
operations) to August 31, 1998, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit, which included
confirmation of securities at August 31, 1998 by correspondence with the
custodian and brokers, provides a reasonable basis for the opinion expressed
above.
Boston, Massachusetts
October 8, 1998
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
HIGH YIELD BOND FUND
STATEMENT OF NET ASSETS
August 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
<S> <C> <C>
LONG-TERM INVESTMENTS - 89.2%
CORPORATE BONDS AND NOTES - 69.6%
Adelphia Communications Corp.
8.125% due 07/15/03 $ 500 $ 489
AK Steel Corp.
10.750% due 04/01/04 354 371
Capital One Financial Corp.
7.125% due 08/01/08 500 503
CSC Holdings, Inc.
7.250% due 07/15/08 500 481
Federal Mogul Corp.
7.750% due 07/01/06 500 509
Global Crossing Holdings, Ltd.
9.625% due 05/15/08 500 475
Gulf Canada Resources, Ltd.
9.250% due 01/15/04 100 104
9.625% due 07/01/05 275 278
Hayes Lemmerz International, Inc.
9.125% due 07/15/07 350 354
Insight Health Services Corp.
9.625% due 06/15/08 500 465
Interep National Radio Sales, Inc.
10.000% due 07/01/08 250 240
Intermedia Communications, Inc.
8.600% due 06/01/08 250 234
International Comfort Products
8.625% due 05/15/08 500 495
Iron Mountain, Inc.
8.750% due 09/30/09 450 434
L-3 Communications Corp.
8.500% due 05/15/08 525 513
Nortek, Inc.
8.875% due 08/01/08 500 478
Ocean Energy, Inc.
7.625% due 07/01/05 250 218
Optel, Inc.
11.500% due 07/01/08 300 285
Quorum Health Group, Inc.
8.750% due 11/01/05 250 252
Regal Cinemas, Inc.
9.500% due 06/01/08 500 471
Standard Pacific Corp.
10.500% due 03/01/00 250 251
Tenet Healthcare Corp.
8.125% due 12/01/08 250 239
Westpoint Stevens, Inc.
7.875% due 06/15/05 150 145
----------
8,284
----------
EURODOLLAR BONDS - 2.2%
Metronet Communications Corp.
Step Up Bond
Zero Coupon due 06/15/08 (c) 500 268
----------
268
----------
UNITED STATES GOVERNMENT
TREASURIES - 17.4%
United States Treasury Notes
6.250% due 01/31/02 1,100 1,141
5.500% due 05/31/03 700 715
6.500% due 08/15/05 200 217
----------
2,073
----------
TOTAL LONG-TERM INVESTMENTS
(cost $10,960) 10,625
----------
SHORT-TERM INVESTMENTS - 9.4%
AIM Short-Term Investment
Treasury Portfolio Class A (a) 437 437
Federated Investors Prime
Obligations Fund (a) 570 570
Federated Investors Treasury
Obligations Fund (a) 114 114
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $1,121) 1,121
----------
</TABLE>
Annual Report 9
<PAGE>
SSgA
HIGH YIELD BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
MARKET
VALUE
(000)
----------
<S> <C>
TOTAL INVESTMENTS
(identified cost $12,081)(b) - 98.6% $ 11,746
OTHER ASSETS AND LIABILITIES,
NET - 1.4% 162
----------
NET ASSETS - 100.0% $ 11,908
----------
----------
</TABLE>
(a) At cost, which approximates market.
(b) See Note 2 for federal income tax information.
(c) Adjustable or floating rate security.
The accompanying notes are an integral part of the financial statements.
10 Annual Repot
<PAGE>
SSgA
HIGH YIELD BOND FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1998
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $12,081)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . $ 11,746
Receivables:
Dividends and interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
From Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
--------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,156
LIABILITIES
Payables:
Investments purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 218
Accrued fees to affiliates and trustees (Note 4) . . . . . . . . . . . . . . . . . 10
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
--------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 248
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,908
--------------
--------------
NET ASSETS CONSIST OF:
Undistributed net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 168
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7)
Unrealized appreciation (depreciation) on investments. . . . . . . . . . . . . . . . . . . . . . . . . . (335)
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,081
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,908
--------------
--------------
NET ASSET VALUE, offering and redemption price per share:
($11,908,273 divided by 1,202,505 shares of $.001
par value shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . $ 9.90
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 11
<PAGE>
SSgA
HIGH YIELD BOND FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Period May 5, 1998
(Commencement of Operations) to August 31, 1998
Amounts
in thousands
<S> <C> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 199
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
--------------
Total Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213
EXPENSES (Notes 2 and 4):
Advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Amortization of deferred organization expenses . . . . . . . . . . . . . . . . . . 1
--------------
Expenses before reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Expense reductions (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . (31)
--------------
Expenses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193
--------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7)
Net change in unrealized appreciation or depreciation of investments . . . . . . . . . . . . . . . . . . (335)
--------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (342)
--------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . $ (149)
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 Annual Report
<PAGE>
SSgA
HIGH YIELD BOND FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the Period May 5, 1998
(Commencement of Operations) to August 31, 1998
Amounts in
thousands
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 193
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7)
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . . . . . . . . . . . . . . (335)
--------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . . . . . . . . . . . (149)
--------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (25)
--------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions (Note 5) . . . . . . . . . . . . 12,082
--------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,908
NET ASSETS
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --
--------------
End of period (including undistributed net investment income of $168) . . . . . . . . . . . . . . . . $ 11,908
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Annual Report 13
<PAGE>
SSgA
HIGH YIELD BOND 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.
1998*
--------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10.00
--------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Net realized and unrealized gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . (.24)
--------------
Total Income From Investment Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.06)
--------------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.04)
--------------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9.90
--------------
--------------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.59)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,908
Ratios to average net assets (%)(b):
Operating expenses, net (c) .65
Operating expenses, gross (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.66
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.38
Portfolio turnover (%)(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173.64
</TABLE>
* For the period May 5, 1998 (commencement of operations) to August 31, 1998.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended August 31, 1998 are annualized.
(c) See Note 4 for current period amounts.
(d) The ratio has not been annualized due to the Fund's short period of
operation.
14 Annual Report
<PAGE>
SSgA
HIGH YIELD BOND FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1998
1. ORGANIZATION
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 21 investment portfolios which are in operation as
of August 31, 1998. These financial statements report on one portfolio, the
SSgA High Yield Bond 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 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 15
<PAGE>
SSgA
HIGH YIELD BOND FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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 fund 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 $6,600 incurred from May 5, 1998 to August 31, 1998, and
treat it as arising in fiscal year 1999.
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, 1998 are as follows:
<TABLE>
<CAPTION>
NET
UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
------------ ------------ -------------- --------------
<S> <C> <C> <C>
$ 12,081,749 $ 43,241 $ (378,990) $ (335,749)
</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 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.
16 Annual Report
<PAGE>
SSgA
HIGH YIELD BOND FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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 period May 5, 1998 (commencement of
operations) to August 31, 1998, purchases and sales of investment
securities, excluding US Government and Agency obligations and short-term
investments, aggregated to $12,141,346 and $3,206,503, respectively.
For the period May 5, 1998 (commencement of operations) to August 31, 1998,
purchases and sales of US Government and Agency obligations, excluding
short-term investments, aggregated to $14,224,229 and $12,184,816,
respectively.
Annual Report 17
<PAGE>
SSgA
HIGH YIELD BOND FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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. The Adviser has agreed to
reimburse the Fund for all expenses in excess of .65% 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 5% of the asset-based
fee determined in (i)); (iii) out-of-pocket expenses; and (iv) start-up
costs for new funds.
On August 10, 1998, Frank Russell Company entered into an agreement with
The Northwestern Mutual Life Insurance Co., an insurance organization,
pursuant to which Northwestern Mutual Life will acquire all of the
outstanding common stock of Frank Russell Company.
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 charged by the Distributor in connection with the distribution and
marketing of shares of the Investment Company and the servicing of investor
accounts.
18 Annual Report
<PAGE>
SSgA
HIGH YIELD BOND FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
The Fund has entered into service agreements with the Adviser, the
Adviser's Retirement Investment Services Division ("RIS"), the Adviser's
Metropolitan Division of Commercial Banking ("Commercial Banking") and
State Street Solutions ("Solutions")(collectively the "Agents"), as well as
several unaffiliated service providers. For these services, the Fund pays
.025%, .175%, .175%, .175%, and .175% to the Adviser, SSBSI, RIS,
Commercial Banking, and Solutions, respectively, based upon the average
daily value of all Fund shares held by or for customers of these Agents.
For the period May 5, 1998 (commencement of operations) to August 31, 1998,
the Fund was charged shareholder servicing expenses of $753 and $6 by the
Adviser and SSBSI. The Fund did not incur any expenses from RIS, Commercial
Banking or Solutions 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.
BOARD OF TRUSTEES: The Investment Company pays each Trustee not affiliated
with the Investment Company a retainer of $48,000 annually, $1,500 for each
board meeting attended, an additional $1,500 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, 1998 WERE
AS FOLLOWS:
<TABLE>
<S> <C>
Administration fees 310
Custodian fees 5,753
Distribution fees 18
Shareholder servicing fees 258
Transfer agent fees 3,657
Trustees' fees 41
---------
$ 10,037
---------
---------
</TABLE>
Annual Report 19
<PAGE>
SSgA
HIGH YIELD BOND FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
5. FUND SHARE TRANSACTIONS
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS)
FOR THE PERIOD MAY 5, 1998
(COMMENCEMENT OF OPERATIONS) TO
AUGUST 31, 1998
------------------------------
SHARES DOLLARS
------------ --------------
<S> <C> <C>
Proceeds from shares sold 1,215 $ 12,208
Proceeds from reinvestment
of distributions -- --
Payments for shares redeemed (12) (126)
------------ --------------
Total net increase (decrease) 1,203 $ 12,082
------------ --------------
------------ --------------
</TABLE>
6. DIVIDENDS
On September 1, 1998, the Board of Trustees declared a dividend of $.1397
from net investment income, payable on September 9, 1998 to shareholders of
record on September 2, 1998.
20 Annual Report
<PAGE>
SSgA HIGH YIELD BOND FUND
One International Place, 27th 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
Mark E. Swanson, Assistant Secretary
and Principal Accounting Officer
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.
One International Place, 27th 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
PricewaterhouseCoopers LLP
One Post Office Square
Boston, Massachusetts 02109
Annual Report 21
<PAGE>
SSgA-Registered Trademark- FUNDS
SPECIAL EQUITY FUND
Annual Report
August 31, 1998
Table of Contents
Page
Chairman's Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Management Discussion and Analysis . . . . . . . . . . . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . . 8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . 18
Fund Management and Service Providers. . . . . . . . . . . . . . . . . . . 23
"SSgA-Registered Trademark-" IS A REGISTERED TRADEMARK 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 SPECIAL 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, 1998. Over the past year, the Funds have grown to
include twenty-one 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 Special Equity
Fund. I hope you find this information a useful tool as you review your
overall investment strategy.
The SSgA Funds opened four additional funds in fiscal 1998. The investment
objectives for the four new funds are as follows:
The SSgA Special Equity Fund seeks to maximize total return through
investment in mid- and small capitalization US equity securities. This Fund
was opened as an alternative investment strategy for the SSgA Small Cap Fund
that closed to new investors on August 31, 1998.
The SSgA International Growth Opportunities Fund seeks to provide long-term
capital growth by investing primarily in securities of foreign issuers.
The SSgA High Yield Bond Fund seeks to maximize total return by investing
primarily in non investment-grade bonds, including, but not limited to, those
represented by the Lehman Brothers High Yield Bond Index.
The SSgA Real Estate Equity Fund seeks to provide income and capital growth
by investing primarily in publicly traded securities of real estate companies.
During the past fiscal year, the SSgA Funds were proud to announce that the
SSgA S&P 500 Index Fund and the SSgA Yield Plus Fund each achieved five years
of operational history. We are proud of our long term record and look forward
to having additional funds reach their five year anniversary.
SSgA intends to proceed with the evolution of new products and services while
committing to your investment needs. We will continue to develop our
professional expertise by focusing on the expansion of both our global
resources and our diversified product lines.
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 SPECIAL 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. As a result, the
portfolios we manage benefit from the knowledge of the entire team.
Ms. Jennifer Bardsley, Principal, has been the portfolio manager primarily
responsible for investment decisions regarding the Special Equity Fund since
its inception on April 1998. Ms. Bardsley joined State Street in March 1993.
She became a member of the Investments Systems Group and moved into the US
Active Equities Group in January 1996. She holds BA degrees in Economics and
Russian from Middlebury College, and an MS in Computer Science from Boston
College. There are seven other portfolio managers working with Ms. Bardsley.
Annual Report 5
<PAGE>
SSgA SPECIAL EQUITY FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
OBJECTIVE: The SSgA Special Equity Fund seeks to maximize total return
through investments in mid- and small capitalization US equity securities.
INVESTS IN: Mid- and small capitalization US equity securities.
STRATEGY: The Fund management team uses a quantitative approach to
investment management, designed to uncover equity securities which are
undervalued, with superior growth potential. This quantitative investment
approach rests on the employment of a modeling process which evaluates
financial data and corporate earnings forecasts. This structured and
disciplined approach seeks to provide long-term total returns in excess of
the Russell Special Small Company Index (the "RSMALL" Index), through
bottom-up stock selection within a risk controlled framework. The RSMALL
Index is defined as the Russell 3000 Index minus the S&P 500 Index.
Approximately 40% of the RSMALL Index is comprised of the small cap stocks,
while the remaining 60% are mid-cap issues. As of June 30, 1998, the S&P 500
represented 79.8% of the total US market capitalization, while the RSMALL
Index represented 20.2% of the market.
[GRAPH]
<TABLE>
<CAPTION>
GROWTH OF A $10,000 INVESTMENT
DATES SPECIAL EQUITY FUND F RUSSELL 3000 SPECIAL SMALL COMPANY INDEX**
<S> <C> <C>
INCEPTION* $10,000 $10,000
1998 $7,170 $7,345
</TABLE>
YEARLY PERIOD ENDED AUGUST 31
SSgA SPECIAL EQUITY FUND
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ------------ ------------ ------------
<S> <C> <C>
Inception $ 7,170 (28.30)%+
</TABLE>
SEE RELATED NOTES ON THE FOLLOWING PAGE.
RUSSELL SPECIAL SMALL COMPANY INDEX
<TABLE>
<CAPTION>
Period Ended Growth of Total
08/31/98 $10,000 Return
- ------------ ------------ ------------
<S> <C> <C>
Inception $ 7,345 (26.55)%+
</TABLE>
6 Annual Report
<PAGE>
SSgA SPECIAL EQUITY FUND
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
PERFORMANCE REVIEW
The SSgA Special Equity Fund lost 28.3% since its inception on May 1, 1998.
This compares with the RSMALL Index, which posted a loss of 26.6% for the
same period. The consumer cyclical and financial sectors had the greatest
impact on the Fund's negative performance on an absolute basis for the
period. The Fund held a modest 1.6% overweight sector position relative to
the benchmark in consumer cyclicals, and was underweight by 2.1% in
financials. Within the financials sector, the banking industry was very weak
over the period. Performance was assisted by strong stock selection within
the technology sector, where the Fund's allocation was 19%. Within
technology, the Fund was assisted by the computer hardware and services
sectors.
MARKET AND PORTFOLIO HIGHLIGHTS
Following the correction which began last spring, the small cap stock market
officially entered bear market territory in late August 1998. Mid-cap stocks
have been weak recently, losing 18.6% for the month ended August 31, 1998, as
measured by the S&P 400. However, over the last twelve months, mid-cap issues
are not down to the degree of small caps, as the S&P 400 was off only 9.4%
versus a loss of 19.4% for the Russell 2000. Large cap stocks continue to
outperform small and mid-caps, which is reflected in the three-year
annualized returns of 21.8%, 4.8%, and 11.7% for the S&P 500, Russell 2000,
and the S&P 400, respectively. A "flight to quality" by investors due to
continued turmoil in the Asian markets and, more recently, global emerging
markets, contributed to the large cap stock outperformance. Additionally, due
to the popularity of equities over the past several years, investment
managers have been forced to put the increased cash flows to work in larger,
more liquid names, which has helped push price/earnings multiples to
historically high ranges.
It has been a trying time for both small and mid-cap stocks. Historically,
small cap stocks have higher long-term returns and associated volatility, as
their performance cycles of over or under performance tend to be more
extended. While near- term market events may be noteworthy for media
coverage, the Manager believes that investors should not let market shocks
change their long-term investment perspective as recoveries happen in short
bursts which are difficult to anticipate.
At the end of the fiscal year, the SSgA Special Equity Fund held 202 stocks,
with market capitalizations ranging from $100 million to $26 billion,
resulting in an average weighted market capitalization of $2.2 billion. The
Fund has portfolio characteristics in line with the RSMALL Index due to the
risk-controlled nature of the investment process. As the Fund's objective is
achieved through stock selection with a disciplined investment approach, the
portfolio will be fully invested at all times.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
(AS A PERCENT OF TOTAL INVESTMENTS) AUGUST 31, 1998
<S> <C>
Safeway, Inc. 1.8
BMC Software, Inc. 1.4
Symbol Technologies, Inc. 1.1
AmSouth Bancorp 1.0
Office Depot, Inc. 1.0
PacifiCare Health Systems, Inc. Class B 1.0
USG Corp. 1.0
Hertz Corp. Class A 0.9
Zions Bancorp 0.9
Network Associates, Inc. 0.9
- -------------------------------------------------------------------------------
</TABLE>
NOTES: THE FOLLOWING NOTES RELATE TO THE GROWTH OF $10,000 GRAPH AND TABLE ON
THE PRECEDING PAGE.
* The Fund commenced operations on May 1, 1998. Index comparison also
began May 1, 1998.
** The Russell Special Small Company Index (the RSMALL Index) is defined as
the Russell 3000 Index minus the S&P 500 Index. Approximately 40% of the
RSMALL Index is comprised of the small cap stocks, while the remaining 60%
are mid-cap issues.
+ Total return reflects performance for the period May 1, 1998 to August 31,
1998.
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:
In our opinion, the accompanying statement of assets and liabilities and
statement of net assets, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of SSgA Special Equity Fund (the
"Fund") at August 31, 1998, the results of its operations, the changes in its
net assets, and the financial highlights for the period May 1, 1998
(commencement of operations) to August 31, 1998, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our
audit of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audit, which included confirmation of securities at August 31, 1998 by
correspondence with the custodian and broker, provides a reasonable basis for
the opinion expressed above.
Boston, Massachusetts
October 8, 1998
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
SPECIAL EQUITY FUND
STATEMENT OF NET ASSETS
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
COMMON STOCKS - 98.5%
BASIC INDUSTRIES - 4.9%
Aluminum Co. of America 115 $ 7
Bio-Rad Laboratories, Inc.
Class A (a) 2,800 67
Georgia-Pacific Timber Group 3,300 66
Gibraltar Steel Corp. (a) 3,300 55
International Specialty
Products, Inc. (a) 3,000 46
Metals USA, Inc. (a) 2,500 29
Octel Corp. (a) 3,300 51
Premark International, Inc. 4,300 114
Reliance Steel & Aluminum Co. 2,200 67
RMI Titanium Co. (a) 3,700 66
Solutia, Inc. 3,200 72
----------
640
----------
CAPITAL GOODS - 4.5%
AMETEK, Inc. 1,700 33
Brown & Sharpe
Manufacturing Co. (a) 5,900 59
D.R. Horton, Inc. 4,400 70
Exide Corp. 4,100 41
Gardner Denver Machinery, Inc. (a) 2,900 55
General Cable Corp. 2,850 57
Gleason Corp. 2,500 55
Harmon Industries, Inc. 2,200 42
Hughes Supply, Inc. 2,200 60
National-Oilwell, Inc. (a) 2,500 19
NCI Building Systems, Inc. (a) 1,800 32
Republic Industries, Inc. (a) 100 2
Simpson Manufacturing Co., Inc. (a) 1,500 44
Terex Corp. (a) 1,800 28
----------
597
----------
CONSUMER BASICS - 14.3%
Allegiance Corp. 3,200 90
Arterial Vascular
Engineering, Inc. (a) 2,800 97
Beverly Enterprises, Inc. New (a) 9,300 73
Bindley Western Industries, Inc. 2,933 77
Biogen, Inc. (a) 2,500 116
BJ's Wholesale Club, Inc. (a) 2,900 98
Corn Products International, Inc. (a) 2,300 54
Curative Technologies, Inc. (a) 2,100 51
Fleming Cos., Inc. 4,600 55
Flowers Industries, Inc. 2,400 43
Food Lion, Inc. Class B 8,700 86
General Nutrition Cos., Inc. (a) 4,300 57
Genesis Health Ventures, Inc. (a) 5,200 62
Integrated Health Services, Inc. 2,400 47
International Home
Foods, Inc. New (a) 6,000 101
Medicis Pharmaceutical Corp.
Class A. (a) 2,200 72
Michael Foods, Inc. 1,800 45
Omega Protein Corp. (a) 2,900 30
Outback Steakhouse, Inc. (a) 3,700 111
PacifiCare Health Systems, Inc.
Class B (a) 2,100 131
</TABLE>
Annual Report 9
<PAGE>
SSgA
SPECIAL EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
ResMed, Inc. (a) 800 $ 30
Safeway, Inc. (a) 5,800 228
Scios, Inc. (a) 6,800 30
Suiza Foods Corp. (a) 800 39
Worthington Foods, Inc. 3,400 54
----------
1,877
----------
CONSUMER DURABLES - 2.5%
Discount Auto Parts, Inc. (a) 2,600 56
Excel Industries, Inc. 3,800 48
Furniture Brands
International, Inc. (a) 3,700 83
La-Z-Boy Chair Co. 700 37
Meritor Automotive, Inc. 2,900 51
O'Sullivan Industries
Holdings, Inc. (a) 5,300 50
----------
325
----------
CONSUMER NON-DURABLES - 8.2%
AMERCO (a) 2,200 49
Ames Department Stores, Inc. (a) 3,000 44
Bacou USA, Inc. (a) 4,300 85
Canandaigua Wine International, Inc.
Class A (a) 1,700 71
Department 56, Inc. (a) 2,400 71
Family Dollar Stores, Inc. 8,400 107
Footstar, Inc. (a) 2,300 67
Intimate Brands, Inc. Class A 4,900 91
Jones Apparel Group, Inc. (a) 4,200 81
Nautica Enterprises, Inc. (a) 3,400 65
Office Depot, Inc. (a) 5,200 133
Shopko Stores, Inc. (a) 2,500 64
Tiffany & Co. 3,100 115
Timberland Co. Class A (a) 900 38
----------
1,081
----------
CONSUMER SERVICES - 4.6%
Alaska Air Group, Inc. (a) 800 31
Applebee's International, Inc. 1,600 29
Bristol Hotels & Resorts, Inc. (a) 350 2
Equity Inns, Inc. 3,000 30
Galileo International, Inc. 3,500 114
Grand Casinos, Inc. (a) 4,900 43
Host Marriott Corp. (a) 8,000 112
MeriStar Hospitality Corp.
REIT (a) 3,100 52
Northwest Airlines Corp.
Class A (a) 1,300 36
Sonic Corp. (a) 3,750 60
Toy Biz, Inc. Class A (a) 7,400 54
UAL Corp. (a) 700 43
----------
606
----------
ENERGY - 3.1%
Energy East Corp. 1,100 50
Enron Oil & Gas Co. 2,800 36
ENSCO International, Inc. 4,400 46
Houston Exploration Co. (The) (a) 3,300 48
MarketSpan Corp. 1,100 30
Murphy Oil Corp. 1,400 49
</TABLE>
10 Annual Report
<PAGE>
SSgA
SPECIAL EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
--------- ---------
<S> <C> <C>
Pioneer Natural Resources Co. 3,500 $ 51
R&B Falcon Corp. (a) 3,700 33
Valero Energy Corp. 2,300 41
Veritas DGC, Inc. (a) 1,700 27
---------
411
---------
FINANCE - 17.7%
Ambac Financial Group, Inc. 2,200 104
AmSouth Bancorp 3,900 134
Bank Plus Corp. (a) 5,700 43
Bear Stearns Cos., Inc. 2,400 89
Charter One Financial, Inc. 4,800 111
City National Corp. 3,700 103
Community Trust Bancorp, Inc. 2,500 61
CORUS Bankshares, Inc. 1,900 54
Donaldson, Lufkin & Jenrette, Inc. 1,300 46
Everest Reinsurance Holdings, Inc. 2,600 91
Fidelity National Financial 2,200 61
First Security Corp. 6,700 104
FirstFed Financial Corp. (a) 3,600 53
FIRSTPLUS Financial
Group, Inc. (a) 3,000 68
Franchise Mortgage
Acceptance Co. (a) 4,000 63
Hamilton Bancorp, Inc. (a) 2,500 70
Highlands Insurance Group, Inc. (a) 3,000 38
IMC Mortgage Co. (a) 3,200 22
Imperial Credit Industries, Inc. (a) 3,300 44
Investment Technology
Group, Inc. (a) 1,400 39
Jefferies Group, Inc. 1,800 51
LandAmerica Financial Group, Inc. 600 30
Lehman Brothers Holdings, Inc. 900 35
North Fork Bancorporation, Inc. 5,850 111
Orion Capital Corp. 1,700 63
PaineWebber Group, Inc. 2,400 83
Peoples Heritage Financial Group 3,600 56
PFF Bancorp, Inc. (a) 4,100 57
PMI Group, Inc. (The) 1,800 100
Resource Bancshares Mortgage
Group 3,500 55
Travelers Property Casualty Corp.
Class A 3,500 115
Webster Financial Corp. 2,500 52
Zions Bancorp 3,100 119
---------
2,325
---------
GENERAL BUSINESS - 7.7%
ACNielsen Corp. (a) 4,800 96
Advo Systems, Inc. (a) 2,200 55
Belo (A.H.) Corp. Class A 5,600 104
Bowne & Co., Inc. 4,200 66
Comdisco, Inc. 6,800 85
Merrill Corp. 3,100 59
National Data Corp. 1,900 67
Nielsen Media Research (a) 2,000 18
RemedyTemp, Inc. Class A (a) 2,200 49
Reynolds & Reynolds Co.
Class A 6,000 76
SABRE Group Holdings, Inc. (The)
Class A (a) 3,000 96
</TABLE>
Annual Report 11
<PAGE>
SSgA
SPECIAL EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
--------- ---------
<S> <C> <C>
SPS Transaction Services, Inc. (a) 2,600 $ 81
True North Communications, Inc. 4,500 102
Viad Corp. 3,100 63
---------
1,017
---------
MISCELLANEOUS - 3.0%
Apartment Investment &
Management Co. REIT
Class A 1,400 48
Bradley Real Estate, Inc. REIT 2,100 42
Health Care REIT Inc. 1,700 39
Horizon Group Properties, Inc.
REIT (a) 146 1
Indymac Mortgage
Holdings, Inc. REIT 2,000 39
Kimco Realty Corp. REIT 900 32
Liberty Property Trust REIT 2,000 45
New Century Energies, Inc. 2,300 106
Pacific Gulf Properties, Inc.
REIT 1,900 36
---------
388
---------
SHELTER - 3.4%
Champion Enterprises, Inc. (a) 2,700 63
Lennar Corp. 100 2
NVR, Inc. (a) 2,400 78
Republic Group, Inc. 3,300 48
Standard Pacific Corp. 4,500 53
Universal Forest Products, Inc. 4,500 64
USG Corp. 2,900 125
Vulcan Materials Co. 100 11
---------
444
---------
TECHNOLOGY - 14.8%
Avant! Corp. (a) 3,000 38
BE Aerospace, Inc. (a) 2,300 48
BMC Software, Inc. (a) 4,400 187
Cadence Design Systems, Inc. (a) 2,000 42
CHS Electronics, Inc. (a) 4,000 51
Compuware Corp. (a) 2,000 91
Cordant Technologies, Inc. 2,600 93
Esterline Corp. (a) 3,500 56
Fair, Isaac and Co., Inc. 2,100 65
InaCom Corp. (a) 2,400 46
Keane, Inc. (a) 600 25
Learning Co., Inc. (The) (a) 4,300 76
Lexmark International Group, Inc.
Class A (a) 1,700 103
NeoMagic Corp. (a) 3,800 49
Network Associates, Inc. (a) 3,600 116
Periphonics Corp. (a) 6,600 32
Progress Software Corp. (a) 2,800 51
Splash Technology Holdings, Inc. (a) 2,800 41
Sterling Software, Inc. (a) 5,300 109
Storage Technology Corp. (a) 4,000 87
Sundstrand Corp. 2,400 109
Symbol Technologies, Inc. 3,400 139
Synopsys, Inc. (a) 3,500 91
</TABLE>
12 Annual Report
<PAGE>
SSgA
SPECIAL EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
August 31, 1998
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
--------- ---------
<S> <C> <C>
Tech-Sym Corp. (a) 2,600 $ 64
US LEC Corp. (a) 2,700 38
USCS International, Inc. (a) 2,900 65
Vitesse Semiconductor Corp. (a) 1,500 40
---------
1,952
---------
TRANSPORTATION - 3.6%
Airborne Freight Corp. 1,500 29
America West Holding Corp.
Class B (a) 2,900 56
American Freightways Corp. (a) 6,400 49
Hertz Corp. Class A 3,200 121
Rollins Truck Leasing Corp. 6,300 60
Titan International, Inc. 2,300 24
Trinity Industries, Inc. 2,500 76
USFreightways Corp. 2,400 54
---------
469
---------
UTILITIES - 6.2%
Allegheny Energy, Inc. 3,000 80
Alltel Corp. 2,294 104
CTG Resources, Inc. 2,700 62
Florida Progress Corp. 100 4
Kansas City Power & Light Co. 1,900 54
NIPSCO Industries, Inc. 3,100 91
Puget Sound Power & Light Co. 3,000 75
Rochester Gas & Electric Corp. 2,900 85
Southwest Gas Corp. 3,600 65
Southwestern Energy Co. 7,100 48
U.S. West, Inc. 1,300 68
Wisconsin Energy Corp. 2,700 79
---------
815
---------
TOTAL COMMON STOCKS
(cost $17,555) 12,947
---------
<CAPTION>
PRINCIPAL
AMOUNT
(000)
----------
<S> <C>
SHORT-TERM INVESTMENTS - 0.3%
AIM Short-Term Investment Treasury
Portfolio Class A (b) $ 30 30
Federated Investors Prime
Obligations Fund (b) 13 13
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $43) 43
----------
TOTAL INVESTMENTS
(identified cost $17,598)(c) - 98.8% 12,990
OTHER ASSETS AND LIABILITIES,
NET - 1.2% 156
----------
NET ASSETS - 100.0% $13,146
----------
----------
</TABLE>
(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 13
<PAGE>
SSgA
SPECIAL EQUITY FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1998
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $17,598)(Note 2). . . . . . . . . . . . . . . . . . . . . . . . . $ 12,990
Receivables:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
--------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,236
LIABILITIES
Payables:
Investments purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 58
Accrued fees to affiliates and trustees (Note 4) . . . . . . . . . . . . . . . . . 16
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
--------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,146
--------------
--------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (574)
Unrealized appreciation (depreciation) on investments. . . . . . . . . . . . . . . . . . . . . . . . . . (4,608)
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,312
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,146
--------------
--------------
NET ASSET VALUE, offering and redemption price per share:
($13,146,088 divided by 1,832,732 shares of $.001 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7.17
--------------
--------------
</TABLE>
The accompanying notes are in integral part of financial statements.
14 Annual Report
<PAGE>
SSgA
SPECIAL EQUITY FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Period May 1, 1998
(Commencement of Operations) to August 31, 1998
Amounts in
thousands
<S> <C> <C>
INVESTMENT INCOME:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 66
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
--------------
Total Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
EXPENSES (Notes 2 and 4):. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advisory fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 43
Administrative fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Distribution fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Shareholder servicing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
--------------
Expenses before reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Expense reductions (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . (26)
--------------
Expenses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
--------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (574)
Net change in unrealized appreciation or depreciation of investments . . . . . . . . . . . . . . . . . . (4,608)
--------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,182)
--------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . . . $ (5,168)
--------------
--------------
</TABLE>
The accompanying notes are in integral part of financial statements.
Annual Report 15
<PAGE>
SSgA
SPECIAL EQUITY FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the Period May 1, 1998
(Commencement of Operations) to August 31, 1998
Amounts in
thousands
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (574)
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . . . . . . . . . . . . . . (4,608)
--------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . . . . . . . . . . . (5,168)
--------------
FROM FUND SHARE TRANSACTIONS:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in net assets from Fund share transactions (Note 5). . . . . . . . . . . . . . 18,314
--------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,146
--------------
NET ASSETS
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --
--------------
End of period (including undistributed net investment income of $14) . . . . . . . . . . . . . . . . . . $ 13,146
--------------
--------------
</TABLE>
The accompanying notes are in integral part of financial statements.
16 Annual Report
<PAGE>
SSgA
SPECIAL EQUITY FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each
period and other performance information derived from the financial statements.
1998
--------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10.00
--------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .01
Net realized and unrealized gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . (2.84)
--------------
Total Income From Investment Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2.83)
--------------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7.17
--------------
--------------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (28.30)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,146
Ratios to average net assets (%)(b):
Operating expenses, net (c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.10
Operating expenses, gross (c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.55
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
Portfolio turnover rate (%)(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88.36
</TABLE>
* For the period May 1, 1998 (commencement of operations) to August 31,
1998.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended August 31, 1998 are annualized.
(c) See Note 4 for current period amounts.
Annual Report 17
<PAGE>
SSgA
SPECIAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1998
1. ORGANIZATION
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 21 investment portfolios which are in operation as
of August 31, 1998. These financial statements report on one portfolio, the
SSgA Special 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 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.
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
SPECIAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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 fund 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 $574,329 incurred from May 1, 1998 to August 31, 1998, and
treat it as arising in fiscal year 1999.
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, 1998 are as follows:
<TABLE>
<CAPTION>
NET
UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
-------------- -------------- --------------- ----------------
<S> <C> <C> <C>
$ 17,598,003 $ 69,083 $ (4,677,086) $ (4,608,003)
</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 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 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.
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
Annual Report 19
<PAGE>
SSgA
SPECIAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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 period May 1, 1998 (commencement of
operations) to August 31, 1998, purchases and sales of investment
securities, excluding short-term investments and futures contracts
aggregated to $22,898,781 and $4,769,000, 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 an annual rate of
.75% of its average daily net assets. For the period May 1, 1998 to August
31, 1998, the Adviser voluntarily agreed to reimburse the Fund for all
expenses in excess of 1.10% 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 combined 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 5% of the
asset-based fee determined in (i)); (iii) out-of-pocket expenses; and (iv)
start-up costs for new funds.
On August 10, 1998, Frank Russell Company entered into an agreement with
The Northwestern Mutual Life Insurance Co., an insurance organization,
pursuant to which Northwestern Mutual Life will acquire all of the
outstanding common stock of Frank Russell Company.
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
20 Annual Report
<PAGE>
SSgA
SPECIAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
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 charged 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"), the
Adviser's Metropolitan Division of Commercial Banking ("Commercial
Banking") and State Street Solutions ("Solutions")(collectively the
"Agents"), as well as several unaffiliated service providers. For these
services, the Fund pays .025%, .175%, .175%, .175% and .175% to the
Adviser, SSBSI, RIS, Commercial Banking, and Solutions, respectively, based
upon the average daily value of all Fund shares held by or for customers of
these Agents. For the period May 1, 1998 to August 31, 1998, the Fund was
charged shareholder servicing expenses of $1,431 and $35 by the Adviser and
SSBSI, respectively. The Fund did not incur any expenses from RIS,
Commercial Banking, and Solutions 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, 1998.
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 $35 for the period May 1, 1998 to
August 31, 1998.
BOARD OF TRUSTEES: The Investment Company pays each Trustee not affiliated
with the Investment Company a retainer of $48,000 annually, $1,500 for each
board meeting attended, an additional $1,500 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.
Annual Report 21
<PAGE>
SSgA
SPECIAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
August 31, 1998
ACCRUED FEES PAYABLE TO AFFILIATES AND TRUSTEES AS OF AUGUST 31, 1998 WERE
AS FOLLOWS:
<TABLE>
<CAPTION>
<S> <C>
Advisory fees $ 7,575
Administration fees 401
Custodian fees 5,016
Distribution fees 45
Shareholder servicing fees 338
Transfer agent fees 3,012
Trustees' fees 26
--------
$ 16,413
--------
--------
</TABLE>
BENEFICIAL INTEREST: As of August 31, 1998, one shareholder (who was also
an affiliate of the Investment Company) was a record owner of approximately
98% of the total outstanding shares of the Fund.
5. FUND SHARE TRANSACTIONS
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS)
FOR THE YEAR ENDED AUGUST 31,
-----------------------------
1998
-----------------------------
SHARES DOLLARS
----------- ---------
<S> <C> <C>
Proceeds from shares sold 1,833 $ 18,319
Proceeds from reinvestment
of distributions -- --
Payments for shares redeemed (1) (5)
----------- ---------
Total net increase (decrease) 1,832 $ 18,314
----------- ---------
----------- ---------
</TABLE>
6. LINE OF CREDIT
The Fund and several affiliated Funds (the "Participants") share in a $50
million revolving credit facility for temporary or emergency purposes,
including the meeting of redemption requests that otherwise might require
the untimely disposition of securities. The Participants are charged an
annual commitment fee of .065% on the average daily unused amount of the
aggregate commitment, which is allocated among each of the Participants.
Interest, at the Federal Fund Rate plus .50% annually, is calculated based
on the market rates at the time of the borrowing. The Fund may borrow up to
a maximum of 33 1/3 percent of the value of it's total assets under the
agreement.
22 Annual Report
<PAGE>
SSgA SPECIAL EQUITY FUND
One International Place, 27th 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
Mark E. Swanson, Assistant Secretary
and Principal Accounting Officer
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.
One International Place, 27th 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
PricewaterhouseCoopers LLP
One Post Office Square
Boston, Massachusetts 02109
Annual Report 23
