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 .................................................
Intermediate Municipal Bond Fund...................................
Emerging Markets Fund .............................................
Tuckerman Active REIT Fund ........................................
International Growth Opportunities ................................
High Yield Bond ...................................................
Special Equity ....................................................
Aggressive Equity Fund ............................................
IAM Shares Fund ...................................................
<PAGE>
[COVER GRAPHIC]
SSgA(R) funds
ANNUAL REPORT
Life Solutions Funds
August 31, 2000
<PAGE>
SSgA(R) Life Solutions(sm) Funds
Income and Growth Fund
Balanced Fund
Growth Fund
Annual Report
August 31, 2000
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(R)" 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,
It is our pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 2000. The SSgA Fund Family has grown to include
twenty-four portfolios with over $21 billion in assets as of August 31, 2000.
The Fund Family provides a wide range of strategies covering the world's major
markets. The enclosed information provides an overview of the investment process
for the SSgA Life Solutions Funds. This overview contains the portfolio
management discussion, performance updates and financial information for the
Fund.
In an ongoing effort to develop competitive products and services that provide
investment solutions for our clients, we have added the SSgA Intermediate
Municipal Bond Fund to the SSgA Fund Family. This Fund's investment objective
seeks to provide federally tax-exempt current income by investing primarily in a
diversified portfolio of municipal debt securities with a dollar-weighted
average maturity between three and ten years.
We are also pleased with the success of our SSgA Emerging Markets and SSgA
Growth and Income Funds as they were included in Money(R) Magazine's June 2000
issue listing of the 'Top 100 Mutual Funds'. This is the second year in a row
that these funds have been selected.
Additionally, the SSgA Tax Free Money Market and the SSgA Active International
Funds have achieved five-year performance history during the 2000 fiscal year.
Currently, all of our SSgA Money Market Funds have at least a five-year
performance history. We strive to meet our clients' needs by providing funds
with long-term records and competitive performance.
We would like to thank you for choosing the SSgA Funds. Our reputation is based
on our tradition of designing and delivering exceptional financial services to
our clients. We look forward to continue sharing the benefit of our experience
with you.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
/s/ Timothy B. Harbert
Timothy B. Harbert
State Street Global Advisors
President and Chief Operating Officer, SSgA
4 Annual Report
<PAGE>
SSgA Life Solutions Funds
--------------------------------------------------------------------------------
Management of the Funds
--------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
[PHOTO]
Timothy B. Harbert
President and Chief Operating 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. Heydon Traub, CFA, Principal, has been the portfolio manager primarily
responsible for investment decisions regarding the SSgA Life Solutions Funds
since April 1999. He joined the firm in 1987, and currently leads a team
responsible for the management of client assets in excess of $10 billion
invested in 50 developed and emerging markets. He is one of the developers of
the firm's country, stock, and currency selection processes and continues to
lead the research effort to enhance those strategies. Mr. Traub has written
several articles which have been published in leading investment journals and he
currently writes a monthly column on global investing for the Boston Business
Journal. He holds a BA in Economics and an MBA in Finance and Accounting from
the University if Chicago. There are two other portfolio managers working with
Mr. Traub.
Annual Report 5
<PAGE>
SSgA Life Solutions Funds
--------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
--------------------------------------------------------------------------------
Strategy: Each Life Solutions Fund allocates its assets by investing in shares
of a combination of underlying SSgA funds. By investing in the underlying
component funds, each Life Solutions Fund seeks to maintain different
allocations among 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 seek to optimize performance
consistent with its investment objective.
Objective: Life Solutions Income and Growth Fund seeks income and, secondarily,
long-term growth of capital.
--------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
Life Solutions Lehman Brothers
Dates Income and Growth Fund Russell 3000(R) Index++ Aggregate Bond Index+++ Composite Market 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
1999 $11,747 $14,839 $11,350 $12,606
2000 $13,125 $17,890 $12,205 $14,160
</TABLE>
================================================================================
--------------------------------------------------------------------------------
SSgA Life Solutions Income and Growth Fund
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
---------------------- ------------- ------------
1 Year $ 11,173 11.73%
Inception $ 13,125 8.97%+
--------------------------------------------------------------------------------
Composite Market Index **
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
---------------------- ------------- ------------
1 Year $ 11,237 12.37%
Inception $ 14,160 11.61%+
--------------------------------------------------------------------------------
Russell 3000(R) Index ++
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
---------------------- ------------- ------------
1 Year $ 12,063 20.63%
Inception $ 17,890 20.16%+
--------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index +++
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
---------------------- ------------- ------------
1 Year $ 10,756 7.56%
Inception $ 12,205 6.50%+
** 35% Russell 3000(R) Index
5% MSCI EAFE Index
60% Lehman Brothers Aggregate Bond Index
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.
--------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
Life Solutions Lehman Brothers
Dates Balanced Fund Russell 3000(R) Index++ Aggregate Bond Index+++ Composite Market 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
1999 $12,079 $14,839 $11,350 $13,160
2000 $13,841 $17,890 $12,205 $15,059
</TABLE>
================================================================================
--------------------------------------------------------------------------------
SSgA Life Solutions Balanced Fund
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
---------------------- ------------- ------------
1 Year $ 11,459 14.59%
Inception $ 13,841 10.81%+
--------------------------------------------------------------------------------
Composite Market Index **
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
---------------------- ------------- ------------
1 Year $ 11,446 14.46%
Inception $ 15,059 13.80%+
--------------------------------------------------------------------------------
Russell 3000(R) Index ++
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
---------------------- ------------- ------------
1 Year $ 12,063 20.63%
Inception $ 17,890 20.16%+
--------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index +++
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
---------------------- ------------- ------------
1 Year $ 10,756 7.56%
Inception $ 12,205 6.50%+
** 50% Russell 3000(R) Index
10% MSCI EAFE Index
40% Lehman Brothers Aggregate Bond Index
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.
--------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
Life Solutions Lehman Brothers
Dates Growth Fund Russell 3000(R) Index++ Aggregate Bond Index+++ Composite Market 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
1999 $12,432 $14,839 $11,350 $13,702
2000 $14,564 $17,890 $12,205 $15,956
</TABLE>
================================================================================
--------------------------------------------------------------------------------
SSgA Life Solutions Growth Fund
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
---------------------- ------------- ------------
1 Year $ 11,715 17.15%
Inception $ 14,564 12.61%+
--------------------------------------------------------------------------------
Composite Market Index **
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
---------------------- ------------- ------------
1 Year $ 11,650 16.50%
Inception $ 15,956 15.90%+
--------------------------------------------------------------------------------
Russell 3000(R) Index ++
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
---------------------- ------------- ------------
1 Year $ 12,063 20.63%
Inception $ 17,890 20.16%+
--------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index +++
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
---------------------- ------------- ------------
1 Year $ 10,756 7.56%
Inception $ 12,205 6.50%+
** 65% Russell 3000(R) Index
15% MSCI EAFE Index
20% Lehman Brothers Aggregate Bond Index
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 is a family of balanced funds targeted to meet the
investment objectives of investors with varying degrees of risk tolerance. The
family consists of three Funds with distinct risk/return profiles. The most
conservative, the Life Solutions Income and Growth Fund, is targeted to
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, 2000, the Life Solutions Funds returned
11.73%, 14.59%, and 17.15% for the Income and Growth, Balanced, and Growth
Funds, respectively. The composite benchmarks over the last twelve months for
the three Funds returned 12.37%, 14.46%, and 16.50%, respectively. The Funds'
performance is net of operating expenses, whereas Index results do not include
expenses of any kind.
The US equity component of the composite benchmark is the Russell 3000(R) Index,
an unmanaged index of US equities representing approximately the largest 3000 US
companies by market value. The international component is comprised of the
Morgan Stanley Capital International Europe, Australia, Far East (MSCI EAFE)
Index, an unmanaged index reflecting the performance of international markets
around the globe. The fixed income component of the composite benchmark is the
Lehman Brothers Aggregate Bond Index, an unmanaged index capturing the
performance of the broad US bond markets, including government, investment grade
corporate, and mortgage-backed securities.
Market and Portfolio Highlights
Returns for the Funds were assisted over the past year by strong equity markets
in the US, including a long awaited surge from the small-cap sector. In
particular, the more aggressive Funds (Balanced and Growth) benefited from
having the majority of their assets in equities. Returns were driven by large US
stocks, which make up a substantial portion of the Funds, as the S&P 500(R)
returned over 16% for the past fiscal year. The Funds also gained from their
exposure to small cap US stocks, as they returned 27% as measured by the Russell
2000(R) Index. Overall Fund returns were curtailed slightly by their respective
allocations in fixed income issues, which rose around 7% as measured by the
Lehman Brothers Aggregate Bond Index.
Performance relative to the composite benchmarks was helped dramatically by the
holding of the SSgA Aggressive Equity Fund, which soared over 112% for the
fiscal year. This Fund benefited from the surge in small cap growth stocks, and
specifically, its investment in Initial Public Offerings (IPOs). Although
participating in IPOs is within the Aggressive Equity Fund's investment
guidelines, there is no guarantee that this Fund will continue to participate in
the IPO market in the future. Additionally, due to their inherent volatility,
there can be no assurance that IPOs will continue to have a positive impact on
the Aggressive Equity Fund's performance.
The continued strong performance of growth stocks caused the SSgA Matrix Fund
and the SSgA Active International Fund to lag their benchmarks. Ironically, the
Managers' focus on companies which have improved earnings outlooks and lower
price multiples than the market has hurt stock selection over the last year.
Despite the difficulties in the large-cap Funds, strong performance in small-cap
stocks overcame these issues to help the Balanced and the Growth Funds to
outperform their respective benchmarks.
The Funds continue to be positioned somewhat defensively as the Manager views
large-cap US stocks to be less attractive than international stocks or bonds.
International stocks have had disappointing performance recently, due primarily
to a dramatic decline in the Euro. The Manager believes there will not be a
repeat of this kind of decline, making for a more appealing climate for European
stocks. Japan also has had its recent problems, but important economic and
earnings growth expectations call for a strong improvement in both Japan and
Europe.
Annual Report 9
<PAGE>
SSgA Life Solutions Funds
--------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Portfolio Allocation by Asset Class
as of 08/31/00
--------------------------------------------------------------------------------
Income and
Growth Balanced Growth
Fund Fund Fund
---------- -------- --------
Equities:
Domestic 28.4% 43.6% 58.7%
International 7.7 12.6 17.6
---------- -------- --------
36.1 56.2 76.3
Bonds 61.9 42.0 22.1
Cash, net 2.0 1.8 1.6
---------- -------- --------
100.0% 100.0% 100.0%
========== ======== ========
--------------------------------------------------------------------------------
----------------------
Notes: The following notes relate to the Growth of $10,000 graph and table on
the 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(R) 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 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.
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.
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 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, 2000, the results of their
operations for the fiscal year then ended, and the changes in their 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 July 1, 1997 (commencement of operations) to August 31, 1997, in
conformity with accounting principles generally accepted in the United States of
America. 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 auditing standards generally accepted in the United States of
America 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, 2000 by
correspondence with the transfer agent, provide a reasonable basis for our
opinion.
Boston, Massachusetts
October 11, 2000
/s/ PricewaterhouseCoopers LLP
Annual Report 11
<PAGE>
SSgA Life Solutions
Income and Growth Fund
Statement of Net Assets August 31, 2000
Number Value
of (000)
Shares $
---------- ---------
Investments
Domestic Equities - 28.4%
SSgA Aggressive Equity Fund............................. 32,377 646
SSgA Matrix Equity Fund................................. 181,822 3,093
SSgA S&P 500 Index Fund................................. 61,989 1,637
SSgA Small Cap Fund..................................... 27,989 635
------
6,011
------
International Equities - 7.7%
SSgA Active International Fund.......................... 140,014 1,522
SSgA Emerging Markets Fund.............................. 9,032 103
------
1,625
------
Bonds - 61.9%
SSgA Bond Market Fund................................... 1,214,027 11,776
SSgA High Yield Bond Fund............................... 130,594 1,324
------
13,100
------
Short-Term Assets - 2.0%
SSgA Money Market Fund (a).............................. 422,561 423
------
Total Investments - 100.0%
(identified cost $20,774)......................................... 21,159
------
Other Assets and Liabilities
Deferred organization expenses.................................... 16
Receivables from Advisor.......................................... 34
Other assets...................................................... 11
Liabilities....................................................... (70)
------
Total Other Assets and Liabilities,
Net - (0.0%)...................................................... (9)
------
Net Assets - 100.0%............................................... 21,150
======
12 Annual Report
<PAGE>
SSgA Life Solutions
Income and Growth Fund
Statement of Net Assets, continued August 31, 2000
Value
(000)
$
---------
Net Assets Consist of:
Undistributed net investment income.................................. 346
Accumulated net realized gain (loss)................................. 95
Unrealized appreciation (depreciation) on investments................ 385
Shares of beneficial interest........................................ 2
Additional paid-in capital........................................... 20,322
------
Net Assets........................................................... 21,150
======
Net Asset Value, offering and redemption price per share:
($21,149,852 divided by 1,600,487 shares of $.001 par value
shares of beneficial interest outstanding)........................ 13.21
======
(a) At amortized cost, which approximates market.
See accompanying notes which are an integral part of the financial statements.
Annual Report 13
<PAGE>
SSgA Life Solutions
Income and Growth Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 2000
<TABLE>
<CAPTION>
Investment Income
<S> <C> <C>
Income distributions from Underlying Funds ......................................... $ 983
Expenses
Distribution fees ........................................................ $ 3
Transfer agent fees ...................................................... 23
Bookkeeping service fees ................................................. 15
Professional fees ........................................................ 9
Registration fees ........................................................ 30
Shareholder servicing fees ............................................... 31
Amortization of deferred organization expenses ........................... 5
Miscellaneous ............................................................ 12
-------
Expenses before reductions ............................................... 128
Expense reductions ....................................................... (22)
-------
Expenses, net ................................................................... 106
-------
Net investment income ................................................................. 877
-------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments .............................................................. 617
Capital gain distributions from Underlying Funds ......................... 761 1,378
-------
Net change in unrealized appreciation (depreciation) on investments ................... 360
-------
Net realized and unrealized gain (loss) ............................................... 1,738
-------
Net increase (decrease) in net assets from operations ................................. $ 2,615
=======
</TABLE>
See accompanying notes which are an integral part of the financial statements.
14 Annual Report
<PAGE>
SSgA Life Solutions
Income and Growth Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Year Ended August 31,
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ............................................ $ 877 $ 922
Net realized gain (loss) ......................................... 1,378 1,066
Net change in unrealized appreciation (depreciation) ............. 360 758
-------- --------
Net increase (decrease) in net assets from operations ......... 2,615 2,746
-------- --------
Distributions
From net investment income ....................................... (1,449) (1,186)
From net realized gain ........................................... (690) (983)
-------- --------
Net decrease in net assets from distributions ................. (2,139) (2,169)
-------- --------
Share Transactions
Net increase (decrease) in net assets from share transactions .... (5,068) 1,394
-------- --------
Total net increase (decrease) in net assets ......................... (4,592) 1,971
Net Assets
Beginning of period .............................................. 25,742 23,771
-------- --------
End of period (including undistributed net investment income of
$346 and $574, respectively) .................................. $ 21,150 $ 25,742
======== ========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Annual Report 15
<PAGE>
SSgA Life Solutions
Income and Growth Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
----------------------------------------
2000 1999 1998 1997*
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .......... $ 12.93 $ 12.65 $ 12.93 $ 12.68
------- ------- ------- -------
Income From Operations
Net investment income (a) .................. .47 .44 .46 --
Net realized and unrealized gain (loss) .... .94 .95 (.01) .25
------- ------- ------- -------
Total income from operations ............ 1.41 1.39 .45 .25
------- ------- ------- -------
Distributions
From net investment income ................. (.77) (.61) (.41) --
From net realized gain ..................... (.36) (.50) (.32) --
------- ------- ------- -------
Total distributions ..................... (1.13) (1.11) (.73) --
------- ------- ------- -------
Net Asset Value, End of Period ................ $ 13.21 $ 12.93 $ 12.65 $ 12.93
======= ======= ======= =======
Total Return (%)(b) ........................... 11.73 11.27 3.53 1.97
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ... 21,150 25,742 23,771 13,979
Ratios to average net assets (%)(c):
Operating expenses, net (d) ............. .45 .45 .45 .35
Operating expenses, gross (d) ........... .55 .50 .72 1.14
Net investment income ................... 3.71 3.37 3.00 .16
Portfolio turnover rate (%)(c) ............. 31.07 93.34 93.28 106.68
</TABLE>
* For the period July 1, 1997 (commencement of operations) to August 31,
1997.
(a) For the periods subsequent to August 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for the period ended August 31, 1997 are annualized.
(d) See Note 4 for current period amounts and Underlying Funds.
16 Annual Report
<PAGE>
SSgA Life Solutions
Balanced Fund
Statement of Net Assets
August 31, 2000
Number Value
of (000)
Shares $
---------- ---------
Investments
Domestic Equities - 43.6%
SSgA Aggressive Equity Fund........................ 164,871 3,292
SSgA Matrix Equity Fund............................ 1,123,735 19,115
SSgA S&P 500 Index Fund............................ 374,549 9,892
SSgA Small Cap Fund................................ 144,399 3,276
------
35,575
------
International Equities - 12.6%
SSgA Active International Fund..................... 873,547 9,495
SSgA Emerging Markets Fund......................... 71,490 813
------
10,308
------
Bonds - 42.0%
SSgA Bond Market Fund.............................. 3,181,204 30,858
SSgA High Yield Bond Fund.......................... 342,207 3,470
------
34,328
------
Short-Term Assets - 2.0%
SSgA Money Market Fund (a)......................... 1,625,720 1,626
------
Total Investments - 100.2%
(identified cost $77,911)...................................... 81,837
------
Other Assets and Liabilities
Deferred organization expenses................................. 16
Other assets................................................... 69
Liabilities.................................................... (211)
------
Total Other Assets and Liabilities,
Net - (0.2%)................................................... (126)
------
Net Assets - 100.0%............................................ 81,711
======
18 Annual Report
<PAGE>
SSgA Life Solutions
Balanced Fund
Statement of Net Assets, continued
August 31, 2000
Value
(000)
$
---------
Net Assets Consist of:
Undistributed net investment income................................. 1,248
Accumulated net realized gain (loss)................................ 2,864
Unrealized appreciation (depreciation) on investments............... 3,926
Shares of beneficial interest....................................... 6
Additional paid-in capital.......................................... 73,667
------
Net Assets.......................................................... 81,711
======
Net Asset Value, offering and redemption price per share:
($81,710,618 divided by 5,601,620 shares of $.001 par value
shares of beneficial interest outstanding)....................... 14.59
======
(a) At amortized cost, which approximates market.
See accompanying notes which are an integral part of the financial statements.
Annual Report 19
<PAGE>
SSgA Life Solutions
Balanced Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 2000
<TABLE>
<S> <C> <C>
Investment Income
Income distributions from Underlying Funds ........................................ $ 3,507
Expenses
Distribution fees ........................................................ $ 12
Transfer agent fees ...................................................... 28
Bookkeeping service fees ................................................. 15
Professional fees ........................................................ 10
Registration fees ........................................................ 30
Shareholder servicing fees ............................................... 136
Amortization of deferred organization expenses ........................... 5
Miscellaneous ............................................................ 28
------
Total expenses ................................................................. 264
---------
Net investment income ................................................................ 3,243
---------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments .............................................................. 4,829
Capital gain distributions from Underlying Funds ......................... 5,501 10,330
------
Net change in unrealized appreciation (depreciation) on investments .................. 1,532
---------
Net realized and unrealized gain (loss) .............................................. 11,862
---------
Net increase (decrease) in net assets from operations ................................ $ 15,105
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
20 Annual Report
<PAGE>
SSgA Life Solutions
Balanced Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Years Ended August 31,
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income .......................................... $ 3,243 $ 2,837
Net realized gain (loss) ....................................... 10,330 5,339
Net change in unrealized appreciation (depreciation) ........... 1,532 7,816
-------- --------
Net increase (decrease) in net assets from operations ....... 15,105 15,992
-------- --------
Distributions
From net investment income ..................................... (6,007) (4,311)
From net realized gain ......................................... (3,568) (5,336)
-------- --------
Net decrease in net assets from distributions ............... (9,575) (9,647)
-------- --------
Share Transactions
Net increase (decrease) in net assets from share transactions .. (22,911) 1,943
-------- --------
Total net increase (decrease) in net assets ....................... (17,381) 8,288
Net Assets
Beginning of period ............................................ 99,092 90,804
-------- --------
End of period (including undistributed net investment income
of $1,248 and $1,531, respectively) ........................ $ 81,711 $ 99,092
======== ========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Annual Report 21
<PAGE>
SSgA Life Solutions
Balanced Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Fiscal years Ended August 31,
--------------------------------------------
2000 1999 1998 1997*
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .......... $ 13.80 $ 12.95 $ 13.98 $ 13.69
-------- -------- -------- --------
Income From Operations
Net investment income (a) .................. .42 .38 .50 --
Net realized and unrealized gain (loss) .... 1.47 1.84 (.45) .29
-------- -------- -------- --------
Total income from operations ............ 1.89 2.22 .05 .29
-------- -------- -------- --------
Distributions
From net investment income ................. (.70) (.61) (.56) --
From net realized gain ..................... (.40) (.76) (.52) --
-------- -------- -------- --------
Total distributions ..................... (1.10) (1.37) (1.08) --
-------- -------- -------- --------
Net Asset Value, End of Period ................ $ 14.59 $ 13.80 $ 12.95 $ 13.98
======== ======== ======== ========
Total Return (%)(b) ........................... 14.59 17.89 .33 2.12
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ... 81,711 99,092 90,804 47,003
Ratios to average net assets (%)(c):
Operating expenses, net ................. .24 .28 .36 .35
Operating expenses, gross ............... .24 .28 .36 .49
Net investment income ................... 3.01 2.83 2.07 .07
Portfolio turnover rate (%)(c) ............. 42.47 51.09 101.40 51.61
</TABLE>
* For the period July 1, 1997 (commencement of operations) to August 31,
1997.
(a) For the periods subsequent to August 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for the period ended August 31, 1997 are annualized.
22 Annual Report
<PAGE>
SSgA Life Solutions
Growth Fund
Statement of Net Assets August 31, 2000
Number Value
of (000)
Shares $
---------- ----------
Investments
Domestic Equities - 58.7%
SSgA Aggressive Equity Fund ......................... 132,382 2,644
SSgA Matrix Equity Fund ............................. 1,001,785 17,040
SSgA S&P 500 Index Fund ............................. 298,663 7,888
SSgA Small Cap Fund ................................. 115,810 2,628
-------
30,200
-------
International Equities - 17.6%
SSgA Active International Fund ...................... 765,462 8,320
SSgA Emerging Markets Fund .......................... 65,897 749
-------
9,069
-------
Bonds - 22.1%
SSgA Bond Market Fund ............................... 1,049,939 10,184
SSgA High Yield Bond Fund ........................... 115,167 1,168
-------
11,352
-------
Short-Term Assets - 1.9%
SSgA Money Market Fund (a) .......................... 957,714 958
-------
Total Investments - 100.3%
(identified cost $47,252) ........................................ 51,579
-------
Other Assets and Liabilities
Deferred organization expenses ................................... 16
Other assets ..................................................... 33
Liabilities ...................................................... (217)
-------
Total Other Assets and Liabilities,
Net - (0.3%) ..................................................... (168)
-------
Net Assets - 100.0% .............................................. 51,411
=======
24 Annual Report
<PAGE>
SSgA Life Solutions
Growth Fund
Statement of Net Assets, continued August 31, 2000
Value
(000)
$
---------
Net Assets Consist of:
Undistributed net investment income ................................. 357
Accumulated net realized gain (loss) ................................ 1,864
Unrealized appreciation (depreciation) on investments ............... 4,327
Shares of beneficial interest ....................................... 3
Additional paid-in capital .......................................... 44,860
-------
Net Assets .......................................................... 51,411
=======
Net Asset Value, offering and redemption price per share:
($51,411,282 divided by 3,267,551 shares of $.001 par value
shares of beneficial interest outstanding) ....................... 15.73
=======
(a) At amortized cost, which approximates market.
See accompanying notes which are an integral part of the financial statements.
Annual Report 25
<PAGE>
SSgA Life Solutions
Growth Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 2000
<TABLE>
<S> <C> <C>
Investment Income
Income distributions from Underlying Funds ........................................ $ 1,307
Expenses
Distribution fees ......................................................... $ 16
Transfer agent fees ....................................................... 23
Bookkeeping service fees .................................................. 15
Professional fees ......................................................... 10
Registration fees ......................................................... 30
Shareholder servicing fees ................................................ 83
Amortization of deferred organization expenses ............................ 5
Miscellaneous ............................................................. 34
-------
Total expenses ................................................................. 216
---------
Net investment income ................................................................ 1,091
---------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments ............................................................... 2,872
Capital gain distributions from Underlying Funds .......................... 4,212 7,084
-------
Net change in unrealized appreciation (depreciation) on investments .................. 2,029
---------
Net realized and unrealized gain (loss) .............................................. 9,113
---------
Net increase (decrease) in net assets from operations ................................ $ 10,204
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
26 Annual Report
<PAGE>
SSgA Life Solutions
Growth Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Years Ended August 31,
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income .......................................... $ 1,091 $ 1,215
Net realized gain (loss) ....................................... 7,084 4,065
Net change in unrealized appreciation (depreciation) ........... 2,029 8,203
-------- --------
Net increase (decrease) in net assets from operations ....... 10,204 13,483
-------- --------
Distributions
From net investment income ..................................... (3,157) (2,340)
From net realized gain ......................................... (2,360) (3,927)
-------- --------
Net decrease in net assets from distributions ............... (5,517) (6,267)
-------- --------
Share Transactions
Net increase (decrease) in net assets from share transactions .. (18,294) 4,370
-------- --------
Total net increase (decrease) in net assets ....................... (13,607) 11,586
Net Assets
Beginning of period ............................................ 65,018 53,432
-------- --------
End of period (including undistributed net investment
income of $357 and $513, respectively) ...................... $ 51,411 $ 65,018
======== ========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Annual Report 27
<PAGE>
SSgA Life Solutions
Growth Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
--------------------------------------------
2000 1999 1998 1997*
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .......... $ 14.62 $ 13.02 $ 14.79 $ 14.44
-------- -------- -------- --------
Income From Operations
Net investment income (a) .................. .26 .26 .38 --
Net realized and unrealized gain (loss) .... 2.13 2.81 (.75) .35
-------- -------- -------- --------
Total income from operations ............ 2.39 3.07 (.37) .35
-------- -------- -------- --------
Distributions
From net investment income ................. (.72) (.55) (.71) --
From net realized gain ..................... (.56) (.92) (.69) --
-------- -------- -------- --------
Total distributions ..................... (1.28) (1.47) (1.40) --
-------- -------- -------- --------
Net Asset Value, End of Period ................ $ 15.73 $ 14.62 $ 13.02 $ 14.79
======== ======== ======== ========
Total Return (%)(b) ........................... 17.15 24.72 (2.68) 2.42
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ... 51,411 65,018 53,432 43,603
Ratios to average net assets (%)(c):
Operating expenses, net ................. .35 .38 .41 .35
Operating expenses, gross ............... .35 .38 .41 .54
Net investment income ................... 1.78 1.89 1.52 .09
Portfolio turnover rate (%)(c) ............. 33.00 43.15 67.66 39.49
</TABLE>
* For the period July 1, 1997 (commencement of operations) to August 31,
1997.
(a) For the periods subsequent to August 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for the period ended August 31, 1997 are annualized.
28 Annual Report
<PAGE>
SSgA
Life Solutions Funds
Notes to Financial Statements
August 31, 2000
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 24 investment portfolios which are in operation as
of August 31, 2000. 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 Class/Underlying Fund Asset Allocation Ranges
------------------------------------------------
Income and Balanced Growth
Growth Fund Fund Fund
-------------- ------------- ------------
<S> <C> <C> <C>
Equities
US Equities 20 - 60% 40 - 80% 60 - 100%
SSgA S&P 500 Index Fund
SSgA Matrix Equity Fund
SSgA Small Cap Fund
SSgA Growth and Income Fund
SSgA Special Equity Fund
SSgA Tuckerman Active REIT Fund
SSgA Aggressive Equity Fund
International Equities* 15% 20% 25%
SSgA Active International Fund
SSgA Emerging Markets Fund
SSgA International Growth Opportunities Fund
Bonds 40 - 80% 20 - 60% 0 - 40%
SSgA Bond Market Fund
SSgA Intermediate Fund
SSgA High Yield Bond Fund
SSgA Yield Plus Fund
Short Term Assets 0 - 20% 0 - 20% 0 - 20%
SSgA Money Market Fund
SSgA US Government Money Market Fund
</TABLE>
* International equities are included in the total equity exposure
indicated above and should not exceed the listed percentages.
Annual Report 29
<PAGE>
SSgA
Life Solutions Funds
Notes to Financial Statements, continued
August 31, 2000
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 presented above. 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 Special Equity Fund: To maximize total return through investment in
mid- and small capitalization US equity securities.
SSgA Tuckerman Active REIT Fund: To provide income and capital growth by
investing primarily in publicly traded securities of real estate
companies.
SSgA Aggressive Equity Fund: To maximize total return through investing in
US equity securities that are under-valued relative to their growth
potential as measured by SSgA's proprietary models.
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 International Growth Opportunities Fund: To provide long-term capital
growth by investing primarily 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 High Yield Bond Fund: To maximize total return by investing in fixed
income securities, including, but not limited to, those represented by the
Lehman Brothers High Yield Bond Index.
30 Annual Report
<PAGE>
SSgA
Life Solutions Funds
Notes to Financial Statements, continued
August 31, 2000
SSgA Yield Plus Fund: To seek high current income and liquidity by
investing 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.
2. Significant Accounting Policies
The Funds' financial statements are prepared in accordance with accounting
principles generally accepted in the United States 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.
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: Distributions of income and capital gains are recorded
from the Underlying Funds on the ex-dividend date.
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 Funds to distribute all of their taxable income. Therefore, the Funds
paid no federal income taxes and no federal income tax provision was
required.
Annual Report 31
<PAGE>
SSgA
Life Solutions Funds
Notes to Financial Statements, continued
August 31, 2000
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, 2000 are as follows:
<TABLE>
<CAPTION>
Net
Unrealized
Federal Tax Unrealized Unrealized Appreciation
Cost Appreciation (Depreciation) (Depreciation)
----------- ------------ -------------- --------------
<S> <C> <C> <C> <C>
Income and Growth Fund 21,118,377 63,245 (22,568) 40,677
Balanced Fund 79,213,453 2,697,581 (73,901) 2,623,680
Growth Fund 48,432,773 3,219,891 (73,466) 3,146,425
</TABLE>
Dividends and distributions to shareholders: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date.
Dividends are generally declared and paid quarterly. Capital gain
distributions are generally declared and paid annually. An additional
distribution may be paid by the Funds to avoid imposition of federal
income tax on any remaining undistributed net investment income and
capital gains.
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 year may differ significantly from
distributions during such year. 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.
Expenses: The Funds will pay all of their expenses other than those
expressly assumed by the Adviser and the Administrator. Certain expenses
of the investment company 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 statements of operations 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. These costs were deferred and are
being amortized over 60 months on a straight-line basis.
3. Securities Transactions
Investment transactions: During the year ended August 31, 2000, purchases
and sales of the Underlying Funds aggregated to the following:
Purchases Sales
------------ -------------
Income and Growth Fund $ 7,263,296 $ 15,302,389
Balanced Fund 44,928,938 86,060,032
Growth Fund 20,088,573 45,123,408
32 Annual Report
<PAGE>
SSgA
Life Solutions Funds
Notes to Financial Statements, continued
August 31, 2000
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, through State Street Global Advisors, the investment management
group of 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,
2000, 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. The total
amount of reimbursement for the Income and Growth Fund for the year ended
August 31, 2000 was $22,478. As of August 31, 2000, the receivable due
from the Adviser for reimbursed expenses in excess of the expense cap has
been netted against the Advisory fee payable.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly-owned subsidiary of The Northwestern Mutual Life Insurance Company,
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. For the period September 1,
1999 to April 30, 2000, each Underlying Fund will pay indirectly its
proportionate share of the following: All Underlying Funds combined
(except Active International, Emerging Markets and International Growth
Opportunities) up to and including $500 million - .06%; over $500 million
up to and including $1 billion - .05%; and over $1 billion - .03%. Active
International, Emerging Markets and International Growth Opportunities up
to and including $500 million - .07%; over $500 million up to and
including $1 billion - .06%; over $1 billion up to and including $1.5
billion - .04%; and over $1.5 billion - .03%. Effective May 1, 2000, each
fund will pay indirectly its proportionate share of the following:
<TABLE>
<S> <C> <C>
Money Market Portfolios $0 up to and including $15 billion .0315%
over $15 billion .0290%
U.S. Equity Portfolios $0 up to and including $2 billion .0315%
over $2 billion .0290%
U.S. Fixed Income Portfolios $0 up to and including $1 billion .0315%
over $1 billion .0290%
International Portfolios $0 up to and including $1 billion .0700%
over $1 billion .0500%
Feeder Portfolios $0 up to and including $1 billion .0315%
over $1 billion .0100%
</TABLE>
Annual Report 33
<PAGE>
SSgA
Life Solutions Funds
Notes to Financial Statements, continued
August 31, 2000
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. The Administrator will also receive reimbursement of
expenses it incurs in connection with establishing new investment
portfolios, including the Funds.
Distributor and Shareholder Servicing: Pursuant to the Distribution
Agreement with Investment Company, Russell Fund Distributors, Inc.
("Distributor"), a wholly-owned subsidiary of the Administrator, serves as
distributor for all Investment Company portfolio shares, including the
Funds.
The Funds and Underlying Funds have 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
expenses carried over as of August 31, 2000. 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 Shareholder Service Agreements with State
Street Solutions ("Solutions"), State Street Brokerage Services, Inc.
("SSBSI"), the State Street Retirement Investment Services Division
("RIS"), (collectively the "Agents"), as well as other non-related third
party service providers. For these services, the Fund pays .13% each,
based upon the average daily net asset value of all Fund shares held by or
for customers of these Agents. For the year ended August 31, 2000, the
Funds were charged shareholder servicing expenses by Solutions, SSBSI and
RIS as follows:
Solutions SSBSI RIS
--------- --------- ---------
Income and Growth Fund $ 23,380 $ 528 $ 4,032
Balanced Fund 107,679 558 34,799
Growth Fund 75,489 301 5,703
34 Annual Report
<PAGE>
SSgA
Life Solutions Funds
Notes to Financial Statements, continued
August 31, 2000
Board of Trustees: The Investment Company paid each Trustee not affiliated
with the Investment Company an annual retainer, plus specified amounts for
board and committee meetings attended. 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, 2000 were
as follows:
Income and
Growth Fund Balanced Fund Growth Fund
----------- ------------- -----------
Administration fees $ 78 $ 100 $ 145
Bookkeeping service fees 4,035 7,672 14,491
Distribution 4,356 18,297 24,607
Shareholder servicing fees 4,870 2,174 13,688
Transfer agent fees 403 780 2,135
----------- ------------- -----------
$ 13,742 $ 29,023 $ 55,066
=========== ============= ===========
Beneficial Interest: In the Income and Growth Fund, as of August 31, 2000,
two shareholders (who were also affiliates of the Investment Company) were
record owners of approximately 70% and 12%, respectively, of the total
outstanding shares of the Fund. In the Balanced Fund, as of August 31,
2000, two shareholders (who were also affiliates of the Investment
Company) were record owners of approximately 85% and 11%, respectively, of
the total outstanding shares of the Fund. In the Growth Fund, as of August
31, 2000, two shareholders (who were also affiliates of the Investment
Company) were record owners of approximately 80% and 16% respectively, 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 the voting securities.
Transactions during the year ended August 31, 2000 with Underlying Funds
which are or were affiliates are as follows:
<TABLE>
<CAPTION>
Dividend and
Distribution
Affiliate Purchase Cost Sales Cost Income
---------------------------------- ------------- ---------- ------------
<S> <C> <C> <C>
Income and Growth Fund
SSgA Aggressive Equity Fund $ 513,322 $ 508,125 $ 162,704
----------- ----------- ----------
$ 513,322 $ 508,125 $ 162,704
=========== =========== ==========
Balanced Fund
SSgA Aggressive Equity Fund $ 2,539,689 $ 3,022,698 $1,183,861
SSgA Active International Fund 9,014,005 8,733,327 187,384
SSgA Bond Market Fund 30,884,026 27,213,233 2,478,128
SSgA High Yield Bond Fund 3,554,204 2,628,734 434,830
----------- ----------- ----------
$45,991,924 $41,597,992 $4,284,203
=========== =========== ==========
Growth Fund
SSgA Active International Fund 1,670,818 2,201,004 928,450
SSgA Aggressive Equity Fund 7,577,736 6,574,401 131,663
----------- ----------- ----------
$ 9,248,554 $ 8,775,405 $1,060,113
=========== =========== ==========
</TABLE>
The values of the above Underlying Funds are shown in the accompanying
Statements of Net Assets.
Annual Report 35
<PAGE>
SSgA
Life Solutions Funds
Notes to Financial Statements, continued
August 31, 2000
5. Fund Share Transactions (amounts in thousands)
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
---------------------------------------------------
2000 1999
----------------------- -----------------------
Shares Dollars Shares Dollars
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Income and Growth Fund
Proceeds from shares sold .............. 398 $ 5,072 866 $ 10,846
Proceeds from reinvestment of
distributions ....................... 173 2,139 172 2,169
Payments for shares redeemed ........... (961) (12,279) (926) (11,621)
--------- ---------- --------- ----------
Total net increase (decrease) .......... (390) $ (5,068) 112 $ 1,394
========= ========== ========= ==========
Balanced Fund
Proceeds from shares sold .............. 2,728 $ 38,171 992 $ 12,420
Proceeds from reinvestment of
distributions ....................... 712 9,575 737 9,647
Payments for shares redeemed ........... (5,017) (70,657) (1,560) (20,124)
--------- ---------- --------- ----------
Total net increase (decrease) .......... (1,577) $ (22,911) 169 $ 1,943
========= ========== ========= ==========
Growth Fund
Proceeds from shares sold .............. 714 $ 10,726 776 $ 10,200
Proceeds from reinvestment of
distributions ....................... 385 5,517 465 6,267
Payments for shares redeemed ........... (2,277) (34,537) (898) (12,097)
--------- ---------- --------- ----------
Total net increase (decrease) .......... (1,178) $ (18,294) 343 $ 4,370
========= ========== ========= ==========
</TABLE>
6. Interfund Lending Program
The Funds and all other funds of the Investment Company received from the
Securities and Exchange Commission an exemptive order on December 23, 1999
to establish and operate an Interfund Credit Facility. This allows the
Funds to directly lend to and borrow money from the SSgA Money Market Fund
for temporary purposes in accordance with certain conditions. The
borrowing Funds are charged the average of the current Repo Rate and the
Bank Loan Rate. The Funds did not utilize the interfund lending program
during this year.
36 Annual Report
<PAGE>
SSgA
Life Solutions Funds
Tax Information
August 31, 2000 (Unaudited)
The Fund paid distributions of $532,709, $3,398,035 and $2,221,590 for Income
and Growth Fund, Balanced Fund and Growth Fund, respectively, from net long-term
capital gains during its taxable year ended August 31, 2000.
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, Treasurer and CEO
Mark E. Swanson, Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Treasurer
Carla L. Anderson, Assistant 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
160 Federal Street
Boston, Massachusetts 02110
38 Annual Report
<PAGE>
[COVER GRAPHIC]
SSgA(R) funds
ANNUAL REPORT
Money Market Fund
August 31, 2000
<PAGE>
SSgA(R) Funds
Money Market Fund
Annual Report
August 31, 2000
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(R)" 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,
It is our pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 2000. The SSgA Fund Family has grown to include
twenty-four portfolios with over $21 billion in assets as of August 31, 2000.
The Fund Family provides a wide range of strategies covering the world's major
markets. The enclosed information provides an overview of the investment process
for the SSgA Money Market Fund. This overview contains the portfolio management
discussion, performance updates and financial information for the Fund.
In an ongoing effort to develop competitive products and services that provide
investment solutions for our clients, we have added the SSgA Intermediate
Municipal Bond Fund to the SSgA Fund Family. This Fund's investment objective
seeks to provide federally tax-exempt current income by investing primarily in a
diversified portfolio of municipal debt securities with a dollar-weighted
average maturity between three and ten years.
We are also pleased with the success of our SSgA Emerging Markets and SSgA
Growth and Income Funds as they were included in Money(R) Magazine's June 2000
issue listing of the 'Top 100 Mutual Funds'. This is the second year in a row
that these funds have been selected.
Additionally, the SSgA Tax Free Money Market and the SSgA Active International
Funds have achieved five-year performance history during the 2000 fiscal year.
Currently, all of our SSgA Money Market Funds have at least a five-year
performance history. We strive to meet our clients' needs by providing funds
with long-term records and competitive performance.
We would like to thank you for choosing the SSgA Funds. Our reputation is based
on our tradition of designing and delivering exceptional financial services to
our clients. We look forward to continue sharing the benefit of our experience
with you.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
/s/ Timothy B. Harbert
Timothy B. Harbert
State Street Global Advisors
President and Chief Operating Officer, SSgA
4 Annual Report
<PAGE>
SSgA Money Market Fund
--------------------------------------------------------------------------------
Management of the Funds
--------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
[PHOTO]
Timothy B. Harbert
President and Chief Operating 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 is the Unit Head of the cash desk with responsibility
for the SSgA money market funds, several short-term funds and enhanced cash
portfolios. Prior to joining SSgA, she was a portfolio manager with State
Street's Investment Research Department, where she managed the securities
lending reinvestment funds since their inception in 1987, as well as other money
market portfolios. She received a BS from Suffolk University. There are ten
other portfolio managers working with Ms. Hatfield.
Annual Report 5
<PAGE>
SSgA Money Market Fund
--------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
--------------------------------------------------------------------------------
Objective: Maximize current income while preserving 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 vary depending on the general level of
interest rates as well as supply and demand imbalances in the market.
--------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
Dates Money Market Salomon Smith Barney 3-Month T-Bill Index**
* $10,000 $10,000
1990 $10,848 $10,815
1991 $11,616 $11,523
1992 $12,160 $12,014
1993 $12,585 $12,383
1994 $12,975 $12,824
1995 $13,691 $13,539
1996 $14,425 $14,263
1997 $15,187 $15,012
1998 $16,009 $15,796
1999 $16,787 $16,530
2000 $16,369 $16,127
================================================================================
Performance Review
The Fund had a total return of 5.78% for the fiscal year ended August 31, 2000.
This compared favorably to the Salomon Smith Barney 3-Month Treasury Bill Index
return of 5.51% for the same period. The Fund's performance is net of operating
expenses, while Index results do not include expenses of any kind. The Salomon
Smith Barney 3-Month Treasury Bill Index was chosen as a standard, well-known
representation of money market rates.
The market environment for the last year began with the Federal Open Market
Committee (FOMC) tightening monetary policy due to strong domestic growth and
rejuvenated demand from abroad. The FOMC raised rates by 25 basis points in
June, August and November 1999, bringing the Fed Funds target from 4.75% to
5.50%. The FOMC took no action at its December meeting, but followed a strategy
of injecting the economy with massive amounts of cash to ease Y2K liquidity
concerns. Fourth quarter GDP logged an impressive 8.3% due to Y2K inventory
building
--------------------------------------------------------------------------------
SSgA Money Market Fund
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
------------------- ------------ -------
1 Year $ 10,578 5.78%
5 Years $ 12,970 5.34%+
10 Years $ 16,369 5.05%+
--------------------------------------------------------------------------------
Salomon Smith Barney 3-Month Treasury Bill Index
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
------------------- ------------ -------
1 Year $ 10,551 5.51%
5 Years $ 12,882 5.20%+
10 Years $ 16,127 4.89%+
See related Notes on following page.
6 Annual Report
<PAGE>
SSgA Money Market Fund
--------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
--------------------------------------------------------------------------------
supported by the generous liquidity provisions from the Federal Reserve. This
surfeit of liquidity, in effect, loosened monetary policy when in fact tight
labor markets and excess demand called for tightening.
First quarter 2000 GDP followed with a 4.8% growth rate. The Federal Reserve
Board needed to take back the excess liquidity and slow the economy. The FOMC
did so by raising interest rates by 100 basis points in the first half of 2000.
Although GDP advanced 5.4% throughout the second quarter of 2000, fears of
inflation were tempered by the fact that productivity grew at 5% for the same
period. The FOMC opted to leave rates unchanged at the June and August meetings
while maintaining a cautious stance going forward. The Manager continues to be
cautious about future FOMC policy considering the trend in rising oil prices as
well as the upcoming presidential election.
Market and Portfolio Highlights
In the last fiscal 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 decreased in size by $1.5 billion or 14.9% over the past year to $8.6
billion at August 31, 2000.
During the fall tightening period the Fund was managed with liquidity as a
primary concern, with maturing positions remaining in cash and very liquid
short-term securities throughout the last calendar quarter of 1999. This large
cash position served to hedge against Y2K liquidity concerns and helped with the
substantial swings in assets related to calendar year-end 1999. The 100 basis
points of tightening in the first half of 2000, combined with the market's
concern of further tightening, resulted in a very steep yield curve, with the
6-month LIBOR at 7.10% and the 12-month LIBOR at 7.50%. The Fund took the
opportunity to buy on market weakness and extended the Fund's average maturity.
By the end of August, the yield curve had stabilized with the 3-month LIBOR at
6.67%, the 6-month LIBOR at 6.80% and the 12-month LIBOR at 6.92%. The Fund's
average maturity ranged between 44 and 68 days, ending at 68 days at August 31,
2000, longer than its peer group average of 51 days as measured by iMoneyNet,
Inc. (formerly IBC Financial Data).
The Fund increased exposure in fixed rate securities, from 76.5% at August 31,
1999, to 85% on August 31, 2000. Fixed rate securities were selected over
floating rate securities, enabling the Fund to add yield in a rising rate
environment. The Fund increased exposure in 1- to 3-month asset-backed
commercial paper, which was priced 2 to 5 basis points cheaper than
corresponding-maturity bank and finance commercial paper. With the yield curve's
potential to steepen on negative inflation news, the Manager will look for those
opportunities to extend duration and add yield.
--------------------------------------------------------
Top Five Holdings (by investment type,
as a percent of Total Investments) August 31, 2000
--------------------------------------------------------
Domestic Commercial Paper 38.4%
Yankee Certificates of Deposit 22.6
Corporate Bonds and Notes 18.7
Eurodollar Certificates of Deposit 11.9
Domestic Certificates of Deposit 3.3
--------------------------------------------------------
---------------------
Notes: The following notes relate to the Growth of $10,000 graph and table on
the preceding page.
* Assumes initial investment on September 1, 1990.
** 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, 2000, 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 accounting principles generally
accepted in the United States of America. 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 auditing standards
generally accepted in the United States of America 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, 2000 by correspondence with the custodian, provide a reasonable basis for
our opinion.
Boston, Massachusetts
October 11, 2000
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
Money Market Fund
Statement of Net Assets
August 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity $
--------- ---- -------- -------
<S> <C> <C> <C> <C>
Corporate Bonds and Notes - 15.7%
Bank of America N.A. 100,000 6.600 11/09/00 100,000
Bank of America N.A. 50,000 6.740 02/20/01 50,000
Bank of New York 60,000 6.070 11/20/00 59,991
Bank One Corp. (a) 50,000 6.870 10/06/00 49,998
BMW Corp. (a) 90,000 6.823 06/04/01 90,000
Chase Manhattan Corp. (a) 10,000 6.740 02/26/01 10,006
Citigroup, Inc. (a) 85,000 6.580 04/04/01 85,000
Comerica Bank (a) 25,000 6.610 11/20/00 24,998
Commerzbank (a) 25,000 6.530 01/25/01 24,995
Commerzbank (a) 75,000 6.700 02/12/01 74,984
Commerzbank (a) 125,000 6.530 02/16/01 124,972
DaimlerChrysler 30,000 6.680 02/07/01 29,991
DaimlerChrysler (a) 20,000 6.560 02/22/01 19,993
du Pont (E.I.) de Nemours & Co. 35,000 6.480 09/28/00 34,830
Ford Motor Credit Co. 30,000 6.510 10/19/00 29,740
Ford Motor Credit Co. 50,000 6.640 11/22/00 49,995
Ford Motor Credit Co. (a) 27,000 7.089 03/05/01 27,037
Ford Motor Credit Co. (a) 50,000 6.904 07/16/01 50,071
Key Bank N.A. (a) 25,000 6.675 07/27/01 24,996
National City Bank 40,000 6.808 09/18/00 40,002
National City Bank, Grand Cayman 50,060 6.625 09/01/00 50,060
PNC Bank, Pittsburgh (a) 38,000 6.520 02/26/01 37,989
PNC Bank, Pittsburgh (a) 60,000 6.540 03/23/01 59,984
PNC Bank, Pittsburgh 30,000 6.578 05/25/01 29,998
Unilever Capital Corp. (a) 53,000 6.649 09/07/01 53,000
US Bank, Minnesota 40,000 6.580 11/20/00 39,995
US Bank, Minnesota 40,000 6.880 04/04/01 39,993
US Bank, Minnesota (a) 30,000 6.670 05/24/01 30,000
---------
Total Corporate Bonds and Notes (cost $1,342,618) 1,342,618
---------
</TABLE>
Annual Report 9
<PAGE>
SSgA
Money Market Fund
Statement of Net Assets, continued
August 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity $
--------- ---- -------- -------
<S> <C> <C> <C> <C>
Domestic Certificates of Deposit - 2.7%
First Tennessee Bank NA 25,000 6.700 09/18/00 25,000
First Tennessee Bank NA 75,000 6.560 11/27/00 74,988
Firstar Bank 50,000 6.710 09/29/00 50,000
Merrill Lynch & Co. Inc. 50,000 6.520 10/24/00 49,520
US National Bank, Minneapolis 35,000 6.780 12/26/00 35,000
---------
Total Domestic Certificates of Deposit (cost $234,508) 234,508
---------
Eurodollar Certificates of Deposit - 10.0%
Abbey National Treasury Services PLC 45,000 6.600 11/21/00 45,000
Abbey National Treasury Services PLC 50,000 6.720 12/29/00 50,000
Abbey National Treasury Services PLC 50,000 7.260 05/09/01 50,000
Abbey National Treasury Services PLC 50,000 7.330 05/17/01 50,000
Bank of Scotland 75,000 6.705 09/18/00 75,000
Bank of Scotland 50,000 6.650 10/26/00 50,001
Barclays Bank 40,000 6.750 02/20/01 40,002
Barclays Bank 25,000 6.750 02/21/01 25,000
Halifax PLC 30,000 6.620 12/11/00 30,000
Halifax PLC 140,000 6.620 12/27/00 140,009
Halifax PLC 53,000 6.720 12/27/00 52,993
Halifax PLC 50,000 6.700 12/29/00 50,000
ING Bank 50,000 6.600 11/30/00 50,000
Rabobank London ECD 75,000 6.580 09/29/00 75,000
Royal Bank of Scotland 25,000 6.815 09/05/00 25,000
Royal Bank of Scotland 50,000 6.590 09/28/00 50,000
---------
Total Eurodollar Certificates of Deposit (cost $858,005) 858,005
---------
Eurodollar Time Deposits - 0.3%
Den Denske Bank 25,000 6.600 12/27/00 25,000
---------
Total Eurodollar Time Deposits (cost $25,000) 25,000
---------
Domestic Commercial Paper - 32.3%
ABN Amro 75,000 6.607 09/29/00 74,615
ABN Amro 100,000 6.472 11/30/00 98,382
Alcatel 50,000 6.520 10/24/00 49,520
</TABLE>
10 Annual Report
<PAGE>
SSgA
Money Market Fund
Statement of Net Assets, continued
August 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity $
--------- ---- -------- -------
<S> <C> <C> <C> <C>
Amsterdam FDG Corp. 40,000 6.510 09/14/00 39,906
Amsterdam FDG Corp. 35,000 6.520 09/15/00 34,911
Banco Bilbao Vizacaya (NY) BRH 100,000 6.690 09/21/00 99,999
Ciesco LP 25,000 6.510 09/13/00 24,946
Ciesco LP 50,000 6.520 10/19/00 49,565
Coca Cola Co. 25,000 6.460 09/14/00 24,942
Corporate Asset Funding Co. Inc. 37,000 6.590 09/20/00 36,871
Corporate Asset Funding Co. Inc. 40,000 6.530 09/21/00 39,855
Corporate Asset Funding Co. Inc. 40,000 6.520 09/26/00 39,819
Corporate Asset Funding Co. Inc. 40,000 6.580 10/10/00 39,715
Corporate Asset Funding Co. Inc. 15,000 6.510 10/27/00 14,848
Corporate Asset Funding Co. Inc. 75,000 6.500 11/07/00 74,093
Credit Suisse 50,000 6.590 09/07/00 49,945
Credit Suisse 60,000 6.600 09/22/00 59,769
CREGEM Inc. 40,000 6.500 02/15/01 38,794
CREGEM Inc. 50,000 6.490 02/27/01 48,387
CREGEM Inc. 32,000 6.500 02/27/01 30,966
Delaware Funding Corp. 51,745 6.500 10/13/00 51,353
Delaware Funding Corp. 75,000 6.510 01/31/01 72,939
Den Denske Corp. 50,000 6.585 09/25/00 49,781
Den Denske Corp. 25,000 6.666 12/12/00 24,528
Dexia Co. 25,000 6.590 09/20/00 24,913
Dexia Co. 35,000 6.530 10/17/00 34,708
Dexia Co. 25,000 6.520 10/25/00 24,756
Falcon Asset Securitization 70,000 6.540 09/08/00 69,911
Falcon Asset Securitization 65,000 6.510 10/06/00 64,589
Federal Home Loan Bank 50,000 6.460 08/17/01 49,967
Fortis Funding 25,000 6.530 10/12/00 24,814
General Electric Capital Corp. 50,000 6.580 09/07/00 49,945
General Electric Capital Corp. 50,000 6.580 09/11/00 49,909
General Electric Capital Corp. 50,000 6.570 09/14/00 49,881
General Electric Capital Corp. 75,000 6.530 10/11/00 74,456
General Electric Capital Corp. 50,000 6.520 10/24/00 49,520
General Electric Capital Corp. 30,000 6.520 02/16/01 29,087
General Electric Capital Corp. 50,000 6.500 02/27/01 48,384
General Electric Capital Corp. 25,000 7.380 05/23/01 25,000
Glaxo PLC 38,700 6.580 09/20/00 38,566
Goldman Sachs Group LP 75,000 6.610 09/11/00 74,862
J.P. Morgan Co. Inc. 50,000 6.580 09/08/00 49,936
</TABLE>
Annual Report 11
<PAGE>
SSgA
Money Market Fund
Statement of Net Assets, continued
August 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity $
--------- ---- -------- -------
<S> <C> <C> <C> <C>
Morgan Stanley Dean Witter 50,000 6.600 09/22/00 49,808
Morgan Stanley Dean Witter 25,000 6.540 10/24/00 24,759
National Australia FDG Inc. 50,000 6.580 09/22/00 49,808
Old Line Funding Corp. 66,284 6.510 10/13/00 65,781
Pfizer Inc. 103,300 6.470 10/02/00 102,724
Preferred Receivables Funding Corp. 55,370 6.520 09/20/00 55,179
Preferred Receivables Funding Corp. 25,000 6.520 09/22/00 24,905
Preferred Receivables Funding Corp. 32,000 6.520 09/25/00 31,861
Preferred Receivables Funding Corp. 52,336 6.490 11/29/00 51,496
Wal Mart Stores Inc. 35,000 6.480 11/28/00 34,446
Wells Fargo & Company (a) 125,000 6.761 07/24/01 124,958
Windmill Funding Corp. 40,000 6.510 09/22/00 39,848
Windmill Funding Corp. 50,000 6.510 10/05/00 49,692
Woolwich PLC 20,000 6.680 12/11/00 19,624
Woolwich PLC 40,000 6.760 12/22/00 39,999
---------
Total Domestic Commercial Paper (cost $2,766,541) 2,766,541
---------
Time Deposits - 1.8%
Chase Bank 150,000 6.688 09/01/00 150,000
---------
Total Time Deposits (cost $150,000) 150,000
---------
United States Government Agencies - 2.3%
Federal Farm Credit Bank 25,000 6.350 02/02/01 24,988
Federal National Mortgage Association 25,000 6.425 10/26/00 24,755
Federal National Mortgage Association 150,000 6.390 12/20/00 147,071
---------
Total United States Government Agencies (cost $196,814) 196,814
---------
Yankee Certificates of Deposit - 19.0%
ABN AMRO 25,000 7.178 05/08/01 24,996
ANZ Bank (a) 40,000 6.776 06/01/01 39,997
Bank of Nova Scotia (a) 75,000 6.740 09/29/00 75,001
Bank of Nova Scotia (a) 30,000 6.550 01/16/01 29,995
Bank of Nova Scotia (a) 24,000 6.550 01/24/01 23,995
Bank of Nova Scotia (a) 50,000 6.530 03/01/01 49,988
Bank of Scotland (a) 25,000 6.540 03/23/01 24,993
</TABLE>
12 Annual Report
<PAGE>
SSgA
Money Market Fund
Statement of Net Assets, continued
August 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity $
--------- ---- -------- -------
<S> <C> <C> <C> <C>
Bank of Scotland (a) 50,000 6.560 04/25/01 49,990
Bank of Scotland (a) 30,000 6.980 07/16/01 29,994
Canadian Imperial Bank 50,000 6.720 12/27/00 50,000
Canadian Imperial Bank 70,000 6.870 04/25/01 69,983
Canadian Imperial Bank 75,000 7.070 05/03/01 74,986
Deutsche Bank AG 75,000 6.700 09/22/00 75,000
Deutsche Bank AG 50,000 6.215 12/01/00 49,991
Deutsche Bank AG 20,000 6.500 01/08/01 19,997
Deutsche Bank AG 68,000 6.550 01/16/01 67,988
Deutsche Bank AG 50,000 6.550 01/24/01 49,991
Deutsche Bank AG 43,000 6.750 02/22/01 42,990
Deutsche Bank AG 70,000 6.890 08/20/01 69,981
National City Bank 36,000 6.550 01/22/01 35,993
National Westminster Bank PLC 50,000 6.080 11/24/00 49,992
National Westminster Bank PLC 40,000 6.100 11/24/00 39,994
National Westminster Bank PLC 50,000 6.855 08/31/01 49,986
Royal Bank of Canada 25,000 6.550 01/16/01 24,996
Royal Bank of Canada 21,000 6.550 01/22/01 20,996
Royal Bank of Canada (a) 50,000 6.615 07/06/01 49,977
Royal Bank of Scotland 37,000 7.230 05/15/01 36,998
Svenska Handelsbanken 50,000 6.710 03/15/01 49,990
Svenska Handelsbanken 25,000 6.930 05/02/01 24,997
Svenska Handelsbanken 25,000 7.000 05/02/01 24,997
Svenska Handelsbanken 40,000 7.075 07/23/01 39,992
UBSAG Stamford Branche 35,000 6.080 11/20/00 34,995
UBSAG Stamford Branche 50,000 6.085 11/27/00 49,993
UBSAG Stamford Branche 50,000 6.240 12/06/00 49,990
UBSAG Stamford Branche 50,000 6.500 01/08/01 49,991
UBSAG Stamford Branche 20,000 6.710 02/09/01 19,995
Unibank 50,000 6.690 09/21/00 49,999
---------
Total Yankee Certificates of Deposit (cost $1,623,727) 1,623,727
---------
Total Investments - 84.1% (amortized cost $7,197,213) 7,197,213
---------
</TABLE>
Annual Report 13
<PAGE>
SSgA
Money Market Fund
Statement of Net Assets, continued
August 31, 2000
<TABLE>
<CAPTION>
Value
(000)
$
-------
<S> <C>
Repurchase Agreements - 15.7%
Agreement with ABN Amro Securities (USA) Inc. and Bank of New York (Tri-Party)
of $989,944 acquired August 31, 2000 at 6.660% to be repurchased at
$990,124 on September 1, 2000, collateralized by:
$1,001,672 United States Treasury Note, valued at $1,009,764 989,944
Agreement with Swiss Bank Corp. and Chase Bank (Tri-Party) of $350,000
acquired August 31, 2000 at 6.630% to be repurchased at $350,063 on
September 1, 2000, collateralized by:
$354,139 United States Treasury Note, valued at $357,004 350,000
---------
Total Repurchase Agreements (identified cost $1,339,944) 1,339,944
---------
Total Investments and Repurchase Agreements - 99.8% (cost $8,537,157)(b) 8,537,157
Other Assets and Liabilities, Net - 0.2% 19,087
---------
Net Assets - 100.0% 8,556,244
=========
</TABLE>
(a) Adjustable or floating rate security.
(b) The identified cost for federal income tax purposes is the same as shown
above.
14 Annual Report
<PAGE>
SSgA
Money Market Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amount) August 31, 2000
<TABLE>
<S> <C> <C>
Assets
Investments at amortized cost which approximates market ................................... $7,197,213
Repurchase agreements (identified cost $1,339,944) ........................................ 1,339,944
Interest receivable ....................................................................... 69,381
----------
Total assets ........................................................................ 8,606,538
Liabilities
Payables:
Dividends ................................................................... $47,165
Other accrued expenses ...................................................... 3,129
-------
Total liabilities ................................................................... 50,294
----------
Net Assets ................................................................................ $8,556,244
==========
Net Assets Consist of:
Accumulated net realized gain (loss) ...................................................... $ 7
Shares of beneficial interest ............................................................. 8,556
Additional paid-in capital ................................................................ 8,547,681
----------
Net Assets ................................................................................ $8,556,244
==========
Net Asset Value, offering and redemption price per share:
($8,556,244,488 divided by 8,556,236,917 shares of $.001 par value
shares of beneficial interest outstanding) .......................................... $ 1.00
==========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 15
<PAGE>
SSgA
Money Market Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 2000
<TABLE>
<S> <C> <C>
Investment Income
Interest ............................................................................... $531,199
Expenses
Advisory fees ............................................................... $22,080
Administrative fees ......................................................... 2,774
Custodian fees .............................................................. 1,776
Distribution fees ........................................................... 2,981
Transfer agent fees ......................................................... 889
Professional fees ........................................................... 166
Registration fees ........................................................... 127
Shareholders servicing fees ................................................. 3,542
Trustees' fees .............................................................. 141
Miscellaneous expenses ...................................................... 185
-------
Expenses before reductions .................................................. 34,661
Expense reductions .......................................................... (62)
-------
Expenses, net ....................................................................... 34,599
--------
Net investment income ..................................................................... 496,600
--------
Net Realized Gain (Loss)
Net realized gain (loss) on investments ................................................... 259
--------
Net increase in net assets from operations ................................................ $496,859
========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
16 Annual Report
<PAGE>
SSgA
Money Market Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Years Ended August 31,
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income .......................................... $ 496,600 $ 358,632
Net realized gain (loss) ....................................... 259 1,666
------------ ------------
Net increase in net assets from operations .................. 496,859 360,298
------------ ------------
Distributions
From net investment income ..................................... (496,600) (358,632)
------------ ------------
Share Transactions
Net increase (decrease) in net assets from share transactions .. (1,528,298) 4,605,291
------------ ------------
Total net increase (decrease) in net assets ....................... (1,528,039) 4,606,957
Net Assets
Beginning of period ............................................ 10,084,283 5,477,326
------------ ------------
End of period .................................................. $ 8,556,244 $ 10,084,283
============ ============
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 17
<PAGE>
SSgA
Money Market Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
------------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ......... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
---------- ---------- ---------- ---------- ----------
Income From Operations
Net investment income ..................... .0562 .0476 .0528 .0516 .0524
---------- ---------- ---------- ---------- ----------
Distributions
From net investment income ................ (.0562) (.0476) (.0528) (.0516) (.0524)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period ............... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
========== ========== ========== ========== ==========
Total Return (%) ............................. 5.78 4.86 5.41 5.28 5.36
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) .. 8,556,244 10,084,283 5,477,326 4,278,165 3,475,409
Ratios to average net assets (%):
Operating expenses ..................... .39 .40 .41 .39 .39
Net investment income .................. 5.62 4.74 5.28 5.17 5.20
</TABLE>
18 Annual Report
<PAGE>
SSgA
Money Market Fund
Notes to Financial Statements
August 31, 2000
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 24 investment portfolios which are in operation as
of August 31, 2000. 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 shares of beneficial interest at a $.001 par value.
2. Significant Accounting Policies
The Fund's financial statements are prepared in accordance with accounting
principles generally accepted in the United States 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 utilizes the amortized cost valuation method
in accordance with Rule 2a-7 of the 1940 Act, a method by which each
portfolio instrument meeting certain materiality parameters and credit
worthiness standards are initially valued at cost, and thereafter a
constant accretion/amortization to maturity of any discount or premium is
assumed.
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.
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
of the investment company which cannot be directly attributed are
allocated among all funds based principally on their relative net assets.
Annual Report 19
<PAGE>
SSgA
Money Market Fund
Notes to Financial Statements, continued
August 31, 2000
Repurchase agreements: The Fund may engage in repurchase and tri-party
repurchase agreements with certain qualified 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. State Street
Bank and Trust Company (the "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, 2000, purchases,
sales, and maturities of investment securities, excluding US Government
and Agency obligations and repurchase agreements, for the Fund aggregated
to $379,722,879,767, $723,706,763, and $380,100,456,257, respectively.
For the year ended August 31, 2000, purchases and maturities of US
Government and Agency obligations, excluding repurchase agreements,
aggregated to $2,236,431,258 and $2,348,973,000, respectively.
4. Related Parties
Adviser: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company under which the Adviser, through State
Street Global Advisors, the investment management group of 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.
In addition, the Fund has entered into arrangements with its Adviser
whereby custody credits realized as a result of uninvested cash balances
were used to reduce a portion of the Fund's expenses. During the year, the
Fund's custodian fees were reduced by $62,143 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly-owned subsidiary of The Northwestern Mutual Life Insurance Company,
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 for services supplied by the
Administrator pursuant to the Administration Agreement, an annual fee,
payable monthly on a pro rata basis. For the period September 1, 1999 to
April 30, 2000, the following percentages of the average daily net assets
of all domestic funds: $0 up to and including $500 million - .06%; over
$500 million up to and including $1 billion - .05%; over $1 billion -
.03%. Effective May 1, 2000, the annual fee is based on the following
percentages of the average daily net assets of all money market
portfolios: $0 up to $15 billion - .0315%; over $15 billion - .029%. The
Administrator will also charge a flat fee of $30,000 per year per Fund
with less than $500 million in net assets and $1,500 per year for monthly
performance reports and use of
20 Annual Report
<PAGE>
SSgA
Money Market Fund
Notes to Financial Statements, continued
August 31, 2000
Russell Performance Universe software product. In addition, the Fund
reimburses the Administrator for out-of-pocket expenses and start-up costs
for new funds.
Distributor and Shareholder Servicing: The Investment Company has 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 enter 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 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 Shareholder 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, 2000, the Fund
was charged shareholder servicing expenses of $2,207,039, $578,337,
$70,528, $406,003, and $76,002, 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 of the Fund on an
annual basis. The shareholder servicing payments shall not exceed .20% of
the average daily value of net assets of the Fund on an annual basis.
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, 2000.
Board of Trustees: The Investment Company paid each Trustee not affiliated
with the Investment Company an annual retainer, plus specified amounts for
board and committee meetings attended. These expenses are allocated among
all of the funds based upon their relative net assets.
Annual Report 21
<PAGE>
SSgA
Money Market Fund
Notes to Financial Statements, continued
August 31, 2000
Accrued fees payable to affiliates and trustees as of August 31, 2000 were
as follows:
Advisory fees $1,871,910
Administration fees 222,787
Custodian fees 172,039
Distribution fees 170,380
Shareholder servicing fees 387,105
Transfer agent fees 300,863
Trustees' fees 3,581
----------
$3,128,665
==========
5. Fund Share Transactions (On a Constant Dollar Basis):
<TABLE>
<CAPTION>
(amounts in thousands)
Fiscal Years Ended August 31,
----------------------------
2000 1999
------------ ------------
<S> <C> <C>
Proceeds from shares sold ..................... 142,514,809 105,783,537
Proceeds from reinvestment of distributions ... 436,772 298,285
Payments for shares redeemed .................. (144,479,879) (101,476,531)
------------ ------------
Total net increase (decrease) ................. (1,528,298) 4,605,291
============ ============
</TABLE>
6. Interfund Lending Program
The Fund and all other funds of the Investment Company received from the
Securities and Exchange Commission an exemptive order on December 23, 1999
to establish and operate an Interfund Credit Facility. This allows the
Funds to directly lend to and borrow money from the SSgA Money Market Fund
for temporary purposes in accordance with certain conditions. The
borrowing Funds are charged the average of the current Repo Rate and the
Bank Loan Rate. Interest Income on the Statement of Operations includes
$48,358 received under the interfund lending program for the year ended
August 31, 2000.
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, Treasurer and CEO
Mark E. Swanson, Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Treasurer
Carla L. Anderson, Assistant 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
160 Federal Street
Boston, Massachusetts 02110
Annual Report 23
<PAGE>
[COVER GRAPHIC]
SSgA(R) funds
ANNUAL REPORT
Matrix Equity Fund
August 31, 2000
<PAGE>
SSgA(R) Funds
Matrix Equity Fund
Annual Report
August 31, 2000
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(R)" 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,
It is our pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 2000. The SSgA Fund Family has grown to include
twenty-four portfolios with over $21 billion in assets as of August 31, 2000.
The Fund Family provides a wide range of strategies covering the world's major
markets. The enclosed information provides an overview of the investment process
for the SSgA Matrix Equity Fund. This overview contains the portfolio management
discussion, performance updates and financial information for the Fund.
In an ongoing effort to develop competitive products and services that provide
investment solutions for our clients, we have added the SSgA Intermediate
Municipal Bond Fund to the SSgA Fund Family. This Fund's investment objective
seeks to provide federally tax-exempt current income by investing primarily in a
diversified portfolio of municipal debt securities with a dollar-weighted
average maturity between three and ten years.
We are also pleased with the success of our SSgA Emerging Markets and SSgA
Growth and Income Funds as they were included in Money(R) Magazine's June 2000
issue listing of the 'Top 100 Mutual Funds'. This is the second year in a row
that these funds have been selected.
Additionally, the SSgA Tax Free Money Market and the SSgA Active International
Funds have achieved five-year performance history during the 2000 fiscal year.
Currently, all of our SSgA Money Market Funds have at least a five-year
performance history. We strive to meet our clients' needs by providing funds
with long-term records and competitive performance.
We would like to thank you for choosing the SSgA Funds. Our reputation is based
on our tradition of designing and delivering exceptional financial services to
our clients. We look forward to continue sharing the benefit of our experience
with you.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
/s/ Timothy B. Harbert
Timothy B. Harbert
State Street Global Advisors
President and Chief Operating Officer, SSgA
4 Annual Report
<PAGE>
SSgA Matrix Equity Fund
--------------------------------------------------------------------------------
Management of the Funds
--------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
[PHOTO]
Timothy B. Harbert
President and Chief Operating 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. Theodore Gekas, Principal, has been the portfolio manager primarily
responsible for investment decisions regarding the SSgA Matrix Equity Fund since
April 1999. Prior to joining SSgA, at Citibank Mr. Gekas developed asset
allocation and forecasting models for the global equity and fixed income
markets. With the IBM Retirement Fund, he applied quantitative strategies to
manage US and EAFE equity-indexed and alpha-tilted funds. He holds a BS in
engineering from the University of Wisconsin, and an MBA in Finance from New
York University and Melbourne University (Australia). There are seven other
managers working with Mr. Gekas.
Annual Report 5
<PAGE>
SSgA Matrix Equity Fund
--------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
--------------------------------------------------------------------------------
Objective: Provide total returns that exceed the S&P 500(R) Index over the long
term.
Invests in: Large capitalization US equity securities.
Strategy: The Fund management team uses a systematic approach to investment
management designed to uncover equity securities which are undervalued, with
superior growth potential. This disciplined investment approach rests on a
modeling process that evaluates vast amounts of financial and market data and
corporate earnings forecasts. The result is an investment process that provides
strong long-term total returns through strong bottom-up stock selection within a
risk-controlled framework.
--------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
Dates Matrix Equity Fund S&P 500(R) Index**
Inception* $10,000 $10,000
1992 $9,780 $10,093
1993 $12,152 $11,628
1994 $12,687 $12,264
1995 $15,074 $14,895
1996 $17,285 $17,685
1997 $24,675 $24,874
1998 $25,192 $26,887
1999 $33,463 $37,597
2000 $38,211 $43,734
================================================================================
Performance Review
For the fiscal year ended August 31, 2000, the SSgA Matrix Equity Fund had a
total return of 14.19%, as compared to the S&P 500(R) Index results of 16.33%.
The Fund's performance is net of operating expenses, whereas Index results do
not include expenses of any kind. These expenses account for 90% of the
difference in performance.
Market and Portfolio Highlights
For the twelve months ended August 31, 2000, the US equity market, as measured
by the S&P 500(R) Index, made steady gains. The Index reached record highs in
March. However, valuations finally reached unsustainable levels and after
attaining such record highs, the market reacted with a correction in April.
After the correction, valuations trended higher through the fiscal year-end. The
correction was attributable, in part, to the Federal Reserve's previous
short-term interest rate hikes which were intended to slow the
--------------------------------------------------------------------------------
SSgA Matrix Equity Fund
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
-------------- ------------ -------
1 Year $ 11,419 14.19%
5 Years $ 25,350 20.45%+
Inception $ 38,211 17.48%+
--------------------------------------------------------------------------------
Standard & Poor's(R)
500 Composite Stock Price Index
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
-------------- ------------ -------
1 Year $ 11,633 16.33%
5 Years $ 29,362 24.04%+
Inception $ 43,734 19.37%+
See related Notes on following page.
6 Annual Report
<PAGE>
SSgA Matrix Equity Fund
--------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
--------------------------------------------------------------------------------
economy and dampen inflation expectations. However, as fears of future
aggressive rate increases subsided, the market was able to post additional gains
late in the fiscal year.
To meet the Fund's strategic objective, the investment process combines proven
stock selection capability with a refined, proprietary portfolio construction
methodology. The Manager seeks to control and diversify the active exposures in
the Fund relative to the S&P 500(R) Index by controlling sector and industry
weights, stock-specific weights, market capitalization, beta, and yield of the
portfolio. Specifically, capitalization is controlled by a method that
approximates a weighted median capitalization constraint. Additionally,
individual security-specific weights are controlled relative to the benchmark
weight.
Within the Technology sector, the Manager favored those companies with the
ability to support their capital structures, and with favorable valuations
relative to their industry peers such as Altera, Applied Materials, and Apple.
The Manager under-weighted Texas Instruments and Nortel Networks, which hurt
performance. The Fund reflected strong stock selection in Manufacturing, Medical
Services, and Financials Services, which included positions in Northrup Grumman,
United Healthcare, and Lehman Brothers. Poor stock selection in Technology
software companies, such as positions in Oracle and Computer Associates, hurt
Fund performance.
Due to the risk-controlled nature of the investment process, the Fund maintains
portfolio characteristics which are consistent with the S&P 500(R) Index. As of
August 31, 2000, the Fund was overweight in Technology, with a 37.6% allocation
versus the benchmark exposure of 35.4%, and was underweight Consumer Staples,
with a fiscal year-end weight of 5.4% as compared to 7.9% for the Index.
As of August 31, 2000, the SSgA Matrix Equity Fund held 109 stocks with an
average weighted market capitalization of $151.5 billion. As the Fund's
objective is achieved through stock selections with a disciplined investment
approach, the portfolio will be fully invested at all times.
-------------------------------------------------------------
Top Ten Equity Holdings
(as a percent of Total Investments) August 31, 2000
-------------------------------------------------------------
Intel Corp. 4.2%
General Electric Co. 4.1
Cisco Systems, Inc. 3.8
Microsoft Corp. 2.8
Sun Microsystems, Inc. 2.5
Exxon Mobil Corp. 2.5
Citigroup, Inc. 2.2
Merck & Co., Inc. 2.1
International Business Machines Corp. 2.0
Oracle Systems Corp. 1.9
-------------------------------------------------------------
---------------------
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(R) 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, 2000, 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 accounting principles generally
accepted in the United States of America. 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 auditing standards
generally accepted in the United States of America 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, 2000 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
Boston, Massachusetts
October 11, 2000
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
Matrix Equity Fund
Statement of Net Assets
August 31, 2000
Market
Number Value
of (000)
Shares $
-------- ------
Common Stocks - 97.9%
Basic Industries - 1.6%
Eastman Chemical Co. 58,200 2,510
FMC Corp. (a) 61,600 4,177
-------
6,687
-------
Capital Goods - 6.4%
Dover Corp. 89,200 4,360
General Electric Co. 292,600 17,172
Novellus Systems, Inc. (a) 72,000 4,428
Tyco International, Ltd. 12,800 730
-------
26,690
-------
Consumer Basics - 14.8%
Abbott Laboratories 28,600 1,251
Amgen, Inc. (a) 60,300 4,575
Biomet, Inc. 100,000 3,381
Bristol-Myers Squibb Co. 67,600 3,583
Coca-Cola Co. (The) 36,500 1,921
Genzyme Corp. (a) 28,400 2,130
Johnson & Johnson 86,400 7,943
Kroger Co. (a) 69,600 1,579
Merck & Co., Inc. 127,800 8,930
Oxford Health Plans, Inc. (a) 109,700 3,346
PacifiCare Health Systems, Inc. (a) 37,900 2,042
Pepsi Bottling Group, Inc. (The) 73,800 2,343
PepsiCo, Inc. 22,900 976
Pfizer, Inc. 161,875 7,001
Philip Morris Cos., Inc. 132,600 3,928
United Health Corp (a) 30,700 2,901
Wellpoint Health Networks, Inc. (a) 49,600 4,281
-------
62,111
-------
Consumer Durables - 1.3%
Best Buy Co. (a) 33,900 2,093
Ford Motor Co. (a) 140,550 3,400
-------
5,493
-------
Consumer Non-Durables - 4.1%
Anheuser-Busch Cos., Inc. 21,600 1,702
Coors (Adolph) Co. Class B 9,700 578
Home Depot, Inc. (The) 37,500 1,802
Sears Roebuck & Co. 75,800 2,364
Tiffany & Co. 112,900 4,699
Wal-Mart Stores, Inc. 120,800 5,730
Zale Corp. (a) 11,600 428
-------
17,303
-------
Consumer Services - 0.5%
Disney (Walt) Co. 15,800 615
Mandalay Resort Group (a) 50,300 1,399
-------
2,014
-------
Energy - 6.3%
Ashland, Inc. 30,700 1,082
Chevron Corp. 18,900 1,597
Exxon Mobil Corp. 126,758 10,347
Kerr-McGee Corp. 37,900 2,395
Occidental Petroleum Corp. 99,600 2,154
Phillips Petroleum Co. 27,800 1,720
Tosco Corp. 64,500 1,967
Ultramar Diamond Shamrock Corp. 38,800 909
USX-Marathon Group 60,700 1,665
Valero Energy Corp. 75,600 2,277
-------
26,113
-------
Finance - 14.4%
American International Group, Inc. 48,825 4,352
AXA Financial, Inc. 73,800 3,819
Bear Stearns Companies Inc. (The) 29,000 1,945
Citigroup, Inc. 158,067 9,227
Comerica, Inc. 40,500 2,281
FleetBoston Financial Corp. 67,200 2,869
Golden West Financial Corp. 29,000 1,381
Greenpoint Financial Corp. 39,700 1,037
John Hancock Financial Services,
Inc. (a) 94,700 2,391
Annual Report 9
<PAGE>
SSgA
Matrix Equity Fund
Statement of Net Assets, continued
August 31, 2000
Market
Number Value
of (000)
Shares $
-------- ------
KeyCorp 69,600 1,405
Lehman Brothers Holdings, Inc. 24,500 3,553
Loews Corp. 51,500 4,168
Merrill Lynch & Co., Inc. 26,900 3,901
Morgan Stanley Dean Witter & Co. 29,900 3,216
PMI Group, Inc. (The) 50,100 3,106
Radian Group, Inc. 64,300 3,995
Robert Half International, Inc. (a) 121,200 3,856
Torchmark Corp. 400 11
UnionBanCal Corp. 37,500 931
Washington Mutual, Inc. 78,800 2,759
-------
60,203
-------
General Business - 5.1%
Automatic Data Processing, Inc. 89,900 5,360
First Data Corp. 58,400 2,785
New York Times Co. Class A 100,200 3,927
SBC Communications, Inc. 154,918 6,468
Time Warner, Inc. 20,500 1,753
Viacom, Inc. Class B (a) 14,900 1,003
-------
21,296
-------
Shelter - 0.4%
USG Corp. 55,800 1,796
-------
Technology - 36.4%
America Online, Inc. (a) 89,900 5,270
Analog Devices, Inc. (a) 22,700 2,281
Apple Computer, Inc. (a) 45,400 2,767
Applied Materials, Inc. (a) 25,000 2,158
BroadVision, Inc. (a) 61,500 2,118
Cisco Systems, Inc. (a) 235,100 16,148
Dell Computer Corp. (a) 132,600 5,785
EMC Corp. (a) 78,600 7,703
Hewlett-Packard Co. 40,000 4,830
Intel Corp. 237,400 17,775
International Business Machines
Corp. 62,300 8,224
Intersil Holding Corp. New (a) 43,500 2,338
JDS Uniphase Corp. (a) 31,200 3,884
Lucent Technologies, Inc. 57,200 2,392
Micron Technology, Inc. (a) 39,100 3,196
Microsoft Corp. (a) 166,300 11,610
Nortel Networks Corp. 92,500 7,545
Oracle Systems Corp. (a) 89,400 8,124
Qwest Communications
International, Inc. (a) 69,600 3,593
RadioShack, Corp. 83,300 4,915
Sun Microsystems, Inc. (a) 81,600 10,358
Sybase, Inc. (a) 117,400 3,214
Symantec Corp. (a) 83,400 4,076
Texas Instruments, Inc. 51,900 3,474
Verizon Communications 60,400 2,635
Vishay Intertechnology, Inc. (a) 53,800 2,169
Xilinx, Inc. (a) 8,800 782
Yahoo!, Inc. (a) 24,300 2,952
-------
152,316
-------
Transportation - 1.0%
Boeing Co. (The) 79,800 4,279
-------
Utilities - 5.6%
AT&T Corp. 53,400 1,682
BellSouth Corp. 108,100 4,033
Corning, Inc. 9,300 3,050
Entergy Corp. 72,000 2,192
PG&E Corp. 89,300 2,584
PPL Corp. 72,600 2,432
Public Service Enterprise Group,
Inc. 71,800 2,603
Sprint Corp. (PCS Group) (a) 40,800 2,048
WorldCom, Inc. (a) 74,550 2,721
-------
23,345
-------
Total Common Stocks
(cost $378,877) 409,646
-------
10 Annual Report
<PAGE>
SSgA
Matrix Equity Fund
Statement of Net Assets, continued
August 31, 2000
Principal Market
Amount Value
(000) (000)
$ $
--------- -------
Short-Term Investments - 2.5%
AIM Short-Term Investment Prime
Portfolio Class A (b) 4,026 4,026
Federated Investors Prime Cash
Obligations Fund (b) 5,853 5,853
United States Treasury Bills (b)(c)(d)
5.65% due 09/14/00 250 250
5.77% due 09/14/00 400 400
-------
Total Short-Term Investments
(cost $10,529) 10,529
-------
Total Investments - 100.4%
(identified cost $389,406) 420,175
Other Assets and Liabilities,
Net - (0.4%) (1,624)
-------
Net Assets - 100.0% 418,551
=======
(a) Nonincome-producing security.
(b) At amortized cost, which approximates market.
(c) Rate noted is yield-to-maturity from date of acquisition.
(d) Held as collateral in connection with futures contracts purchased by the
Fund.
Unrealized
Number Appreciation
of (Depreciation)
Futures Contracts Contracts (000)
--------- --------------
S&P 500 Index
expiration date 09/00 24 $ 140
-------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased $ 140
-------
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 11
<PAGE>
SSgA
Matrix Equity Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amount) August 31, 2000
<TABLE>
<S> <C> <C>
Assets
Investments at market (identified cost $389,406) ........................................... $420,175
Receivables:
Dividends ............................................................................... 476
Investments sold ........................................................................ 2,942
Fund shares sold ........................................................................ 4
Daily variation margin on futures contracts ............................................. 127
Prepaid expenses ........................................................................... 21
Short-term investments held as collateral for securities loaned, at market ................. 6,540
--------
Total assets ......................................................................... 430,285
Liabilities
Payables:
Investments purchased ........................................................ $ 4,735
Fund shares redeemed ......................................................... 131
Accrued fees to affiliates ................................................... 328
Payable upon return of securities loaned, at market ............................. 6,540
--------
Total liabilities .................................................................... 11,734
--------
Net Assets ................................................................................. $418,551
========
Net Assets Consist of:
Undistributed net investment income ........................................................ $ 161
Accumulated net realized gain (loss) ....................................................... 96,208
Unrealized appreciation (depreciation) on:
Investments ............................................................................. 30,769
Futures contracts ....................................................................... 140
Shares of beneficial interest .............................................................. 25
Additional paid-in capital ................................................................. 291,248
--------
Net Assets ................................................................................. $418,551
========
Net Asset Value, offering and redemption price per share:
($418,551,084 divided by 24,612,416 shares of $.001 par value
shares of beneficial interest outstanding) ........................................... $ 17.01
========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
12 Annual Report
<PAGE>
SSgA
Matrix Equity Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 2000
<TABLE>
<S> <C> <C>
Investment Income
Dividends .............................................................. $ 6,063
Interest ............................................................... 39
--------
Total investment income ............................................. 6,102
Expenses
Advisory fees .............................................. $ 3,843
Administrative fees ........................................ 171
Custodian fees ............................................. 111
Distribution fees .......................................... 162
Transfer agent fees ........................................ 69
Professional fees .......................................... 22
Registration fees .......................................... 36
Shareholder servicing fees ................................. 467
Trustees' fees ............................................. 11
Miscellaneous .............................................. 36
--------
Expenses before reductions ................................. 4,928
Expense reductions ......................................... (247)
--------
Expenses, net ....................................................... 4,681
--------
Net investment income ..................................................... 1,421
--------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments ................................................ 107,132
Futures contracts .......................................... (1,161) 105,971
--------
Net change in unrealized appreciation (depreciation) on:
Investments ................................................ (39,146)
Futures contracts .......................................... 140 (39,006)
-------- --------
Net realized and unrealized gain (loss) ................................... 66,965
--------
Net increase (decrease) in net assets from operations ..................... $ 68,386
========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Annual Report 13
<PAGE>
SSgA
Matrix Equity Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Years Ended August 31,
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ............................................... $ 1,421 $ 2,843
Net realized gain (loss) ............................................ 105,971 70,599
Net change in unrealized appreciation (depreciation) ................ (39,006) 72,637
--------- ---------
Net increase (decrease) in net assets from operations ............ 68,386 146,079
--------- ---------
Distributions
From net investment income .......................................... (1,950) (3,191)
From net realized gain .............................................. (80,236) (74,416)
--------- ---------
Net decrease in net assets from distributions .................... (82,186) (77,607)
--------- ---------
Share Transactions
Net increase (decrease) in net assets from share transactions ....... (124,678) 43,480
--------- ---------
Total net increase (decrease) in net assets ............................ (138,478) 111,952
Net Assets
Beginning of period ................................................. 557,029 445,077
--------- ---------
End of period (including undistributed net investment income of
$161 and $690, respectively) ..................................... $ 418,551 $ 557,029
========= =========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
14 Annual Report
<PAGE>
SSgA
Matrix Equity Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
---------------------------------------------------
2000 1999 1998 1997 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ............ $ 17.51 $ 15.68 $ 18.41 $ 14.13 $ 13.93
------- ------- ------- ------- -------
Income From Operations
Net investment income (a) .................... .05 .09 .17 .21 .24
Net realized and unrealized gain (loss) ...... 1.96 4.42 .29 5.43 1.64
------- ------- ------- ------- -------
Total income from operations .............. 2.01 4.51 .46 5.64 1.88
------- ------- ------- ------- -------
Distributions
From net investment income ................... (.06) (.10) (.19) (.22) (.24)
From net realized gain ....................... (2.45) (2.58) (3.00) (1.14) (1.44)
------- ------- ------- ------- -------
Total distributions ....................... (2.51) (2.68) (3.19) (1.36) (1.68)
------- ------- ------- ------- -------
Net Asset Value, End of Period .................. $ 17.01 $ 17.51 $ 15.68 $ 18.41 $ 14.13
======= ======= ======= ======= =======
Total Return (%) ................................ 14.19 32.83 2.09 42.75 14.67
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ..... 418,551 557,029 445,077 429,397 261,888
Ratios to average net assets (%):
Operating expenses, net (b) ............... .91 .78 .69 .58 .66
Operating expenses, gross (b) ............. .96 .94 .97 .96 1.04
Net investment income ..................... .28 .52 .97 1.33 1.76
Portfolio turnover rate (%) .................. 149.82 130.98 133.63 117.27 150.68
</TABLE>
(a) For the periods subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.
(b) See Note 4 for current period amounts.
Annual Report 15
<PAGE>
SSgA
Matrix Equity Fund
Notes to Financial Statements
August 31, 2000
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 24 investment portfolios which are in operation as
of August 31, 2000. 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 accounting
principles generally accepted in the United States 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.
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.
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.
16 Annual Report
<PAGE>
SSgA
Matrix Equity Fund
Notes to Financial Statements, continued
August 31, 2000
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, 2000 are as follows:
Net Unrealized
Federal Tax Unrealized Unrealized Appreciation
Cost Appreciation (Depreciation) (Depreciation)
------------ ------------ -------------- --------------
$398,268,999 $33,798,734 $(11,893,468) $21,905,266
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.
Expenses: Most expenses can be directly attributed to the individual Fund.
Expenses of the investment company which cannot be directly attributed are
allocated among all funds based principally on their relative 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.
3. Securities Transactions
Investment transactions: For the year ended August 31, 2000, purchases and
sales of investment securities, excluding short-term investments,
aggregated to $752,124,976 and $965,802,252, respectively.
Securities lending: The Investment Company has a securities lending
program whereby each Fund can loan securities with a value up to 33 1/3%
of its total assets to certain brokers. The Fund receives cash (U.S.
currency), U.S. Government or U.S. Government agency obligations as
collateral against the loaned securities. To the extent that a loan is
secured by cash collateral, such collateral shall be invested by State
Street Bank and Trust Company in short-term instruments, money market
mutual funds, and such other short-term investments, provided the
investments meet certain quality and diversification requirements. Under
the securities lending arrangement, the collateral received is recorded on
the Fund's statement of assets and liabilities along with the related
obligation to
Annual Report 17
<PAGE>
SSgA
Matrix Equity Fund
Notes to Financial Statements, continued
August 31, 2000
return the collateral. In those situations where the Company has
relinquished control of securities transferred, it derecognizes the
securities and records a receivable from the counterparty.
Income generated from the investment of cash collateral, less negotiated
rebate fees paid to participating brokers and transaction costs, is
divided between the Fund and State Street Bank and Trust Company and is
recorded as interest income for the Fund. To the extent that a loan is
secured by non-cash collateral, brokers pay the Fund negotiated lenders'
fees, which are divided between the Fund and State Street Bank and Trust
Company and are recorded as interest income for the Fund. All collateral
received will be in an amount at least equal to 102% (for loans of U.S.
securities) or 105% (for non-U.S. securities) of the market value of the
loaned securities at the inception of each loan. Should the borrower of
the securities fail financially, there is a risk of delay in recovery of
the securities or loss of rights in the collateral. Consequently, loans
are made only to borrowers which are deemed to be of good financial
standing. As of August 31, 2000, the value of outstanding securities on
loan and the value of collateral amounted to $6,343,147 and $6,540,239,
respectively. Included in interest income is securities lending income of
$19,393 for the year ended August 31, 2000.
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, through State Street Global Advisors, the investment management
group of 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. The
Adviser has voluntarily agreed to waive .125% of its advisory fee to the
Fund. As of January 1, 2000, the Adviser no longer waives a portion of its
advisory fee. The total amount of the waiver for the period September 1,
1999 to December 31, 1999 was $240,050. 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.
In addition, the Fund has entered into arrangements with its Adviser
whereby custody credits realized as a result of uninvested cash balances
were used to reduce a portion of the Fund's expenses. During the year, the
Fund's custodian fees were reduced by $7,092 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly-owned subsidiary of The Northwestern Mutual Life Insurance Company,
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 for services supplied by the
Administrator pursuant to the Administration Agreement, an annual fee,
payable monthly on a pro rata basis. For the period September 1, 1999 to
April 30, 2000, the following percentages of the average daily net assets
of all domestic funds: $0 up to and including $500 million - .06%; over
$500 million up to and including $1 billion - .05%; over $1 billion -
.03%. Effective May 1, 2000, the annual fee is based on the following
percentages of the average daily net assets of all U.S. Equity portfolios:
$0 to $2 billion - .0315%; over $2 billion - .029%. The Administrator will
charge a flat fee of $30,000 per year per Fund with less than $500 million
in net assets and $1,500 per year for monthly performance reports and use
of Russell
18 Annual Report
<PAGE>
SSgA
Matrix Equity Fund
Notes to Financial Statements, continued
August 31, 2000
Performance Universe software product. In addition, the Fund reimburses
the Administrator for out-of-pocket expenses and start-up costs for new
funds.
Distributor and Shareholder Servicing: The Investment Company has 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 enter 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 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 Shareholder 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, 2000, the Fund
was charged shareholder servicing expenses of $115,215, $2,173, $98,386
and $231,759, by the Adviser, SSBSI, RIS, and Solutions, respectively. The
Fund did not incur any expenses from Commercial Banking during this year.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets of the Fund on an
annual basis. The shareholder servicing payments shall not exceed .20% of
the average daily value of net assets of the Fund on an annual basis.
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, 2000.
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 $151,786 for the year ended
August 31, 2000.
Board of Trustees: The Investment Company paid each Trustee not affiliated
with the Investment Company an annual retainer, plus specified amounts for
board and committee meetings attended. 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, 2000
Accrued fees payable to affiliates and trustees as of August 31, 2000 were
as follows:
Advisory fees $257,375
Administration fees 13,676
Custodian fees 3,276
Distribution fees 3,050
Shareholder servicing fees 41,544
Transfer agent fees 6,101
Trustees' fees 2,785
--------
$327,807
========
Beneficial Interest: As of August 31, 2000, two shareholders (who were
also affiliates of the Investment Company) were record owners of
approximately 25% and 14%, respectively, of the total outstanding shares
of the Fund.
5. Fund Share Transactions (amounts in thousands)
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
----------------------------------------------
2000 1999
-------------------- --------------------
Shares Dollars Shares Dollars
------- --------- ------- ---------
<S> <C> <C> <C> <C>
Proceeds from shares sold ........................ 5,694 $ 92,941 11,235 $ 181,145
Proceeds from reinvestment of distributions ...... 5,377 78,260 5,170 73,530
Payments for shares redeemed ..................... (18,266) (295,879) (12,986) (211,195)
------- --------- ------- ---------
Total net increase (decrease) .................... (7,195) $(124,678) 3,419 $ 43,480
======= ========= ======= =========
</TABLE>
6. Interfund Lending Program
The Fund and all other funds of the Investment Company received from the
Securities and Exchange Commission an exemptive order on December 23, 1999
to establish and operate an Interfund Credit Facility. This allows the
Funds to directly lend to and borrow money from the SSgA Money Market Fund
for temporary purposes in accordance with certain conditions. The
borrowing Funds are charged the average of the current Repo Rate and the
Bank Loan Rate. Miscellaneous Expenses on the Statement of Operations
include $33,967 of interest expense paid under the interfund lending
program.
7. Dividends
On September 1, 2000, the Board of Trustees declared a dividend of $.0059
from net investment income, payable on September 8, 2000 to shareholders
of record on September 5, 2000.
20 Annual Report
<PAGE>
SSgA
Matrix Equity Fund
Tax Information
August 31, 2000 (Unaudited)
The Fund paid a distribution of $55,327,521 from net long-term capital
gains during its taxable year ended August 31, 2000.
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, Treasurer and CEO
Mark E. Swanson, Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Treasurer
Carla L. Anderson, Assistant 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
160 Federal Street
Boston, Massachusetts 02110
22 Annual Report
<PAGE>
[COVER GRAPHIC]
SSgA(R) funds
ANNUAL REPORT
Prime Money Market Fund
August 31, 2000
<PAGE>
SSgA(R) Funds
Prime Money Market Fund
Annual Report
August 31, 2000
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......................... 22
"SSgA(R)" 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,
It is our pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 2000. The SSgA Fund Family has grown to include
twenty-four portfolios with over $21 billion in assets as of August 31, 2000.
The Fund Family provides a wide range of strategies covering the world's major
markets. The enclosed information provides an overview of the investment process
for the SSgA Prime Money Market Fund. This overview contains the portfolio
management discussion, performance updates and financial information for the
Fund.
In an ongoing effort to develop competitive products and services that provide
investment solutions for our clients, we have added the SSgA Intermediate
Municipal Bond Fund to the SSgA Fund Family. This Fund's investment objective
seeks to provide federally tax-exempt current income by investing primarily in a
diversified portfolio of municipal debt securities with a dollar-weighted
average maturity between three and ten years.
We are also pleased with the success of our SSgA Emerging Markets and SSgA
Growth and Income Funds as they were included in Money(R) Magazine's June 2000
issue listing of the 'Top 100 Mutual Funds'. This is the second year in a row
that these funds have been selected.
Additionally, the SSgA Tax Free Money Market and the SSgA Active International
Funds have achieved five-year performance history during the 2000 fiscal year.
Currently, all of our SSgA Money Market Funds have at least a five-year
performance history. We strive to meet our clients' needs by providing funds
with long-term records and competitive performance.
We would like to thank you for choosing the SSgA Funds. Our reputation is based
on our tradition of designing and delivering exceptional financial services to
our clients. We look forward to continue sharing the benefit of our experience
with you.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
/s/ Timothy B. Harbert
Timothy B. Harbert
State Street Global Advisors
President and Chief Operating Officer, SSgA
4 Annual Report
<PAGE>
SSgA Prime Money Market Fund
--------------------------------------------------------------------------------
Management of the Funds
--------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
[PHOTO]
Timothy B. Harbert
President and Chief Operating 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 is the Unit Head of the cash desk with
responsibility for the SSgA money market funds, several short-term funds and
enhanced cash portfolios. Prior to joining SSgA, she was a portfolio manager
with State Street's Investment Research Department, where she managed the
securities lending reinvestment funds since their inception in 1987, as well as
other money market portfolios. She received a BS from Suffolk University. There
are ten 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 while preserving 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 vary depending on the general level of
interest rates as well as supply and demand imbalances in the market.
--------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
Dates Prime Money Market Fund Salomon Brothers 3-Month T-Bill Index**
Inception* $10,000 $10,000
1994 $10,209 $10,200
1995 $10,803 $10,769
1996 $11,409 $11,344
1997 $12,038 $11,940
1998 $12,716 $12,564
1999 $13,362 $13,148
2000 $14,164 $13,872
================================================================================
Performance Review
The Fund had a total return of 6.00% for the fiscal year ended August 31, 2000.
This compared favorably to the Salomon Smith Barney 3-Month Treasury Bill Index
return of 5.51% for the same period. The Fund's performance is net of operating
expenses, while Index results do not include expenses of any kind. The Salomon
Smith Barney 3-Month Treasury Bill Index was chosen as a standard, well-known
representation of money market rates.
The market environment for the last year began with the Federal Open Market
Committee (FOMC) tightening monetary policy due to strong domestic growth and
rejuvenated demand from abroad. The FOMC raised rates by 25 basis points in
June, August and November 1999, bringing the Fed Funds target from 4.75% to
5.50%. The FOMC took no action at its December meeting, but followed a strategy
of injecting the economy with massive amounts of cash to ease Y2K liquidity
concerns. Fourth quarter GDP logged an impressive 8.3% due to Y2K inventory
building supported by the generous liquidity provisions from the Federal
Reserve. This surfeit of liquidity, in effect, loosened monetary policy
--------------------------------------------------------------------------------
SSgA Prime Money Market Fund
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
-------------- ------------ -------
1 Year $ 10,600 6.00%
5 Years $ 13,110 5.57%+
Inception $ 14,164 5.48%+
--------------------------------------------------------------------------------
Salomon Smith Barney 3-Month Treasury Bill Index
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
-------------- ------------ -------
1 Year $ 10,551 5.51%
5 Years $ 12,882 5.20%+
Inception $ 13,872 5.16%+
See related Notes on following page.
6 Annual Report
<PAGE>
SSgA Prime Money Market Fund
--------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
--------------------------------------------------------------------------------
when in fact tight labor markets and excess demand called for tightening.
First quarter 2000 GDP followed with a 4.8% growth rate. To achieve a more
sustainable rate of growth, the Federal Reserve Board needed to take back the
excess liquidity and slow the economy. The FOMC did so by raising interest rates
by 100 basis points in the first half of 2000. Although GDP advanced 5.4%
throughout the second quarter of 2000, fears of inflation were tempered by the
fact that productivity grew at 5% for the same period. The FOMC opted to leave
rates unchanged at the June and August meetings while maintaining a cautious
stance going forward. The Manager continues to be cautious about future FOMC
policy, considering the trend in rising oil prices as well as the upcoming
presidential election.
Market and Portfolio Highlights
In the last fiscal 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 increased in size by $1.5 billion or 62% over the past year to
$4.0 billion at August 31, 2000.
During the fall tightening period the Fund was managed with liquidity as a
primary concern, with maturing positions remaining in cash and very liquid
short-term securities throughout the last calendar quarter of 1999. This large
cash position served to hedge against Y2K liquidity concerns and helped with the
substantial swings in assets related to calendar year-end 1999. The 100 basis
points of tightening in the first half of 2000, combined with the market's
concern of further tightening, resulted in a very steep yield curve, with the
6-month LIBOR at 7.10% and the 12-month LIBOR at 7.50%. At that time the market
was expecting up to 100 basis points of additional tightening. The Fund took the
opportunity to buy on market weakness and extended the Fund's average maturity.
By the end of August, the yield curve had stabilized with the 3-month LIBOR at
6.67%, the 6-month LIBOR at 6.80% and the 12-month LIBOR at 6.92%. The Fund's
average maturity ranged from 41 to 60 days over the last year, ending at 60 days
at August 31, 2000, longer than its peer group average of 51 days as measured by
iMoneyNet, Inc. (formerly IBC Financial Data).
The Fund increased exposure in fixed rate securities from 65% at August 31, 1999
to 81.5% on August 31, 2000. Fixed rate securities were selected over floating
rate securities enabling the Fund to add yield in a rising rate environment. The
Fund also increased exposure in 1- to 3-month asset-backed commercial paper
which was priced 2 to 5 basis points cheaper than corresponding maturity bank
and finance commercial paper. With the yield curve's potential to steepen on
negative inflation news, the Manager will look for those opportunities to extend
duration and add yield.
-------------------------------------------------------------
Top Five Holdings (by investment type,
as a percent of Total Investments) August 31, 2000
-------------------------------------------------------------
Domestic Commercial Paper 37.8%
Corporate Bonds and Notes 19.1
Eurodollar Certificates of Deposit 13.9
Yankee Certificates of Deposit 13.8
Domestic Certificates of Deposit 6.6
-------------------------------------------------------------
---------------------
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, 2000, 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 accounting principles generally
accepted in the United States of America. 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 auditing standards
generally accepted in the United States of America 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, 2000 by correspondence with the custodian, provide a reasonable basis for
our opinion.
Boston, Massachusetts
October 11, 2000
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
Prime Money Market Fund
Statement of Net Assets
August 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity* $
--------- ------ --------- -----
<S> <C> <C> <C> <C>
Corporate Bonds and Notes - 16.7%
Bank of America NA 50,000 6.600 11/09/00 50,000
Bank of America NA (a) 50,000 6.784 07/12/01 50,021
The Bank of New York Co., Inc. 15,000 6.070 11/20/00 14,998
The Bank of New York Co., Inc. 25,000 7.230 05/15/01 24,998
BMW US Capital Corp. (a) 75,000 6.823 06/04/01 75,000
Chase Manhattan Corp. (a) 15,000 6.880 02/26/01 15,008
Citigroup Inc. (a) 25,000 6.580 04/04/01 25,000
DaimlerChrysler North America Holding Corp. 9,900 6.680 02/07/01 9,897
DaimlerChrysler North America Holding Corp. (a) 5,000 6.560 02/22/01 4,998
Fleet National Bank (a) 20,000 6.733 07/31/01 20,004
Ford Motor Credit Co. (a) 5,000 6.771 02/13/01 5,002
Ford Motor Credit Co. (a) 35,000 7.089 03/05/01 35,049
Ford Motor Credit Co. (a) 65,000 6.904 07/16/01 65,098
General Electric Capital Corp. 15,000 7.380 05/23/01 15,000
Key Bank NA (a) 25,000 6.675 07/27/01 24,996
M&I Marshall & Ilsley Bank 10,000 6.070 09/28/00 10,000
National City Bank 12,000 6.550 01/22/01 11,998
PNC Bank NA (a) 10,000 6.520 02/26/01 9,997
PNC Bank NA (a) 20,000 6.550 03/23/01 19,995
PNC Bank NA (a) 14,000 6.578 05/25/01 13,999
Unilever (a) 30,000 6.649 09/07/01 30,000
US Bank of NA, Minnesota (a) 10,000 6.700 12/20/00 10,004
US Bank of NA, Minnesota 20,000 6.880 04/04/01 19,997
US Bank of NA, Minnesota (a) 25,000 6.670 05/24/01 25,000
Wells Fargo & Co. (a) 75,000 6.761 07/24/01 74,975
---------
Total Corporate Bonds and Notes (cost $661,034) 661,034
---------
Domestic Certificates of Deposit - 2.3%
First Bank NA, Tennessee 25,000 6.720 09/07/00 25,000
Old Kent Bank & Trust Co. (a) 50,000 6.660 05/08/01 49,997
US Bank, Minneapolis 15,000 6.780 12/26/00 15,000
---------
Total Domestic Certificates of Deposit (cost $89,997) 89,997
---------
</TABLE>
Annual Report 9
<PAGE>
SSgA
Prime Money Market Fund
Statement of Net Assets, continued
August 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity* $
--------- ------ --------- -----
<S> <C> <C> <C> <C>
Eurodollar Certificate of Deposit - 11.8%
Abbey National Treasury Services PLC 25,000 6.720 12/29/00 25,000
Abbey National Treasury Services PLC 25,000 7.260 05/09/01 25,000
Abbey National Treasury Services PLC 25,000 7.330 05/16/01 25,000
Bank of Scotland 50,000 6.705 09/18/00 50,000
Bank of Scotland 20,000 6.660 10/17/00 20,000
Barclays Bank 20,000 6.750 02/20/01 20,001
Barclays Bank 15,000 6.750 02/21/01 15,000
Halifax Group PLC 15,000 6.620 12/11/00 15,000
Halifax Group PLC 60,000 6.620 12/27/00 60,004
Halifax Group PLC 25,000 6.700 12/29/00 25,000
ING Bank 50,000 6.705 09/08/00 50,000
ING Bank 25,000 6.600 11/30/00 25,000
Rabobank Nederland 25,000 6.580 09/29/00 25,000
Royal Bank of Scotland, Grand Cayman 50,000 6.815 09/05/00 50,000
Royal Bank of Scotland, Grand Cayman 20,000 6.590 09/28/00 20,000
Woolwich PLC 20,000 6.760 12/22/00 20,000
---------
Total Eurodollar Certificates of Deposit (cost $470,005) 470,005
---------
Yankee Certificates of Deposit - 15.9%
Australia & New Zealand Banking Group (a) 30,000 6.776 06/01/01 29,998
Bank of Nova Scotia 25,000 6.740 09/29/00 25,000
Bank of Nova Scotia 20,000 6.550 01/16/01 19,996
Bank of Nova Scotia 8,000 6.550 01/24/01 7,998
Bank of Nova Scotia (a) 20,000 6.555 03/01/01 19,995
Bank of Scotland (a) 50,000 6.665 03/23/01 49,986
Bank of Scotland 10,000 6.980 07/16/01 9,998
Canadian Imperial Bank 25,000 6.720 12/27/00 25,000
Comerica Bank, New York (a) 25,000 6.530 02/16/01 24,994
Deutsche Bank AG 50,000 6.700 09/22/00 50,000
Deutsche Bank AG 10,000 6.500 01/08/01 9,998
Deutsche Bank AG 25,000 6.550 01/16/01 24,996
Deutsche Bank AG 25,000 6.550 01/24/01 24,995
Deutsche Bank AG 30,000 6.890 08/20/01 29,992
National Westminster Bank PLC 25,000 6.855 08/31/01 24,993
Royal Bank of Canada, New York 25,000 6.760 02/22/01 24,975
Royal Bank of Canada, New York 25,000 7.070 05/03/01 24,995
Royal Bank of Canada, New York (a) 30,000 6.615 07/06/01 29,986
</TABLE>
10 Annual Report
<PAGE>
SSgA
Prime Money Market Fund
Statement of Net Assets, continued
August 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity* $
--------- ------ --------- -----
<S> <C> <C> <C> <C>
Svenska Handelsbanken 20,000 6.710 03/15/01 19,996
Svenska Handelsbanken 20,000 7.075 07/23/01 19,996
Toronto Dominion Bank 14,000 7.230 05/15/01 13,999
UBS AG Stamford Branche 10,000 6.500 01/08/01 9,998
Unibank 50,000 6.690 09/21/00 50,000
Westpac Banking Corp. 25,000 6.255 10/23/20 24,997
Westpac Banking Corp. 7,000 6.710 02/09/01 6,998
Westpac Banking Corp. 25,000 6.710 02/12/01 24,995
---------
Total Yankee Certificates of Deposit (cost $628,874) 628,874
---------
Domestic Commercial Paper - 33.0%
ABN AMRO North America 50,000 6.472 11/30/00 49,191
ABN AMRO North America 15,000 6.500 02/12/01 14,556
Alcatel 20,700 6.520 10/25/00 20,498
Amsterdam Funding Corp. 23,000 6.530 09/08/00 22,971
Amsterdam Funding Corp. 25,000 6.510 09/18/00 24,923
Amsterdam Funding Corp. 25,000 6.510 10/05/00 24,846
Asset Securitization Cooperative Corp. 15,000 6.590 09/20/00 14,948
Asset Securitization Cooperative Corp. 15,000 6.530 09/21/00 14,946
Asset Securitization Cooperative Corp. 15,000 6.580 10/10/00 14,893
Bank of New York 25,000 6.590 09/08/00 24,968
Chase Manhattan Corp. 25,000 6.510 01/31/01 24,313
Ciesco LP 10,000 6.510 09/13/00 9,978
Corporate Asset Funding Co, Inc. 20,000 6.520 09/26/00 19,909
Corporate Asset Funding Co, Inc. 10,000 6.510 10/27/00 9,899
Credit Suisse 25,000 6.590 09/07/00 24,973
Credit Suisse 40,000 6.600 09/22/00 39,846
DaimlerChrysler North America Holding Corp. 15,000 6.680 09/01/00 15,000
Delaware Funding Corp. 25,000 6.590 09/11/00 24,954
Delaware Funding Corp. 22,607 6.490 11/22/00 22,273
Dexia Finance Co. 15,000 6.590 09/20/00 14,948
Dexia Finance Co. 20,000 6.520 10/25/00 19,804
Du Pont E I De Nemours & Co. 52,000 6.480 09/20/00 51,822
Edison Asset Securitization 40,000 6.600 09/05/00 39,971
Edison Asset Securitization 25,000 6.600 09/22/00 24,904
Falcon Asset Securitization 25,000 6.510 10/06/20 24,842
Ford Motor Credit Co. 20,000 6.510 10/19/00 19,826
Fortis Funding 50,000 6.500 02/15/01 48,492
</TABLE>
Annual Report 11
<PAGE>
SSgA
Prime Money Market Fund
Statement of Net Assets, continued
August 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity* $
--------- ------ --------- -----
<S> <C> <C> <C> <C>
GE Capital International Funding 25,000 6.570 09/14/00 24,941
General Electric Capital Corp. 20,000 6.580 09/11/00 19,963
General Electric Capital Corp. 30,000 6.530 10/11/00 29,782
General Electric Capital Corp. 41,000 6.520 02/16/01 39,753
General Electric Capital Corp. 20,000 6.500 02/27/01 19,354
General Motors Acceptance Corp. 30,000 6.686 09/07/00 29,967
Glaxo PLC 42,200 6.470 11/30/00 41,517
Goldman Sachs Group LP 30,000 6.610 09/11/00 29,945
KFW International, Inc. 16,900 6.500 10/11/00 16,778
Morgan, (J.P.) & Co., Inc. 25,000 6.580 09/08/00 24,968
National Australia Funding, Inc. 50,000 6.580 09/22/00 49,808
Old Line Funding Corp. 33,942 6.540 09/01/00 33,942
Old Line Funding Corp. 17,823 6.510 10/06/00 17,710
Park Avenue Receivables Corp. 7,528 6.530 09/12/00 7,513
Preferred Receivables Funding Corp. 30,000 6.520 09/20/00 29,897
Preferred Receivables Funding Corp. 30,000 6.520 09/25/00 29,870
Thunder Bay Funding, Inc. 50,000 6.510 10/04/00 49,702
Wal Mart Stores, Inc. 36,000 6.500 09/12/00 35,929
Wal Mart Stores, Inc. 27,704 6.490 11/28/00 27,264
Windmill Funding Corp. 12,500 6.530 09/18/00 12,461
Windmill Funding Corp. 25,000 6.510 10/05/00 24,846
Windmill Funding Corp. 25,000 6.510 11/10/00 24,684
Windmill Funding Corp. 25,000 6.500 11/21/00 24,634
---------
Total Domestic Commercial Paper (cost $1,307,722) 1,307,722
---------
Foreign Commercial Paper - 2.2%
Cregem NA, Inc. 25,000 6.500 02/13/01 24,255
Den Denske Corp. 25,000 6.585 09/25/00 24,890
Den Denske Corp. 25,000 6.666 12/12/00 24,528
Woolwich PLC 15,000 6.680 12/11/00 14,719
---------
Total Foreign Commercial Paper (cost $88,392) 88,392
---------
Domestic Time Deposits - 3.0%
M&I Bank, Milwaukee 119,712 6.625 09/01/00 119,712
---------
Total Domestic Time Deposits (cost $119,712) 119,712
---------
</TABLE>
12 Annual Report
<PAGE>
SSgA
Prime Money Market Fund
Statement of Net Assets, continued
August 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity* $
--------- ------ --------- -----
<S> <C> <C> <C> <C>
United States Government Agency - 2.4%
Federal Home Loan Bank (a) 25,000 6.460 08/17/01 24,984
Federal National Mortgage Association 20,000 6.425 10/26/00 19,804
Federal National Mortgage Association 50,000 6.390 12/20/00 49,024
---------
Total United States Government Agency (cost $93,812) 93,812
---------
Total Investments - 87.3% (amortized cost $3,459,548) 3,459,548
---------
Repurchase Agreements - 12.6%
Agreement with ABN AMRO Securities (USA) Inc. and The Bank of New York
(Tri-Party) of $200,000 acquired on August 31, 2000 at 6.66% to be
repurchased at $200,036 on September 1, 2000, collateralized by:
$199,066 Federal National Mortgage Association securities, valued at $204,001 200,000
Agreement with Bear Stearns & Co., Inc. and Chase Bank (Tri-Party) of
$300,000 acquired on August 31, 2000 at 6.67% to be repurchased at $300,055 on
September 1, 2000, collateralized by:
$316,932 Federal Home Loan Mortgage Corp. Participation Certificates, valued at $311,590 300,000
---------
Total Repurchase Agreements (identified cost $500,000) 500,000
---------
Total Investments and Repurchase Agreements - 99.9% (cost $3,959,548)(b) 3,959,548
Other Assets and Liabilities, Net - 0.1% 2,766
---------
Net Assets - 100.0% 3,962,314
=========
</TABLE>
* The interest rate for all securities with a maturity greater than thirteen
months has an automatic reset feature resulting in an effective maturity
of thirteen months or less.
(a) Adjustable or floating rate security.
(b) The identified cost for federal income tax purpose is the same as shown
above.
See accompanying notes which are an integral part of the financial statements.
Annual Report 13
<PAGE>
SSgA
Prime Money Market Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amount) August 31, 2000
<TABLE>
<S> <C> <C>
Assets
Investments at amortized cost which approximates market .................................. $ 3,459,548
Repurchase agreements (identified cost $500,000) ......................................... 500,000
Interest receivable ...................................................................... 26,796
-----------
Total assets ....................................................................... 3,986,344
Liabilities
Payables:
Dividends ......................................................... $ 23,156
Accrued fees to affiliates ........................................ 778
Other accrued expenses ............................................ 96
------------
Total liabilities .................................................................. 24,030
-----------
Net Assets ............................................................................... $ 3,962,314
===========
Net Assets Consist of:
Accumulated net realized gain (loss) ..................................................... $ (30)
Shares of beneficial interest ............................................................ 3,962
Additional paid-in capital ............................................................... 3,958,382
-----------
Net Assets ............................................................................... $ 3,962,314
===========
Net Asset Value, offering and redemption price per share:
($3,962,314,376 divided by 3,962,356,007 shares of $.001 par value
shares of beneficial interest outstanding) ......................................... $ 1.00
===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
14 Annual Report
<PAGE>
SSgA
Prime Money Market Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 2000
Investment Income
Interest ....................................................... $ 191,750
Expenses
Advisory fees .................................... $ 4,695
Administrative fees .............................. 1,011
Custodian fees ................................... 550
Distribution fees ................................ 527
Transfer agent fees .............................. 146
Professional fees ................................ 28
Registration fees ................................ 112
Shareholder servicing fees ....................... 783
Trustees' fees ................................... 53
Miscellaneous .................................... 66
-----------
Expenses before reductions ....................... 7,971
Expense reductions ............................... (1,711)
-----------
Expenses, net ............................................... 6,260
----------
Net investment income ............................................. 185,490
----------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on investments ........................... (81)
----------
Net increase in net assets from operations ........................ $ 185,409
==========
See accompanying notes which are an integral part of the financial statements.
Annual Report 15
<PAGE>
SSgA
Prime Money Market Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Years Ended August 31,
<TABLE>
<CAPTION>
2000 1999
------------- -------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ........................................... $ 185,490 $ 133,335
Net realized gain (loss) ........................................ (81) 58
------------- -------------
Net increase in net assets from operations ................... 185,409 133,393
------------- -------------
Distributions
From net investment income ...................................... (185,490) (133,335)
------------- -------------
Share Transactions
Net increase (decrease) in net assets from share transactions ... 1,547,164 290,153
------------- -------------
Total net increase (decrease) in net assets ........................ 1,547,083 290,211
Net Assets
Beginning of period ............................................. 2,415,231 2,125,020
------------- -------------
End of period ................................................... $ 3,962,314 $ 2,415,231
============= =============
</TABLE>
See accompanying notes which are an integral part of the financial statements.
16 Annual Report
<PAGE>
SSgA
Prime Money Market Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
------------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ............... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
---------- ---------- ---------- ---------- ----------
Income From Operations
Net investment income ........................... .0580 .0496 .0544 .0528 .0546
---------- ---------- ---------- ---------- ----------
Distributions
From net investment income ...................... (.0580) (.0496) (.0544) (.0528) (.0546)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period ..................... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
========== ========== ========== ========== ==========
Total Return (%) ................................... 6.00 5.08 5.63 5.52 5.60
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ........ 3,962,314 2,415,231 2,125,020 1,406,263 1,095,631
Ratios to average net assets (%):
Operating expenses, net (a) .................. .20 .20 .20 .20 .20
Operating expenses, gross (a) ................ .25 .26 .28 .28 .25
Net investment income ........................ 5.93 4.96 5.48 5.40 5.44
</TABLE>
(a) See Note 4 for current period amounts.
Annual Report 17
<PAGE>
SSgA
Prime Money Market Fund
Notes to Financial Statements
August 31, 2000
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 24 investment portfolios which are in operation as
of August 31, 2000. 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 accounting
principles generally accepted in the United States 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 utilizes the amortized cost valuation method
in accordance with Rule 2a-7 of the 1940 Act, a method by which each
portfolio instrument meeting certain materiality parameters and credit
worthiness standards are initially valued at cost, and thereafter a
constant accretion/amortization to maturity of any discount or premium is
assumed.
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.
As permitted by tax regulations, the Fund intends to defer a net realized
capital loss of $81,302 incurred from November 1, 1999 to August 31, 2000,
and treat it as arising in fiscal year 2001.
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.
18 Annual Report
<PAGE>
SSgA
Prime Money Market Fund
Notes to Financial Statements, continued
August 31, 2000
Expenses: Most expenses can be directly attributed to the Fund. Expenses
of the investment company 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 certain qualified 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. State Street
Bank and Trust Company (the "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, 2000, purchases,
sales, and maturities of investment securities, excluding US Government
and Agency obligations and repurchase agreements, for the Fund aggregated
to $141,985,224,496, $873,362,960, and $139,954,729,000, respectively.
For the year ended August 31, 2000, purchases, sales and maturities of US
Government and Agency obligations, excluding repurchase agreements,
aggregated to $648,475,877, $274,312,561, and $358,930,000, respectively.
4. Related Parties
Adviser: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company under which the Adviser, through State
Street Global Advisors, the investment management group of 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 .15%, of its average daily net assets. The Adviser has voluntarily
agreed to reimburse the Fund for all expenses in excess of .20% of its
average daily net assets on an annual basis. For the period January 1,
2000 to August 31, 2000, the Adviser has also voluntarily agreed to waive
.5% of its .15% advisory fee. The total amounts of the waiver and
reimbursement for the year ended August 31, 2000 were $1,137,643 and
$535,216, respectively. As of August 31, 2000, the receivable due from the
Adviser for reimbursed expenses in excess of the expense cap has been
netted against the Advisory 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.
In addition, the Fund has entered into arrangements with its Adviser
whereby custody credits realized as a result of uninvested cash balances
were used to reduce a portion of the Fund's expenses. During the year, the
Fund's custodian fees were reduced by $37,868 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly-owned subsidiary of The Northwestern Mutual Life Insurance Company,
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
Annual Report 19
<PAGE>
SSgA
Prime Money Market Fund
Notes to Financial Statements, continued
August 31, 2000
pays the Administrator for services supplied by the Administrator pursuant
to the Administration Agreement, an annual fee, payable monthly on a pro
rata basis. For the period September 1, 1999 to April 30, 2000, the
following percentages of the average daily net assets of all domestic
funds: $0 up to and including $500 million - .06%; over $500 million up to
and including $1 billion - .05%; over $1 billion - .03%. Effective May 1,
2000, the annual fee is based on the following percentages of the average
daily net assets of all money market portfolios: $0 up to $15 billion -
.0315%; over $15 billion - .029%. The Administrator will also charge a
flat fee of $30,000 per year per Fund with less than $500 million in net
assets and $1,500 per year for monthly performance reports and use of
Russell Performance Universe software product. In addition, the Fund
reimburses the Administrator for out-of-pocket expenses and start-up costs
for new funds.
Distributor and Shareholder Servicing: The Investment Company has 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 enter 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 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 Shareholder 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, 2000, the
Fund was charged shareholder servicing expenses of $782,582 by the
Adviser.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets of the Fund on an
annual basis. The shareholder servicing payments shall not exceed .20% of
the average daily value of net assets of the Fund on an annual basis.
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, 2000.
Board of Trustees: The Investment Company paid each Trustee not affiliated
with the Investment Company an annual retainer, plus specified amounts for
board and committee meetings attended. These expenses are allocated among
all of the funds based upon their relative net assets.
20 Annual Report
<PAGE>
SSgA
Prime Money Market Fund
Notes to Financial Statements, continued
August 31, 2000
Accrued fees payable to affiliates and trustees as of August 31, 2000 were
as follows:
Advisory fees $514,720
Administration fees 140,368
Custodian fees 15,497
Distribution fees 6,354
Shareholder servicing fees 90,087
Transfer agent fees 8,739
Trustees' fees 1,917
--------
$777,682
========
Beneficial Interest: As of August 31, 2000, one shareholder (who was also
an affiliate of the Investment Company) was a record owner of
approximately 66% of the total outstanding shares of the Fund.
5. Fund Share Transactions (On a Constant Dollar Basis):
(amounts in thousands)
Fiscal Years Ended August 31,
-----------------------------
2000 1999
----------- -----------
Proceeds from shares sold........... 47,952,579 44,635,015
Proceeds from reinvestment of
distributions 143,017 117,035
Payments for shares redeemed........ (46,548,432) (44,461,897)
----------- -----------
Total net increase (decrease)....... 1,547,164 290,153
=========== ===========
6. Interfund Lending Program
The Fund and all of the funds of the Investment Company received from the
Securities and Exchange Commission an exemptive order on December 23, 1999
to establish and operate an Interfund Credit Facility. This allows the
Funds to directly lend to and borrow money from the SSgA Money Market Fund
for temporary purposes in accordance with certain conditions. The
borrowing Funds are charged the average of the current Repo Rate and the
Bank Loan Rate. The Fund did not utilize the interfund lending program
during this year.
Annual Report 21
<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, Treasurer and CEO
Mark E. Swanson, Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Treasurer
Carla L. Anderson, Assistant 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
160 Federal Street
Boston, Massachusetts 02110
22 Annual Report
<PAGE>
[COVER GRAPHIC]
SSgA(R) funds
ANNUAL REPORT
Small Cap Fund
August 31, 2000
<PAGE>
SSgA(R) Funds
Small Cap Fund
Annual Report
August 31, 2000
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(R)" 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,
It is our pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 2000. The SSgA Fund Family has grown to include
twenty-four portfolios with over $21 billion in assets as of August 31, 2000.
The Fund Family provides a wide range of strategies covering the world's major
markets. The enclosed information provides an overview of the investment process
for the SSgA Small Cap Fund. This overview contains the portfolio management
discussion, performance updates and financial information for the Fund.
In an ongoing effort to develop competitive products and services that provide
investment solutions for our clients, we have added the SSgA Intermediate
Municipal Bond Fund to the SSgA Fund Family. This Fund's investment objective
seeks to provide federally tax-exempt current income by investing primarily in a
diversified portfolio of municipal debt securities with a dollar-weighted
average maturity between three and ten years.
We are also pleased with the success of our SSgA Emerging Markets and SSgA
Growth and Income Funds as they were included in Money(R) Magazine's June 2000
issue listing of the 'Top 100 Mutual Funds'. This is the second year in a row
that these funds have been selected.
Additionally, the SSgA Tax Free Money Market and the SSgA Active International
Funds have achieved five-year performance history during the 2000 fiscal year.
Currently, all of our SSgA Money Market Funds have at least a five-year
performance history. We strive to meet our clients' needs by providing funds
with long-term records and competitive performance.
We would like to thank you for choosing the SSgA Funds. Our reputation is based
on our tradition of designing and delivering exceptional financial services to
our clients. We look forward to continue sharing the benefit of our experience
with you.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
/s/ Timothy B. Harbert
Timothy B. Harbert
State Street Global Advisors
President and Chief Operating Officer, SSgA
4 Annual Report
<PAGE>
SSgA Small Cap Fund
--------------------------------------------------------------------------------
Management of the Funds
--------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
[PHOTO]
Timothy B. Harbert
President and Chief Operating 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 P. Adams, Principal, has been the portfolio manager primarily
responsible for investment decisions regarding the SSgA Small Cap Fund since
December 1999. Mr. Adams is the Strategy Leader for the Large Cap Value Strategy
and the co-manager of the Small Cap Strategy. He is also responsible for the
development of the Small Cap Strategy. In addition, he is Head of Research for
the Quantitative US Active Equity Group. Prior to his responsibility in domestic
equities, Mr. Adams was a Senior Investment Support Analyst at SSgA. He has been
working in the investment management field since 1989. He holds a BS in
economics from Northeastern University. 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 relative to the Russell
2000(R) Index through investments in equity securities.
Invests in: At least 65% of the total assets will be invested in smaller cap
securities.
Strategy: The Fund management team uses a systematic investment approach
designed to uncover equity securities which are undervalued, have superior
growth potential and present an opportunity from a price perspective. The Fund
seeks to provide long-term total returns in excess of the Russell 2000(R) Index
through strong bottom-up stock selection within a risk-controlled framework.
--------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
Dates Small Cap Fund S&P 400 Midcap Index** Russell 2000 Index++
Inception* $10,000 $10,000 $10,000
1992 $10,090 $10,245 $10,055
1993 $12,478 $12,751 $13,321
1994 $12,964 $13,341 $14,111
1995 $16,859 $16,077 $17,045
1996 $20,760 $17,988 $18,890
1997 $28,202 $24,693 $24,359
1998 $21,906 $22,376 $19,634
1999 $24,393 $31,698 $25,212
2000 $31,204 $44,277 $32,048
================================================================================
Performance Review
For the fiscal year ended August 31, 2000, the SSgA Small Cap Fund had a total
return of 27.92% versus the Russell 2000(R) Index return of 27.16%. The Fund's
performance is net of operating expenses, whereas Index results do not include
expenses of any kind. The fiscal year-end performance of the Fund can be, in
part, attributed to investments made in Initial Public Offerings (IPOs). There
is no guarantee that the Fund will continue to participate in the IPO market,
and due to their inherent volatility, there can be no assurance that IPOs will
continue to have a positive impact on Fund performance.
The Fund seeks to achieve its strategic objective, to outperform the Russell
2000(R) Index over the long-term, through consistent application of the
Manager's proven stock selection technique combined with a refined, proprietary
portfolio construction methodology. The Fund's exposure to
--------------------------------------------------------------------------------
SSgA Small Cap Fund
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
-------------- ------------ -------
1 Year $ 12,792 27.92%
5 Years $ 18,509 13.10%+
Inception $ 31,204 14.95%+
--------------------------------------------------------------------------------
Standard & Poor's(R) MidCap 400 Index
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
-------------- ------------ -------
1 Year $ 13,976 39.76%
5 Years $ 27,540 22.46%+
Inception $ 44,277 19.98%+
--------------------------------------------------------------------------------
Russell 2000(R) Index
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
-------------- ------------ -------
1 Year $ 12,716 27.16%
5 Years $ 18,801 13.46%+
Inception $ 32,046 15.33%+
See related Notes on the following page.
6 Annual Report
<PAGE>
SSgA Small Cap Fund
--------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
--------------------------------------------------------------------------------
specific market sectors is managed relative to the Russell 2000(R) Index. As a
result, the Fund has sector, industry, market capitalization, beta and yield
exposures similar to those of the Index. Additionally, individual security
weights are managed relative to their Index weight.
Market and Portfolio Highlights
After a difficult start, the Fund added over 16% of excess return over the
benchmark in the second six months of the fiscal year. Many of the issues that
plagued the Fund in the early part of the fiscal year - lack of breadth in the
equity market and significant stock return volatility - dissipated in the second
half and allowed the Manager's stock selection skill to come through in the
returns. In particular, stock selection was very good in the Technology,
Utilities and Consumer Staples sectors. Specifically, positions in hardware
companies Infocus and Proxim boosted returns in the Technology sector, while
holdings of Calpine, Minnesota Power and Energen provided good results for the
Utilities. Selection was uniformly favorable throughout the Consumer Staples
sector during the period.
The small cap segment of the US equity market maintained a favorable position
relative to the large cap segment, as the Russell 2000(R) Index returned 27.16%
for the year ended August 31, 2000 versus 16.33% for the S&P 500(R) Index.
Although the small cap growth market had a significant lead over the value style
during the last fiscal year, a dramatic decline in the NASDAQ in March 2000
prompted investors to begin taking a fresh look at company valuations. As a
result, the Russell 2000(R) Value Index outperformed the Russell 2000(R) Growth
Index in four of the six months ended August 31, 2000. The Manager's attention
to company valuations was rewarded by this shift in the marketplace. The Fund's
position in Micromuse was increased in late April on favorable analyst
expectations, and the stock's subsequent share price increased by more than 100%
before the position was sold in July.
In spite of the strong returns in the mid cap and small cap value portions of
the equity market, it appears that the bull market has subsided somewhat so far
in 2000. The interest rate increases implemented by the Federal Open Market
Committee seem to have put the brakes on market momentum.
At August 31, 2000, the SSgA Small Cap Fund held 235 stocks, with an average
weighted market capitalization of $1.21 billion. The Fund had characteristics in
line with those of the Russell 2000(R) Index due to the risk-controlled nature
if the investment process. A core small cap strategy does not expose the Fund to
any style cycle and instead provides broad diversification across all economic
sectors. Additionally, as the Fund's objective is achieved through stock
selection with a disciplined investment approach, it will seek to be fully
invested at all times.
--------------------------------------------------------
Top Ten Equity Holdings
(as a percent of Total Investments) August 31, 2000
--------------------------------------------------------
InFocus Corp. 1.1%
Reebok International, Ltd. 1.1
AmeriCredit Corp. 1.1
AmeriSource Health Corp. Class A 1.0
Newport News Shipbuilding, Inc. 1.0
Precision Castparts Corp. 1.0
Radian Group, Inc. 1.0
Technitrol, Inc. 0.9
Bank United Corp. Class A 0.9
Silicon Valley Bancshares 0.9
--------------------------------------------------------
---------------------
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(R) 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(R) Index is comprised of the 2,000 smallest securities in
the Russell 3000(R) 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, 2000, 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 accounting principles generally accepted
in the United States of America. 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 auditing standards
generally accepted in the United States of America 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, 2000 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
Boston, Massachusetts
October 11, 2000
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
Small Cap Fund
Statement of Net Assets
August 31, 2000
Market
Number Value
of (000)
Shares $
------- -------
Common Stocks - 98.0%
Basic Industries - 5.6%
Advanced Energy Industries, Inc. (a) 38,500 2,199
Albemarle Corp. 58,600 1,454
CONSOL Energy, Inc. 51,600 1,074
Cytec Industries, Inc. (a) 36,200 1,208
Georgia Gulf Corp. 184,000 2,392
Hexcel Corp. (a) 59,300 819
Mentor Graphics Corp. (a) 161,500 3,028
Mueller Industries, Inc. (a) 52,000 1,641
NL Industries, Inc. 23,600 556
Precision Castparts Corp. 45,600 3,466
Reliance Steel & Aluminum Co. 23,000 474
W.R. Grace & Co. (a) 187,000 1,485
-------
19,796
-------
Capital Goods - 5.3%
AMETEK, Inc. 35,700 763
Applied Industrial Technology, Inc. 12,200 207
Centex Construction Products, Inc. 23,400 604
Cognex Corp. (a) 30,800 1,234
Harman International Industries, Inc. 12,400 952
Kennametal, Inc. 115,000 2,947
Manitowoc Co., Inc. 57,712 1,324
Milacron, Inc. 88,500 1,366
Nanometrics, Inc. (a) 38,900 1,918
Newport News Shipbuilding, Inc. 82,000 3,485
Ryland Group, Inc. 24,200 594
Silicon Valley Group, Inc. (a) 70,500 1,965
Standard Pacific Corp. 98,700 1,622
-------
18,981
-------
Consumer Basics - 16.8%
Advance Paradigm, Inc. (a) 69,200 1,838
AmeriSource Health Corp. Class A (a) 108,200 3,760
Apria Healthcare Group, Inc. (a) 61,000 907
Biosite Diagnostics, Inc. (a) 29,500 2,052
Buckeye Technologies, Inc. (a) 36,800 918
Cooper Companies, Inc. 26,000 855
Coventry Health Care, Inc. (a) 61,800 985
Dean Foods Co. 36,700 1,147
Dura Pharmaceuticals, Inc. (a) 99,600 2,758
Edwards Lifesciences Corp. (a) 82,000 2,153
Enzon, Inc. (a) 16,500 1,004
First Health Group Corp. (a) 18,400 567
Foundation Health Systems, Inc. (a) 144,400 2,536
Henry Schein, Inc. (a) 30,200 555
IDEXX Laboratories, Inc. (a) 76,000 1,976
INAMED Corp. (a) 41,600 1,357
Interstate Bakeries Corp. 60,000 1,076
Invacare Corp. 35,000 943
King Pharmaceuticals, Inc. (a) 56,700 1,821
Laboratory Corp. of America Holdings (a) 19,800 2,343
LifePoint Hospitals, Inc. (a) 86,400 2,587
Medicis Pharmaceutical Corp. Class A. (a) 23,650 1,524
Michael Foods, Inc. 22,200 526
Mid Atlantic Medical Services, Inc. (a) 95,000 1,532
NBTY, Inc. (a) 237,900 1,673
Noven Pharmaceuticals, Inc. (a) 62,000 2,600
Owens & Minor, Inc., Holding Co. 131,000 2,006
Patterson Dental Co. (a) 67,300 1,590
PolyMedica Corp. (a) 63,300 2,247
Priority Healthcare Corp. Class B (a) 36,128 2,093
Protein Design Labs, Inc. (a) 14,200 1,076
Salton, Inc. (a) 78,100 2,939
Syncor International Corp. (a) 45,200 1,796
Topps Co., Inc. (a) 220,900 1,740
Trigon Healthcare, Inc. (a) 23,800 1,228
VISX, Inc. (a) 45,900 1,261
Whole Foods Market, Inc. (a) 9,300 470
-------
60,439
-------
Annual Report 9
<PAGE>
SSgA
Small Cap Fund
Statement of Net Assets, continued
August 31, 2000
Market
Number Value
of (000)
Shares $
------- -------
Consumer Durables - 0.9%
Furniture Brands International, Inc. (a) 41,200 664
Group 1 Automotive, Inc. (a) 48,900 538
Libbey, Inc. 30,000 984
Polaris Industries, Inc. 31,000 1,058
Sonic Automotive, Inc. (a) 10,000 106
-------
3,350
-------
Consumer Non-Durables - 7.9%
Abercrombie & Fitch Co. Class A (a) 61,100 1,417
Canandaigua Brands Co., Inc. Class A (a) 40,700 2,193
Dress Barn, Inc. (a) 34,000 703
Footstar, Inc. (a) 62,500 1,859
Genesco, Inc. (a) 95,400 1,544
Handleman Co. (a) 37,700 467
Haverty Furniture Co., Inc. 5,700 66
Hot Topic, Inc. (a) 11,000 311
Kenneth Cole Productions, Inc. Class A (a) 25,000 1,102
Michaels Stores, Inc. (a) 76,700 2,685
Musicland Stores Corp. (a) 130,800 932
Neiman Marcus Group, Inc. (The) Class A (a) 55,200 1,853
Nortek, Inc. (a) 21,200 433
Payless ShoeSource, Inc. (a) 25,000 1,334
Petco Animal Supplies, Inc. (a) 57,000 1,197
Pier 1 Imports, Inc. 94,600 1,112
Polo Ralph Lauren Corp. Class A (a) 81,300 1,575
Reebok International, Ltd. (a) 201,900 3,874
Trans World Entertainment Corp. (a) 96,300 914
Zale Corp. (a) 80,100 2,958
-------
28,529
-------
Consumer Services - 2.5%
Argosy Gaming Co. (a) 153,300 2,453
Aztar Corp. (a) 109,900 1,600
Brinker International, Inc. (a) 62,500 1,984
CEC Entertainment, Inc. (a) 25,700 742
Isle of Capri Casinos, Inc. (a) 58,000 892
RARE Hospitality International, Inc. (a) 45,100 1,263
-------
8,934
-------
Energy - 5.2%
Clayton Williams Energy, Inc. (a) 8,600 352
Helmerich & Payne, Inc. 80,200 2,962
HS Resources, Inc. (a) 59,700 1,892
Key Production, Inc. (a) 52,000 936
Marine Drilling Co, Inc. (a) 53,500 1,455
Mitchell Energy & Development Corp. Class A 30,000 1,200
ONEOK, Inc. 49,400 1,578
Patina Oil & Gas Corp. 67,300 1,430
Patterson Energy, Inc. (a) 29,000 903
Swift Energy Co. (a) 41,900 1,212
Valero Energy Corp. 101,200 3,049
Vintage Petroleum, Inc. 89,400 1,876
-------
18,845
-------
Finance - 15.0%
AmeriCredit Corp. (a) 139,900 3,865
AmerUs Life Holdings, Inc. 24,000 593
Amli Residential Properties Trust (c) 11,200 277
Astoria Financial Corp. 52,300 1,837
Bank United Corp. Class A 75,400 3,388
Bedford Property Investors, Inc. (c) 44,000 855
CBL & Associates Properties, Inc. (c) 68,400 1,633
Dain Rauscher Corp. 18,000 1,448
Downey Financial Corp. 36,200 1,213
East West Bancorp, Inc. 42,400 721
10 Annual Report
<PAGE>
SSgA
Small Cap Fund
Statement of Net Assets, continued
August 31, 2000
Market
Number Value
of (000)
Shares $
------- -------
Enhance Financial Services Group, Inc. 45,500 717
Essex Property Trust, Inc. (c) 30,400 1,495
FelCor Lodging Trust, Inc. (c) 92,800 2,065
First Industrial Realty Trust, Inc. (c) 33,900 1,006
FirstFed Financial Corp. (a) 68,300 1,229
GBC Bancorp 2,900 110
Glimcher Realty Trust (c) 47,400 729
Greater Bay Bancorp 5,000 310
Imperial Bancorp (a) 54,000 1,175
Innkeepers USA Trust (c) 111,400 1,156
Irwin Financial Corp. 24,500 363
MeriStar Hospitality Corp. (c) 88,300 1,954
Metris Companies, Inc. 91,698 3,295
Morgan Keegan, Inc. 9,000 181
PFF Bancorp, Inc. 21,900 438
Prentiss Properties Trust (c) 71,300 1,733
Provident Bankshares Corp. 56,595 806
Provident Financial Group, Inc. 41,800 1,100
Radian Group, Inc. 55,700 3,460
Reckson Associates Realty Corp. (c) 76,600 1,862
RFS Hotel Investors, Inc. (c) 71,800 898
Riggs National Corp. 24,600 292
Security Capital Group, Inc. Class B (a) 78,600 1,336
Silicon Valley Bancshares (a) 57,700 3,325
SL Green Realty Corp. (c) 42,000 1,126
Smith (Charles E.) Residential Realty, Inc. (c) 30,800 1,267
Southwest Bancorporation of Texas, Inc. (a) 35,200 1,021
Southwest Securities Group, Inc. 63,140 2,095
Tucker Anthony Sutro Corp. 20,400 481
Urban Shopping Centers, Inc. (c) 23,000 803
Westamerica Bancorporation 5,300 160
-------
53,818
-------
General Business - 7.7%
Adminstaff, Inc. (a) 33,900 2,763
Advo Systems, Inc. (a) 44,300 1,814
Career Education Corp. (a) 18,800 744
Diamond Technology Partners, Inc. (a) 28,500 1,817
F.Y.I., Inc. (a) 39,300 1,530
Forrester Research, Inc. (a) 29,000 1,762
Heidrick & Struggles International, Inc. New (a) 35,300 2,047
internet.com Corp. New (a) 20,300 637
Kronos, Inc. (a) 32,200 1,203
Learning Tree International, Inc. (a) 47,000 3,217
Oakley, Inc. (a) 41,500 703
On Assignment, Inc. (a) 54,400 1,618
Penton Media, Inc. 51,000 1,597
Professional Detailing, Inc. (a) 2,100 100
R.H. Donnelley Corp. (a) 56,000 1,176
SCP Pool Corp. (a) 45,000 1,308
Sinclair Broadcast Group, Inc. Class A (a) 87,500 1,050
Sylvan Learning Systems, Inc. (a) 74,100 1,070
United Stationers, Inc. (a) 51,500 1,664
-------
27,820
-------
Shelter - 1.0%
NVR, Inc. (a) 32,600 2,396
Toll Brothers, Inc. (a) 39,000 1,272
-------
3,668
-------
Technology - 25.3%
Actel Corp. (a) 45,200 1,986
ADAC Laboratories (a) 88,000 1,964
Adtran, Inc. (a) 12,300 655
Allaire Corp. (a) 86,500 2,930
Alliant Techsystems, Inc. (a) 28,000 2,158
Amphenol Corp. Class A (a) 39,000 2,496
AXENT Technologies, Inc. (a) 96,000 2,280
Benchmark Electronics, Inc. (a) 24,000 1,239
Braun Consulting, Inc. New (a) 24,000 387
Annual Report 11
<PAGE>
SSgA
Small Cap Fund
Statement of Net Assets, continued
August 31, 2000
Market
Number Value
of (000)
Shares $
------- -------
Cerner Corp. (a) 69,200 2,630
Checkpoint Systems, Inc. (a) 35,600 285
Cognizant Technology Solutions Corp. (a) 30,800 1,317
Corsair Communications, Inc. (a) 67,300 740
Credence Systems Corp. (a) 28,900 1,692
CyberOptics Corp. (a) 27,700 802
Dallas Semiconductor Corp. 64,300 2,660
Dendrite International, Inc. (a) 28,000 742
Electro Scientific Industries, Inc. (a) 55,100 2,259
Electroglas, Inc. (a) 86,500 1,941
Emulex Corp. (a) 23,100 2,414
ESS Technology, Inc. (a) 89,800 1,555
Exchange Applications, Inc. (a) 26,600 648
GaSonics International Corp. (a) 16,400 391
Go2Net, Inc. (a) 39,300 2,709
Hall, Kinion & Associates, Inc. (a) 39,400 1,298
iNet Technologies, Inc. (a) 19,600 788
InFocus Corp. (a) 83,200 4,025
Insight Enterprises, Inc. (a) 52,500 2,635
Interwoven, Inc. (a) 12,200 1,171
Kemet Corp. (a) 104,200 3,126
Littlefuse, Inc. (a) 56,500 2,052
Manhattan Associates, Inc. (a) 35,100 1,628
Marimba, Inc. (a) 55,300 933
Microsemi Corp. (a) 44,000 1,843
Netopia, Inc. (a) 38,500 1,410
PerkinElmer, Inc. 24,100 2,167
Plexus Corp. (a) 8,500 1,315
Power Integrations, Inc. (a) 103,000 1,745
Primus Knowledge Solutions, Inc. New (a) 37,000 863
Progress Software Corp. (a) 75,800 1,033
Proxicom, Inc. (a) 42,500 1,028
Razorfish, Inc. (a) 83,300 1,057
Remedy Corp. (a) 49,000 1,127
RSA Security, Inc. (a) 13,500 797
Sawtek, Inc. (a) 7,700 388
Sensormatic Electronics Corp. (a) 134,800 2,241
Structural Dynamics Research Corp. (a) 1,500 24
Sybase, Inc. (a) 99,600 2,727
Tanning Technology Corp. New (a) 13,500 219
Technitrol, Inc. 26,600 3,392
TelCom Semiconductor, Inc. (a) 92,000 1,604
Varian Semiconductor Equipment Associates, Inc. (a) 55,000 3,148
Verity, Inc. (a) 61,800 2,822
Viant Corp. New (a) 62,500 862
WebTrends Corp. (a) 73,400 2,761
-------
91,109
-------
Transportation - 1.2%
American Freightways Corp. (a) 50,500 827
Arkansas Best Corp. (a) 42,400 636
Dollar Thrifty Automotive Group, Inc. (a) 44,900 1,016
Landstar Systems, Inc. (a) 18,200 920
Yellow Corp. (a) 65,500 991
-------
4,390
-------
Utilities - 3.6%
Conectiv, Inc. 67,000 1,189
Minnesota Power, Inc. 113,200 2,512
MRV Communications, Inc. (a) 18,000 1,388
Price Communications Corp. (a) 104,770 2,148
Public Service Co. of New Mexico 113,200 2,420
RGS Energy Group, Inc. 34,000 846
Superior Energy Services, Inc. (a) 25,000 270
Tut Systems, Inc. (a) 20,000 2,009
-------
12,782
-------
Total Common Stocks
(cost $315,551) 352,461
-------
12 Annual Report
<PAGE>
SSgA
Small Cap Fund
Statement of Net Assets, continued
August 31, 2000
Principal Market
Amount Value
(000) (000)
$ $
--------- -------
Short-Term Investments - 2.4%
AIM Short-Term Investment Prime Portfolio
Class A (b) 4,839 4,839
Federated Investors Prime Cash Obligations
Fund (b) 3,429 3,429
United States Treasury Bills (b)(d)(e)
6.130% due 09/14/00 299 299
5.650% due 09/14/00 150 150
-------
Total Short-Term Investments
(cost $8,717) 8,717
-------
Total Investments - 100.4%
(identified cost $324,268) 361,178
Other Assets and Liabilities,
Net - (0.4%) (1,399)
-------
Net Assets - 100.0% 359,779
=======
(a) Nonincome-producing security.
(b) At amortized cost, which approximates market.
(c) Real Estate Investment Trust (REIT).
(d) Rate noted is yield-to-maturity from date of acquisition.
(e) Held as collateral in connection with futures contracts purchased by the
Fund.
Unrealized
Number Appreciation
of (Depreciation)
Futures Contracts Contracts (000)
--------- --------------
Russell 2000 Index
expiration date 09/00 20 $ 153
------------
Total Unrealized Appreciation (Depreciation)
on Open Futures Contracts Purchased $ 153
============
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 13
<PAGE>
SSgA
Small Cap Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amount) August 31, 2000
<TABLE>
<S> <C> <C>
Assets
Investments at market (identified cost $324,268) ........................................... $361,178
Receivables:
Dividends .............................................................................. 173
Investments sold ....................................................................... 11,868
Fund shares sold ....................................................................... 1,510
Daily variation margin on futures contracts ............................................ 30
Short-term investments held as collateral for securities loaned, at market.................. 41,055
--------
Total assets ....................................................................... 415,814
Liabilities
Payables:
Investments purchased ...................................................... $ 13,883
Fund shares redeemed ....................................................... 734
Accrued fees to affiliates ................................................. 363
Payable upon return of securities loaned, at market ............................ 41,055
--------
Total liabilities .................................................................. 56,035
--------
Net Assets ................................................................................. $359,779
========
Net Assets Consist of:
Accumulated net realized gain (loss) ....................................................... $ (18,032)
Unrealized appreciation (depreciation) on:
Investments ............................................................................ 36,910
Futures contracts ...................................................................... 153
Shares of beneficial interest .............................................................. 16
Additional paid-in capital ................................................................. 340,732
--------
Net Assets ................................................................................. $359,779
========
Net Asset Value, offering and redemption price per share:
($359,778,961 divided by 15,859,286 shares of $.001 par value
shares of beneficial interest outstanding) ......................................... $ 22.69
========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
14 Annual Report
<PAGE>
SSgA
Small Cap Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 2000
Investment Income
Dividends ..................................................... $ 3,254
Interest ...................................................... 148
--------
Total investment income ................................... 3,402
Expenses
Advisory fees ...................................... $ 2,508
Administrative fees ................................ 117
Custodian fees ..................................... 92
Distribution fees .................................. 196
Transfer agent fees ................................ 127
Professional fees .................................. 19
Registration fees .................................. 54
Shareholder servicing fees ......................... 445
Trustees' fees ..................................... 10
Miscellaneous ...................................... 22
--------
Expenses before reductions ......................... 3,590
Expense reduction .................................. (7)
--------
Expenses, net ............................................. 3,583
--------
Net investment income (loss) ...................................... (181)
--------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments ........................................ 39,826
Futures contracts .................................. 1 39,827
--------
Net change in unrealized appreciation (depreciation) on:
Investments ........................................ 42,728
Futures contracts .................................. 153 42,881
-------- --------
Net realized and unrealized gain (loss) ........................... 82,708
--------
Net increase (decrease) in net assets from operations ............. $ 82,527
========
See accompanying notes which are an integral part of the financial statements.
Annual Report 15
<PAGE>
SSgA
Small Cap Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Years Ended August 31,
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) ................................ $ (181) $ 678
Net realized gain (loss) .................................... 39,827 (53,028)
Net change in unrealized appreciation (depreciation) ........ 42,881 88,963
--------- ---------
Net increase (decrease) in net assets from operations ... 82,527 36,613
--------- ---------
Distributions
From net investment income .................................. (238) (468)
From net realized gains ..................................... -- (24)
--------- ---------
Net decrease in net assets from distributions ........... (238) (492)
--------- ---------
Share Transactions
Net increase (decrease) in net assets from share transactions (74,523) (28,738)
--------- ---------
Total net increase (decrease) in net assets ..................... 7,766 7,383
Net Assets
Beginning of period ......................................... 352,013 344,630
--------- ---------
End of period (including undistributed net investment income
of $238 at August 31, 1999) ............................ $ 359,779 $ 352,013
========= =========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
16 Annual Report
<PAGE>
SSgA
Small Cap Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
--------------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .......... $ 17.75 $ 15.96 $ 22.11 $ 17.44 $ 14.42
-------- -------- -------- -------- --------
Income From Operations
Net investment income (loss) (a) .......... (.01) .03 .02 .03 .04
Net realized and unrealized gain (loss) ... 4.96 1.78 (4.54) 5.87 3.25
-------- -------- -------- -------- --------
Total income from operations .......... 4.95 1.81 (4.52) 5.90 3.29
-------- -------- -------- -------- --------
Distributions
From net investment income ................ (.01) (.02) (.04) (.01) (.07)
From net realized gain .................... -- -- (1.59) (1.22) (.20)
-------- -------- -------- -------- --------
Total distributions ................... (.01) (.02) (1.63) (1.23) (.27)
-------- -------- -------- -------- --------
Net Asset Value, End of Period ................ $ 22.69 $ 17.75 $ 15.96 $ 22.11 $ 17.44
======== ======== ======== ======== ========
Total Return (%) .............................. 27.92 11.35 (22.32) 35.85 23.14
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) .. 359,779 352,013 344,630 149,808 55,208
Ratios to average net assets (%):
Operating expenses, net ............... 1.07 1.07 1.04 1.00 1.00
Operating expenses, gross ............. 1.07 1.07 1.04 1.09 1.18
Net investment income (loss) .......... (.05) .17 .10 .18 .26
Portfolio turnover rate (%) ............... 156.41 110.82 86.13 143.79 76.85
</TABLE>
(a) For the periods subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.
Annual Report 17
<PAGE>
SSgA
Small Cap Fund
Notes to Financial Statements
August 31, 2000
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 24 investment portfolios which are in operation as
of August 31, 2000. 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 accounting
principles generally accepted in the United States 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.
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.
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.
18 Annual Report
<PAGE>
SSgA
Small Cap Fund
Notes to Financial Statements, continued
August 31, 2000
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, 2000, the Fund had a net tax basis capital loss carryover of
$8,981,463 which may be applied against any realized net taxable gains in
each succeeding year or until its expiration date of August 31, 2007. As
permitted by tax regulations, the Fund intends to defer a net realized
capital loss of $8,659,636 incurred from November 1, 1999 to August 31,
2000, and treat it as arising in the fiscal year 2001.
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, 2000 are as follows:
Net
Unrealized
Federal Tax Unrealized Unrealized Appreciation
Cost Appreciation (Depreciation) (Depreciation)
------------ ------------ -------------- --------------
$324,310,480 $ 58,155,465 $ (21,287,789) $ 36,867,676
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 year may differ significantly from
distributions during such year. 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
of the investment company which cannot be directly attributed are
allocated among all funds based principally on their relative net assets.
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 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, 2000, purchases and
sales of investment securities, excluding short-term investments and
futures contracts, aggregated to $517,064,833 and $595,690,375,
respectively.
Annual Report 19
<PAGE>
SSgA
Small Cap Fund
Notes to Financial Statements, continued
August 31, 2000
Securities lending: The Investment Company has a securities lending
program whereby each Fund can loan securities with a value up to 33 1/3%
of its total assets to certain brokers. The Fund receives cash (U.S.
currency), U.S. Government or U.S. Government agency obligations as
collateral against the loaned securities. To the extent that a loan is
secured by cash collateral, such collateral shall be invested by State
Street Bank and Trust Company in short-term instruments, money market
mutual funds, and such other short-term investments, provided the
investments meet certain quality and diversification requirements. Under
the securities lending arrangement, the collateral received is recorded on
the Fund's statement of assets and liabilities along with the related
obligation to return the collateral. In those situations where the Company
has relinquished control of securities transferred, it derecognizes the
securities and records a receivable from the counterparty.
Income generated from the investment of cash collateral, less negotiated
rebate fees paid to participating brokers and transaction costs, is
divided between the Fund and State Street Bank and Trust Company and is
recorded as interest income for the Fund. To the extent that a loan is
secured by non-cash collateral, brokers pay the Fund negotiated lenders'
fees, which are divided between the Fund and State Street Bank and Trust
Company and are recorded as interest income for the Fund. All collateral
received will be in an amount at least equal to 102% (for loans of U.S.
securities) or 105% (for non-U.S. securities) of the market value of the
loaned securities at the inception of each loan. Should the borrower of
the securities fail financially, there is a risk of delay in recovery of
the securities or loss of rights in the collateral. Consequently, loans
are made only to borrowers which are deemed to be of good financial
standing. As of August 31, 2000, the value of outstanding securities on
loan and the value of collateral amounted to $39,575,061 and $41,055,048,
respectively. Included in interest income is securities lending income of
$145,510 for the year ended August 31, 2000.
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, through State Global Advisors, the investment management group of
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. 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.
In addition, the Fund has entered into arrangements with its Adviser
whereby custody credits realized as a result of uninvested cash balances
were used to reduce a portion of the Fund's expenses. During the year, the
Fund's custodian fees were reduced by $6,871 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly-owned subsidiary of The Northwestern Mutual Life Insurance Company,
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.
20 Annual Report
<PAGE>
SSgA
Small Cap Fund
Notes to Financial Statements, continued
August 31, 2000
The Investment Company pays the Administrator for services supplied by the
Administrator pursuant to the Administration Agreement, an annual fee,
payable monthly on a pro rata basis. For the period September 1, 1999 to
April 30, 2000, 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 up to and including $1 billion - .05%; over $1
billion - .03%. Effective May 1, 2000, the annual fee is based on the
following percentages of the average daily net assets of all U.S. Equity
portfolios: $0 to $2 billion - .0315%; over $2 billion - .029%. The
Administrator will charge a flat fee of $30,000 per year per Fund with
less than $500 million in net assets and $1,500 per year for monthly
performance reports and use of Russell Performance Universe software
product. In addition, the Fund reimburses the Administrator for
out-of-pocket expenses and start-up costs for new funds.
Distributor and Shareholder Servicing: The Investment Company has 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 enter 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 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 Shareholder 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, 2000, the Fund
was charged shareholder servicing expenses of $80,911, $5,387, $236,711,
$325 and $55,911, 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 of the Fund on an
annual basis. The shareholder servicing payments shall not exceed .20% of
the average daily value of net assets of the Fund on an annual basis.
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, 2000.
Annual Report 21
<PAGE>
SSgA
Small Cap Fund
Notes to Financial Statements, continued
August 31, 2000
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 $13,365 for the year ended
August 31, 2000.
Board of Trustees: The Investment Company paid each Trustee not affiliated
with the Investment Company an annual retainer, plus specified amounts for
board and committee meetings attended. 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, 2000 were
as follows:
Advisory fees $216,415
Administration fees 13,562
Custodian fees 16,561
Distribution fees 9,436
Shareholder servicing fees 71,584
Transfer agent fees 34,336
Trustees' fees 1,534
--------
$363,428
========
Beneficial Interest: As of August 31, 2000, one shareholder was a record
owner of approximately 29% of the total outstanding shares of the Fund.
5. Fund Share Transactions (amounts in thousands)
Fiscal Years Ended August 31,
------------------------------------------
2000 1999
------------------- -------------------
Shares Dollars Shares Dollars
------- --------- ------- ---------
Proceeds from shares sold 10,079 $ 203,755 20,403 $ 358,555
Proceeds from reinvestment
of distributions 11 180 23 405
Payments for shares redeemed (14,067) (278,458) (22,182) (387,698)
------- --------- ------- ---------
Total net increase (decrease) (3,977) $ (74,523) (1,756) $ (28,738)
======= ========= ======= =========
6. Interfund Lending Program
The Fund and all other funds of the Investment Company received from the
Securities and Exchange Commission an exemptive order on December 23, 1999
to establish and operate an Interfund Credit Facility. This allows the
Funds to directly lend to and borrow money from the SSgA Money Market Fund
for temporary purposes in accordance with certain conditions. The
borrowing Funds are charged the average of the current Repo Rate and the
Bank Loan Rate. Miscellaneous Expenses on the Statement of Operations
include $3,578 of interest paid under the interfund lending program.
22 Annual Report
<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, Treasurer and CEO
Mark E. Swanson, Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Treasurer
Carla L. Anderson, Assistant 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
160 Federal Street
Boston, Massachusetts 02110
Annual Report 23
<PAGE>
[COVER GRAPHIC]
SSgA(R) funds
ANNUAL REPORT
US Treasury Money Market Fund
August 31, 2000
<PAGE>
SSgA(R) Funds
US Treasury Money Market Fund
Annual Report
August 31, 2000
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(R)" 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,
It is our pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 2000. The SSgA Fund Family has grown to include
twenty-four portfolios with over $21 billion in assets as of August 31, 2000.
The Fund Family provides a wide range of strategies covering the world's major
markets. The enclosed information provides an overview of the investment process
for the SSgA US Treasury Money Market Fund. This overview contains the portfolio
management discussion, performance updates and financial information for the
Fund.
In an ongoing effort to develop competitive products and services that provide
investment solutions for our clients, we have added the SSgA Intermediate
Municipal Bond Fund to the SSgA Fund Family. This Fund's investment objective
seeks to provide federally tax-exempt current income by investing primarily in a
diversified portfolio of municipal debt securities with a dollar-weighted
average maturity between three and ten years.
We are also pleased with the success of our SSgA Emerging Markets and SSgA
Growth and Income Funds as they were included in Money(R) Magazine's June 2000
issue listing of the 'Top 100 Mutual Funds'. This is the second year in a row
that these funds have been selected.
Additionally, the SSgA Tax Free Money Market and the SSgA Active International
Funds have achieved five-year performance history during the 2000 fiscal year.
Currently, all of our SSgA Money Market Funds have at least a five-year
performance history. We strive to meet our clients' needs by providing funds
with long-term records and competitive performance.
We would like to thank you for choosing the SSgA Funds. Our reputation is based
on our tradition of designing and delivering exceptional financial services to
our clients. We look forward to continue sharing the benefit of our experience
with you.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
/s/ Timothy B. Harbert
Timothy B. Harbert
State Street Global Advisors
President and Chief Operating Officer, SSgA
4 Annual Report
<PAGE>
SSgA US Treasury Money Market Fund
--------------------------------------------------------------------------------
Management of the Funds
--------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
[PHOTO]
Timothy B. Harbert
President and Chief Operating 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 Treasury Money Market
Fund since March 1999. Ms. Hatfield is the Unit Head of the cash desk with
responsibility for the SSgA money market funds, several short-term funds and
enhanced cash portfolios. Prior to joining SSgA, she was a portfolio manager
with State Street's Investment Research Department, where she managed the
securities lending reinvestment funds since their inception in 1987, as well as
other money market portfolios. She received a BS from Suffolk University. There
are ten other portfolio managers working with Ms. Hatfield.
Annual Report 5
<PAGE>
SSgA US Treasury Money Market Fund
--------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
--------------------------------------------------------------------------------
Objective: Maximize current income while preserving capital and liquidity.
Invests in: US Treasury notes and bills, and repurchase agreements backed by
those securities.
Strategy: Fund Managers base their decisions on the relative attractiveness of
different money market investments, which vary depending on the general level of
interest rates as well as supply and demand imbalances in the market.
--------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
Salomon Smith Barney
Dates US Treasury Money Market Fund 3-Month Treasury Bill Index**
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
1999 $13,288 $13,248
2000 $14,039 $13,978
================================================================================
Performance Review
The Fund had a total return of 5.65% for the fiscal year ended August 31, 2000.
This compared favorably to the Salomon Smith Barney 3-Month Treasury Bill Index,
which returned 5.51% for the same period. The Fund's performance is net of
operating expenses, while Index results do not include expenses of any kind. The
Salomon Smith Barney 3-Month Treasury Bill Index was chosen as a standard,
well-known representation of money market rates.
The market environment for the last year began with the Federal Open Market
Committee (FOMC) tightening monetary policy due to strong domestic growth and
rejuvenated demand from abroad. The FOMC raised rates by 25 basis points in
June, August and November 1999, bringing the Fed Funds target from 4.75% to
5.50%. The FOMC took no action at its December meeting, but followed a strategy
of injecting the economy with massive amounts of cash to ease
--------------------------------------------------------------------------------
SSgA US Treasury Money Market Fund
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
------------------- --------------- --------
1 Year $ 10,565 5.65%
5 Years $ 12,983 5.36%+
Inception $ 14,039 5.15%+
--------------------------------------------------------------------------------
Salomon Smith Barney 3-Month Treasury Bill Index
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
------------------- --------------- --------
1 Year $ 10,551 5.51%
5 Years $ 12,882 5.20%+
Inception $ 13,978 5.09%+
See related Notes on following page.
6 Annual Report
<PAGE>
SSgA US Treasury Money Market Fund
--------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
--------------------------------------------------------------------------------
Y2K liquidity concerns. Fourth quarter GDP logged an impressive 8.3% due to Y2K
inventory building supported by the generous liquidity provisions from the
Federal Reserve. This surfeit of liquidity, in effect, loosened monetary policy
when in fact tight labor markets and excess demand called for tightening.
First quarter 2000 GDP followed with a 4.8% growth rate. To achieve a more
sustainable rate of growth, the Federal Reserve Board needed to take back the
excess liquidity and slow the economy. The FOMC did so by raising interest rates
by 100 basis points in the first half of 2000. Although GDP advanced 5.4%
throughout the second quarter of 2000, fears of inflation were tempered by the
fact that productivity grew at 5% for the same period. The FOMC opted to leave
rates unchanged at the June and August meetings while maintaining a cautious
stance going forward. The Manager continues to be cautious about future FOMC
policy, considering the trend in rising oil prices as well as the upcoming
presidential election.
Market and Portfolio Highlights
In the last fiscal year, the SSgA US Treasury Money Market Fund was managed
consistently with its objective of providing safety of principal and liquidity
by investing in treasury securities and providing competitive returns. The
Fund's net assets increased slightly in size by $15 million over the past year
to $1.1 billion at August 31, 2000.
During the fall tightening period the Fund was managed with liquidity as a
primary concern, with maturing positions remaining in cash and very liquid
short-term securities throughout the last calendar quarter of 1999. This large
cash position served to hedge against Y2K liquidity concerns and helped with the
substantial swings in assets related to calendar year-end 1999. Perceived as a
"safe haven", Treasury securities traded very expensively throughout the
tightening period and year end, as investors parked cash in the safety of the
short Treasury market. Short dated Treasury yields continued to drop as the
Treasury reduced the size of bill auctions causing a supply and demand
imbalance. Throughout the period, overnight repurchase agreements significantly
outyielded Treasury bills and notes. Consequently, as Treasury bills and notes
in the Fund matured, the money was largely reinvested into repos, taking
advantage of yields that are priced close to the Fed funds target. Issuance of
short term cash management bills provided some Treasury supply priced at
attractive levels. In this environment, the Fund's average days to maturity
steadily declined, from 39 days at the beginning of the fiscal year, to 8 days
at August 31, 2000, with over 68% of the Fund invested in overnight maturities.
With the yield curve's potential to steepen on negative inflation news, the
Manager will look for those opportunities to extend duration and add yield.
----------
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, 2000, 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 accounting principles
generally accepted in the United States of America. 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 auditing standards
generally accepted in the United States of America 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, 2000 by correspondence with the custodian, provide a reasonable basis for
our opinion.
Boston, Massachusetts
October 11, 2000
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
US Treasury Money Market Fund
Statement of Net Assets
August 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity $
--------- ----- -------- -------
<S> <C> <C> <C> <C>
United States Government - 31.9%
United States Treasury Bills 200,000 6.340 09/21/00 199,295
United States Treasury Bills 100,000 6.395 09/21/00 99,645
United States Treasury Bills 50,000 6.130 09/28/00 49,776
---------
Total United States Government (cost $348,716) 348,716
---------
Total Investments - 31.9% (amortized cost $348,716) 348,716
---------
Repurchase Agreements - 68.6%
Agreement with ABN AMRO Securities (USA) Inc. of $50,000 acquired August 31,
2000 at 6.600% to be repurchased at $50,009 on September 1, 2000,
collateralized by:
$50,032 various United States Treasury Obligations valued at $51,057 50,000
Agreement with Bank One Capital Corp. and Chase Bank (Tri-Party) of $50,000
acquired August 31, 2000 at 6.600% to be repurchased at $50,009 on September
1, 2000, collateralized by:
$50,955 various United States Treasury Obligations valued at $51,003 50,000
Agreement with Bear Stearns & Co., Inc. of $250,000
acquired August 31, 2000 at 6.620% to be repurchased at $250,046 on
September 1, 2000, collateralized by:
$414,748 various United States Treasury Strips valued at $255,328 250,000
Agreement with Deutsche Bank of $50,000
acquired August 31, 2000 at 6.610% to be repurchased at $50,009 on September
1, 2000, collateralized by:
$45,350 various United States Treasury Obligations valued at $51,483 50,000
Agreement with Lehman Brothers, Inc. of $51,210
acquired August 31, 2000 at 6.600% to be repurchased at $51,219 on September
1, 2000, collateralized by:
$49,630 various United States Treasury Obligations valued at $52,331 51,210
Agreement with Merrill Lynch, Pierce, Fenner & Smith, Inc. of $50,000
acquired August 31, 2000 at 6.600% to be repurchased at $50,009 on September
1, 2000, collateralized by:
$49,395 various United States Treasury Obligations valued at $51,002 50,000
</TABLE>
Annual Report 9
<PAGE>
SSgA
US Treasury Money Market Fund
Statement of Net Assets, continued
August 31, 2000
<TABLE>
<CAPTION>
Value
(000)
$
-------
<S> <C>
Agreement with Warburg Dillon Reed, L.L.C. of $250,000
acquired August 31, 2000 at 6.600% to be repurchased at $250,046 on
September 1, 2000, collateralized by:
$255,742 various United States Treasury Obligations valued at $256,251 250,000
---------
Total Repurchase Agreements (identified cost $751,210) 751,210
---------
Total Investments and Repurchase Agreements - 100.5% (cost $1,099,926)(a) 1,099,926
Other Assets and Liabilities, Net - (0.5%) (6,013)
---------
Net Assets - 100.0% 1,093,913
=========
</TABLE>
(a) The identified cost for federal income tax purposes is the same as shown
above.
See accompanying notes which are an integral part of the financial statements.
10 Annual Report
<PAGE>
SSgA
US Treasury Money Market Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amount) August 31, 2000
<TABLE>
<S> <C> <C>
Assets
Investments at amortized cost which approximates market ........................... $ 348,716
Repurchase agreements (identified cost $751,210) .................................. 751,210
Interest receivable ............................................................... 138
Prepaid expenses .................................................................. 16
----------
Total assets .............................................................. 1,100,080
Liabilities
Payables:
Dividends ........................................................ $ 5,936
Accrued fees to affiliates ....................................... 231
----------
Total liabilities ......................................................... 6,167
----------
Net Assets ........................................................................ $1,093,913
==========
Net Assets Consist of:
Accumulated net realized gain (loss) .............................................. $ 29
Shares of beneficial interest ..................................................... 1,094
Additional paid-in capital ........................................................ 1,092,790
----------
Net Assets ........................................................................ $1,093,913
==========
Net Asset Value, offering and redemption price per share:
($1,093,913,250 divided by 1,093,895,680 shares of $.001 par value
shares of beneficial interest outstanding) ................................ $ 1.00
==========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Annual Report 11
<PAGE>
SSgA
US Treasury Money Market Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 2000
Investment Income
Interest ..................................................... $60,277
-------
Expenses
Advisory fees ................................... $ 2,641
Administrative fees ............................. 338
Custodian fees .................................. 364
Distribution fees ............................... 218
Transfer agent fees ............................. 71
Professional fees ............................... 21
Registration fees ............................... 32
Shareholder servicing fees ...................... 264
Trustees' fees .................................. 22
Miscellaneous ................................... 33
-------
Expenses before reductions ...................... 4,004
Expense reductions .............................. (1,891)
-------
Expenses, net ............................................ 2,113
-------
Net investment income ............................................ 58,164
-------
Net Realized Gain (Loss)
Net realized gain (loss) on investments .......................... 27
-------
Net increase in net assets from operations ....................... $58,191
=======
See accompanying notes which are an integral part of the financial statements.
12 Annual Report
<PAGE>
SSgA
US Treasury Money Market Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Years Ended August 31,
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income .......................................... $ 58,164 $ 48,643
Net realized gain (loss) ....................................... 27 --
----------- -----------
Net increase in net assets from operations ................. 58,191 48,643
----------- -----------
Distributions
From net investment income ..................................... (58,164) (48,643)
----------- -----------
Share Transactions
Net increase (decrease) in net assets from share transactions .. (21,728) 115,247
----------- -----------
Total net increase (decrease) in net assets ........................ (21,701) 115,247
Net Assets
Beginning of period ............................................ 1,115,614 1,000,367
----------- -----------
End of period .................................................. $ 1,093,913 $ 1,115,614
=========== ===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Annual Report 13
<PAGE>
SSgA
US Treasury Money Market Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
------------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .......... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
---------- ---------- ---------- ---------- ----------
Income From Operations
Net investment income ..................... .0551 .0473 .0540 .0515 .0529
---------- ---------- ---------- ---------- ----------
Distributions
From net investment income ................ (.0551) (.0473) (.0540) (.0515) (.0529)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period ................ $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
========== ========== ========== ========== ==========
Total Return (%) .............................. 5.65 4.84 5.53 5.36 5.42
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) .. 1,093,913 1,115,614 1,000,367 916,845 189,004
Ratios to average net assets (%):
Operating expenses, net (a) ........... .20 .20 .20 .20 .20
Operating expenses, gross (a) ......... .38 .39 .39 .46 .38
Net investment income ................. 5.51 4.73 5.40 5.28 5.29
</TABLE>
(a) See Note 4 for current period amounts.
14 Annual Report
<PAGE>
SSgA
US Treasury Money Market Fund
Notes to Financial Statements
August 31, 2000
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 24 investment portfolios which are in operation as
of August 31, 2000. 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 accounting
principles generally accepted in the United States 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 utilizes the amortized cost valuation method
in accordance with Rule 2a-7 of the 1940 Act, a method by which each
portfolio instrument meeting certain materiality parameters and credit
worthiness standards are initially valued at cost, and thereafter a
constant accretion/amortization to maturity of any discount or premium is
assumed.
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.
Expenses: Most expenses can be directly attributed to the Fund. Expenses
of the investment company which cannot be directly attributed are
allocated among all funds based principally on their relative net assets.
Annual Report 15
<PAGE>
SSgA
US Treasury Money Market Fund
Notes to Financial Statements, continued
August 31, 2000
Repurchase agreements: The Fund may engage in repurchase and tri-party
repurchase agreements with certain qualified 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. State Street
Bank and Trust Company (the "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, 2000, purchases,
sales and maturities of US Government and Agency obligations, excluding
repurchase agreements aggregated to $2,369,938,597, $722,031,674 and
$1,830,000,000, respectively.
4. Related Parties
Adviser: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company under which the Adviser, through State
Street Global Advisors, the investment management group of 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 Adviser has voluntarily
agreed to waive .15% of its .25% advisory fee. The Adviser has also
voluntarily agreed to reimburse the Fund for all expenses in excess of
.20% of its average daily net assets on an annual basis. The total amounts
of the waiver and reimbursement for the year ended August 31, 2000 were
$1,045,420 and $827,844, respectively. As of August 31, 2000, the
receivable due from the Adviser for reimbursed expenses in excess of the
expense cap has been netted against the Advisory 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.
In addition, the Fund has entered into arrangements with its Adviser
whereby custody credits realized as a result of uninvested cash balances
were used to reduce a portion of the Fund's expenses. During the year, the
Fund's custodian fees were reduced by $17,734 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly-owned subsidiary of The Northwestern Mutual Life Insurance Company,
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 for services supplied by the
Administrator pursuant to the Administration Agreement, an annual fee,
payable monthly on a pro rata basis. For the period September 1, 1999 to
April 30, 2000, the following percentages of the average daily net assets
of all domestic funds: $0 up to and including $500 million - .06%; over
$500 million up to and including $1 billion - .05%; over $1 billion -
.03%. Effective May 1, 2000, the annual fee is based on the following
percentages of the average daily net assets of all money market
portfolios: $0 up to $15 billion - .0315%; over $15 billion - .029%. The
Administrator will also charge a flat fee of $30,000 per year per Fund
with less than $500 million in net assets and $1,500 per year for monthly
performance reports and use of
16 Annual Report
<PAGE>
SSgA
US Treasury Money Market Fund
Notes to Financial Statements, continued
August 31, 2000
Russell Performance Universe software product. In addition, the Fund
reimburses the Administrator for out-of-pocket expenses and start-up costs
for new funds.
Distributor and Shareholder Servicing: The Investment Company has 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 enter 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 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 Shareholder 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, 2000, the
Fund was charged shareholder servicing expenses of $264,024 by the
Adviser.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets of the Fund on an
annual basis. The shareholder servicing payments shall not exceed .20% of
the average daily value of net assets of the Fund on an annual basis.
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, 2000.
Board of Trustees: The Investment Company paid each Trustee not affiliated
with the Investment Company an annual retainer, plus specified amounts for
board and committee meetings attended. These expenses are allocated among
all of the funds based upon their relative net assets.
Annual Report 17
<PAGE>
SSgA
US Treasury Money Market Fund
Notes to Financial Statements, continued
August 31, 2000
Accrued fees payable to affiliates and trustees as of August 31, 2000 were
as follows:
Advisory fees $ 84,399
Administration fees 34,986
Custodian fees 45,135
Distribution fees 24,270
Shareholder servicing fees 23,821
Transfer agent fees 16,537
Trustees' fees 2,316
--------
$231,464
========
Beneficial Interest: As of August 31, 2000, two shareholders (who were
also affiliates of the Investment Company) were record owners of
approximately 52% and 37%, respectively, of the total outstanding shares
of the Fund.
5. Fund Share Transactions (On a Constant Dollar Basis):
<TABLE>
<CAPTION>
(amounts in thousands)
Fiscal Years Ended August 31,
-----------------------------
2000 1999
----------- -----------
<S> <C> <C>
Proceeds from shares sold .................... 12,519,352 8,297,431
Proceeds from reinvestment of distributions .. 16,242 9,755
Payments for shares redeemed ................. (12,557,322) (8,191,939)
----------- -----------
Total net increase (decrease) ................ (21,728) 115,247
=========== ===========
</TABLE>
6. Interfund Lending Program
The Fund and all other funds of the Investment Company received from the
Securities and Exchange Commission an exemptive order on December 23, 1999
to establish and operate an Interfund Credit Facility. This allows the
Funds to directly lend to and borrow money from the SSgA Money Market Fund
for temporary purposes in accordance with certain conditions. The
borrowing Funds are charged the average of the current Repo Rate and the
Bank Loan Rate. The Fund did not utilize the interfund lending program
during this year.
18 Annual Report
<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, Treasurer and CEO
Mark E. Swanson, Assistant Secretary, Assistant
Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Secretary
Carla L. Anderson, Assistant 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
160 Federal Street
Boston, Massachusetts 02110
Annual Report 19
<PAGE>
[COVER GRAPHIC]
SSgA(R) funds
ANNUAL REPORT
Yield Plus Fund
August 31, 2000
<PAGE>
SSgA(R) Funds
Yield Plus Fund
Annual Report
August 31, 2000
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(R)" 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,
It is our pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 2000. The SSgA Fund Family has grown to include
twenty-four portfolios with over $21 billion in assets as of August 31, 2000.
The Fund Family provides a wide range of strategies covering the world's major
markets. The enclosed information provides an overview of the investment process
for the SSgA Yield Plus Fund. This overview contains the portfolio management
discussion, performance updates and financial information for the Fund.
In an ongoing effort to develop competitive products and services that provide
investment solutions for our clients, we have added the SSgA Intermediate
Municipal Bond Fund to the SSgA Fund Family. This Fund's investment objective
seeks to provide federally tax-exempt current income by investing primarily in a
diversified portfolio of municipal debt securities with a dollar-weighted
average maturity between three and ten years.
We are also pleased with the success of our SSgA Emerging Markets and SSgA
Growth and Income Funds as they were included in Money(R) Magazine's June 2000
issue listing of the 'Top 100 Mutual Funds'. This is the second year in a row
that these funds have been selected.
Additionally, the SSgA Tax Free Money Market and the SSgA Active International
Funds have achieved five-year performance history during the 2000 fiscal year.
Currently, all of our SSgA Money Market Funds have at least a five-year
performance history. We strive to meet our clients' needs by providing funds
with long-term records and competitive performance.
We would like to thank you for choosing the SSgA Funds. Our reputation is based
on our tradition of designing and delivering exceptional financial services to
our clients. We look forward to continue sharing the benefit of our experience
with you.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
/s/ Timothy B. Harbert
Timothy B. Harbert
State Street Global Advisors
President and Chief Operating Officer, SSgA
4 Annual Report
<PAGE>
SSgA Yield Plus Fund
--------------------------------------------------------------------------------
Management of the Funds
--------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
[PHOTO]
Timothy B. Harbert
President and Chief Operating 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. Maria Pino, CFA, Principal, has been the portfolio manager primarily
responsible for investment decisions regarding the SSgA Yield Plus Fund since
May 2000. Ms. Pino joined the firm in 1997. Previously, Ms. Pino managed
non-ERISA assets in a short term fixed income fund and a money market fund at
Partners HealthCare System, Inc. Prior to this, she managed fixed income assets
for the Commonwealth of Massachusetts State Employees and Teachers Pension Fund.
She has been working in the investment management field since 1981. She holds a
BS in Accounting from Providence College, an MA in Economics from Northeastern
University and an MBA from Boston University. There are ten other portfolio
managers working with Ms. Pino.
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
Treasuries and Government agencies, corporate bonds, asset-backed securities,
mortgage-backed securities, and high quality money market instruments
maintaining a duration of one year or less.
Strategy: Fund Managers base their decisions on the relative attractiveness of
different sectors and issues which vary depending on the general level of
interest rates, market determined risk premiums, as well as supply and demand
imbalances in the market.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
Salomon Smith Barney 3-Month Salomon Smith Barney 6-Month
Dates Yield Plus Fund Treasury Bill Index++ 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
1999 $13,929 $13,688 $13,842
2000 $14,804 $14,445 $14,621
=================================================================================================
</TABLE>
Performance Review
For the fiscal year ended August 31, 2000, the Fund had a total return of 6.28%.
This compared favorably to the return of 5.51% for the benchmark, the Salomon
3-Month Treasury Bill Index. The Fund's performance is net of operating
expenses, while Index results do not include expenses of any kind.
Market and Portfolio Highlights
The year began on a positive note as economic data suggested ailing foreign
economies were on the mend. Federal Open Market Committee (FOMC) members, faced
with strong domestic growth and rejuvenated demand from abroad, responded by
tightening monetary policy. The FOMC raised rates by 25 basis points in June,
August and November 1999, bringing the Fed Funds target from 4.75% to 5.50%. The
FOMC took no action at its December meeting, but followed a strategy of
injecting the economy with massive amounts of cash to ease Y2K liquidity
concerns. Fourth quarter GDP logged an impressive 8.3% due to Y2K inventory
building
--------------------------------------------------------------------------------
SSgA Yield Plus Fund
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
----------------- ------------ ------
1 Year $ 10,628 6.28%
5 Years $ 13,100 5.55%+
Inception $ 14,804 5.15%+
--------------------------------------------------------------------------------
Salomon Smith Barney 3-Month Treasury Bill Index
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
----------------- ------------ ------
1 Year $ 10,551 5.51%
5 Years $ 12,882 5.20%+
Inception $ 14,445 4.81%+
--------------------------------------------------------------------------------
Salomon Smith Barney 6-Month Treasury Bill Index
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
----------------- ------------ ------
1 Year $ 10,561 5.61%
5 Years $ 12,972 5.34%+
Inception $ 14,621 4.97%+
See related Notes on following page.
6 Annual Report
<PAGE>
SSgA Yield Plus Fund
--------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
--------------------------------------------------------------------------------
supported by the generous liquidity provisions from the Federal Reserve. This
surfeit of liquidity, in effect, loosened monetary policy when in fact tight
labor markets and excess demand called for tightening.
First quarter 2000 GDP followed with 4.8% growth rate. The Federal Reserve
needed to take back the excess liquidity and slow the economy to achieve a more
sustainable rate of growth and dampen the risks of inflation. The FOMC did so by
raising interest rates by 100 basis points in the first half of 2000. Although
GDP advanced 5.4% throughout the second quarter of 2000, fears of inflation were
tempered by the fact that productivity grew at 5% for the same period. The FOMC
opted to leave rates unchanged at the June and August meetings while maintaining
a cautious stance going forward.
By the end of August 2000, the yield curve had stabilized, with the 3-month
LIBOR at 6.67%, the 6-month LIBOR at 6.80% and the 12-month LIBOR at 6.92%. At
August 31, 2000, the two-year Treasury was at 6.17%, the 10-year was at 5.73%
and the 30-year bond was at 5.67%. This inversion in the Treasury yield curve
can be attributed to a combination of low future inflation expectations and
dramatically reduced Treasury supply.
The shape of the yield curve, credit considerations, Y2K concerns, and possible
future increases in interest rates led to a defensive investment strategy for
most of the year. The yield on the two-year Treasury reached a high of 6.23% in
December 1999. Issuance was expected to balloon during the fall, as issuers
sought funding earlier in the year to avoid any year-end market disruptions due
to Y2K. The anticipation of the increase in issuance caused credit spreads to
widen. The Fund took advantage of the spread widening and purchased securities
cheaper than they had been earlier in the year. However, the expected issuance
did not materialize and spreads tightened in December 1999.
The short end of the yield curve was quite volatile during the first eight
months of 2000. The two-year Treasury traded in a range between a high of 6.91%
and a low of 6.13%. The Fund's most significant changes occurred in the
portfolio's industry diversification. The allocation to ABS credit cards
increased from 6% to 25% of the portfolio and represented a shift from unsecured
credits to AAA secured credits. Although the finance allocation only declined
from 8% to 5% of the portfolio, a strategic shift was made from lower quality,
stand-alone finance companies to higher quality finance companies backed by a
strong parent.
-------------------------------------------------------------
Top Ten Issuers
(as a percent of Total Investments) August 31, 2000
-------------------------------------------------------------
US Bancorp 5.6%
Wells Fargo Co. 5.5
First USA Credit Card Master Trust 5.3
Chase Manhattan Corp. 5.1
DaimlerChrysler North America 5.1
SLM Student Loan Trust 4.9
Ford Motor Credit Co. 4.9
Chase Credit Card Master Trust 4.3
MBNA Master Credit Card Trust 4.1
Capital One Master Trust 4.1
-------------------------------------------------------------
---------------------------------------
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 Smith Barney 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, 2000, 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 accounting principles generally accepted
in the United States of America. 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 auditing standards
generally accepted in the United States of America 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, 2000 by correspondence with the custodian, provide a reasonable basis for
our opinion.
Boston, Massachusetts
October 11, 2000
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
Yield Plus Fund
Statement of Net Assets
August 31, 2000
Principal Market
Amount Value
(000) (000)
$ $
--------- ------
Long-Term Investments - 91.2%
Asset-Backed Securities - 42.0%
American Express Credit Account
Master Trust
Series 2000-2 Class A
6.784% due 09/15/07 (a) 16,000 16,015
Capital One Master Trust
Series 1999-1 Class A
6.759% due 07/16/07 (a) 20,000 19,981
Chase Credit Card Master Trust
Series 1999-1 Class A
6.779% due 09/15/06 (a) 16,000 16,028
Series 2000-1 Class A
6.789% due 06/15/07 (a) 5,000 4,998
CIT RV Trust
Series 1996-A Class A
5.400% due 12/15/11 4,861 4,805
Citibank Credit Card Master Trust I
Series 1998-1 Class A
5.750% due 01/15/03 4,000 3,982
Distribution Financial Services
Trust
Series 1999-1 Class A4
5.840% due 10/17/11 9,000 8,818
EQCC Home Equity Loan Trust
Series 1999-3 Class A2F
6.887% due 10/25/13 10,000 9,904
First USA Credit Card Master Trust
Series 1997-2 Class A
6.750% due 01/17/07 (a) 10,176 10,182
Series 1997-7 Class A
6.718% due 05/17/07 (a) 7,500 7,491
Series 1999-1 Class A
6.770% due 10/19/06 (a) 8,658 8,672
Fleet Credit Card Master Trust
Series 1999-D Class A
6.839% due 04/16/07 (a) 8,500 8,519
Ford Credit Auto Owner Trust
Series 2000-D Class A4
7.130% due 07/15/04 5,000 5,025
GE Capital Mortgage Services, Inc.
Series 1997-HE3 Class A3
6.520% due 08/25/13 1,207 1,200
MBNA Master Credit Card Trust
Series 1999-H Class A
6.944% due 09/15/06 (a) 20,000 20,044
Providian Master Trust
Series 1999-1 Class A
6.849% due 01/15/09 (a) 9,000 9,031
Saxon Asset Securities Trust
Series 1998-3 Class AF2
5.750% due 05/25/18 (a) 9,220 9,142
SLM Student Loan Trust
Series 1998-2 Class A1
6.867% due 04/25/07 (a) 12,148 12,081
Series 2000-3 Class A1L
6.599% due 04/25/08 (a) 12,000 11,990
Superior Wholesale Inventory
Financing Trust
Series 2000-A Class A
6.905% due 04/15/07 (a) 15,000 14,991
Wachovia Credit Card Master Trust
Series 1999-1 Class A
6.769% due 08/15/06 (a) 5,000 5,007
--------
207,906
--------
Corporate Bonds and Notes - 44.9%
Bank of America Corp.
Series H
6.878% due 03/19/02 (a) 8,000 8,000
7.350% due 04/03/02 2,000 2,005
Bank of America NA
6.860% due 03/15/02 (a) 15,000 15,000
Boeing Capital Corp.
6.870% due 03/27/02 (a) 12,500 12,482
Chase Manhattan Corp.
Series C
6.831% due 03/22/02 (a) 25,000 25,005
DaimlerChrysler North America
Holding Corp.
Series B
6.670% due 02/15/02 10,000 9,977
Series C
6.900% due 03/15/02 (a) 15,000 14,990
Fleet National Bank
6.836% due 02/01/02 (a) 9,500 9,503
Annual Report 9
<PAGE>
SSgA
Yield Plus Fund
Statement of Net Assets, continued
August 31, 2000
Principal Market
Amount Value
(000) (000)
$ $
--------- ------
FleetBoston Financial Corp.
Series P
6.851% due 05/01/02 (a) 17,500 17,493
Ford Motor Credit Co.
6.500% due 02/28/02 6,000 5,935
6.928% due 03/19/02 (a) 5,000 5,001
6.994% due 07/16/02 (a) 13,000 13,015
Main Place Funding, LLC
Series 99-1
6.810% due 05/28/02 (a) 8,000 7,983
Merrill Lynch & Co.
Series B
6.771% due 11/09/01 (a) 2,000 2,002
7.194% due 01/11/02 (a) 5,000 5,022
Morgan Stanley Dean Witter & Co.
Series 1
6.838% due 01/28/02 (a) 4,900 4,906
Series C
6.910% due 04/08/02 (a) 9,000 8,999
US Bancorp
Series L
6.941% due 02/03/03 (a) 27,500 27,485
Wells Fargo Co.
6.814% due 04/26/02 (a) 27,000 27,027
--------
221,830
--------
Eurodollar Bonds - 3.3%
Holmes Financing PLC
Series 1 Class 1A
6.834% due 07/15/05 (a) 6,000 6,000
Lehman Brothers Holdings PLC
7.089% due 11/06/00 (a) 2,280 2,281
Vodafone Group PLC
6.962% due 12/19/01 (a) 8,000 8,006
--------
16,287
--------
Mortgage-Backed Securities - 1.0%
Federal Home Loan Mortgage Corp. Participation
Certificate
7.000% due 2000 99 99
Federal National Mortgage Association
8.000% due 2013 3,345 3,350
Government National Mortgage
Association
8.000% due 2012 1,323 1,350
--------
4,799
--------
Total Long-Term Investments
(cost $451,089) 450,822
--------
Short-Term Investments - 8.6%
AIM Short Term Investment Prime
Portfolio Class A (b) 23,751 23,751
Federal Home Loan Bank
6.660% due 04/06/01 10,000 9,995
Federated Investors Prime Cash
Obligations Fund (b) 8,756 8,756
--------
Total Short-Term Investments
(cost $42,502) 42,502
--------
Total Investments - 99.8%
(identified cost $493,591) 493,324
Other Assets and Liabilities,
Net - 0.2% 1,052
--------
Net Assets - 100.0% 494,376
========
(a) Adjustable or floating rate security.
(b) At amortized cost, which approximates market.
See accompanying notes which are an integral part of the financial statements.
10 Annual Report
<PAGE>
SSgA
Yield Plus Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amount) August 31, 2000
<TABLE>
<S> <C> <C>
Assets
Investments at market (identified cost $493,591) .................................... $ 493,324
Receivables:
Dividends and interest ........................................................... 4,002
Fund shares sold ................................................................. 90
Prepaid expenses .................................................................... 22
---------
Total assets .................................................................. 497,438
Liabilities
Payables:
Dividends ............................................................ $ 2,802
Fund shares redeemed ................................................. 49
Accrued fees to affiliates ........................................... 177
Other accrued expenses ............................................... 34
---------
Total liabilities ............................................................. 3,062
---------
Net Assets .......................................................................... $ 494,376
=========
Net Assets Consist of:
Accumulated distributions in excess of net investment income ........................ $ (51)
Accumulated net realized gain (loss) ................................................ (5,723)
Unrealized appreciation (depreciation) on investments ............................... (267)
Shares of beneficial interest ....................................................... 50
Additional paid-in capital .......................................................... 500,367
---------
Net Assets .......................................................................... $ 494,376
=========
Net Asset Value, offering and redemption price per share:
($494,376,237 divided by 49,858,439 shares of $.001 par value
shares of beneficial interest outstanding) .................................... $ 9.92
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Annual Report 11
<PAGE>
SSgA
Yield Plus Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 2000
<TABLE>
<S> <C> <C>
Investment Income
Interest ............................................................ $ 32,793
Dividends ........................................................... 1,319
--------
Total investment income .......................................... 34,112
Expenses
Advisory fees ........................................... $ 1,350
Administrative fees ..................................... 172
Custodian fees .......................................... 114
Distribution fees ....................................... 210
Transfer agent fees ..................................... 65
Professional fees ....................................... 24
Registration fees ....................................... 41
Shareholder servicing fees .............................. 256
Trustees' fees .......................................... 14
Miscellaneous ........................................... 28
--------
Expenses before reduction ............................... 2,274
Expense reductions ...................................... (25)
--------
Expenses, net .................................................... 2,249
--------
Net investment income .................................................. 31,863
--------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments ............................................. (2,505)
Futures contracts ....................................... (315)
Options written ......................................... 51 (2,769)
--------
Net change in unrealized appreciation (depreciation) on:
Investments ............................................. 3,286
Futures contracts ....................................... 149 3,435
-------- --------
Net realized and unrealized gain (loss) ................................ 666
--------
Net increase (decrease) in net assets from operations .................. $ 32,529
========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
12 Annual Report
<PAGE>
SSgA
Yield Plus Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Years Ended August 31,
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ............................................... $ 31,863 $ 33,673
Net realized gain (loss) ............................................ (2,769) (961)
Net change in unrealized appreciation (depreciation) ................ 3,435 (2,482)
--------- ---------
Net increase (decrease) in net assets from operations ............ 32,529 30,230
--------- ---------
Distributions
From net investment income .......................................... (31,863) (33,700)
--------- ---------
Share Transactions
Net increase (decrease) in net assets from share transactions ....... (31,784) (143,501)
--------- ---------
Total net increase (decrease) in net assets ............................ (31,118) (146,971)
Net Assets
Beginning of period ................................................. 525,494 672,465
--------- ---------
End of period (including accumulated distributions in excess of
net investment income of $51 and $108, respectively) ............. $ 494,376 $ 525,494
========= =========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Annual Report 13
<PAGE>
SSgA
Yield Plus Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
--------------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ............ $ 9.90 $ 9.97 $ 10.01 $ 10.00 $ 10.00
-------- -------- -------- -------- --------
Income From Operations
Net investment income (a) .................... .59 .54 .57 .54 .56
Net realized and unrealized gain (loss) ...... .01 (.07) (.04) .01 --
-------- -------- -------- -------- --------
Total income from operations .............. .60 .47 .53 .55 .56
-------- -------- -------- -------- --------
Distributions
From net investment income ................... (.58) (.54) (.57) (.54) (.56)
-------- -------- -------- -------- --------
Net Asset Value, End of Period .................. $ 9.92 $ 9.90 $ 9.97 $ 10.01 $ 10.00
======== ======== ======== ======== ========
Total Return (%) ................................ 6.28 4.67 5.40 5.67 5.73
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ..... 494,376 525,494 672,465 840,055 933,485
Ratios to average net assets (%):
Operating expenses ........................ .42 .41 .41 .38 .36
Net investment income ..................... 5.90 5.29 5.66 5.42 5.59
Portfolio turnover rate (%) .................. 162.12 167.12 249.10 92.38 97.05
</TABLE>
(a) For the periods subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.
14 Annual Report
<PAGE>
SSgA
Yield Plus Fund
Notes to Financial Statements
August 31, 2000
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 24 investment portfolios which are in operation as
of August 31, 2000. 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 accounting
principles generally accepted in the United States 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.
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.
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 15
<PAGE>
SSgA
Yield Plus Fund
Notes to Financial Statements, continued
August 31, 2000
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, 2000, the Fund had net tax basis capital loss carryovers of
$1,086,432, $1,891,302 and $80,342, which may be applied against any
realized net taxable gains in each succeeding year or until their
expiration dates of August 31, 2004, August 31, 2007, and August 31, 2008,
respectively, whichever occurs first. As permitted by tax regulations, the
Fund intends to defer a net realized capital loss of $2,664,723 incurred
from November 1, 1999 to August 31, 2000, and treat it as arising in
fiscal year 2001.
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, 2000 are as follows:
Net Unrealized
Federal Tax Unrealized Unrealized Appreciation
Cost Appreciation (Depreciation) (Depreciation)
------------ ------------ -------------- --------------
$493,591,207 $249,373 $(516,154) $(266,781)
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 year may differ significantly from
distributions during such year. The differences between tax regulations
and GAAP relate primarily to investments in certain fixed income
securities purchased at a discount, futures, mortgage-backed securities,
and certain securities sold at a loss. Accordingly, the Fund may
periodically make reclassifications among certain of its capital accounts
without impacting its net asset value.
Expenses: Most expenses can be directly attributed to the Fund. Expenses
of the investment company which cannot be directly attributed are
allocated among all funds based principally on their relative net assets.
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. 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
16 Annual Report
<PAGE>
SSgA
Yield Plus Fund
Notes to Financial Statements, continued
August 31, 2000
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.
Options: The Fund may purchase and sell (write) call and put options on
securities and securities indices, provided such options are traded on a
national securities exchange or in an over-the-counter market. This Fund
may also purchase and sell call and put options on foreign currencies.
When a Fund writes a covered call or a put option, an amount equal to the
premium received by the Fund is included in the Fund's Statement of Assets
and Liabilities as an asset and as an equivalent liability. The amount of
the liability is subsequently marked-to-market to reflect the current
market value of the option written. The Fund receives a premium on the
sale of a call option but gives up the opportunity to profit from any
increase in stock value above the exercise price of the option, and when
the Fund writes a put option it is exposed to a decline in the price of
the underlying security. If an option which the Fund has written either
expires on its stipulated expiration date or the Fund enters into a
closing purchase transaction, the Fund realizes a gain (or loss, if the
cost of a closing purchase transaction exceeds the premium received when
the option was sold) without regard to any unrealized gain or loss on the
underlying security, and the liability related to such option is
extinguished. If a call option which the Fund has written is exercised,
the Fund realizes a capital gain or loss from the sale of the underlying
security, and the proceeds from such sale are increased by the premium
originally received. When a put option which a Fund has written is
exercised, the amount of the premium originally received will reduce the
cost of the security which a Fund purchases upon exercise of the option.
Realized gains (losses) on purchased options are included in net realized
gain (loss) from investments.
Annual Report 17
<PAGE>
SSgA
Yield Plus Fund
Notes to Financial Statements, continued
August 31, 2000
The Fund's use of written options involves, to varying degrees, elements
of market risk in excess of the amount recognized in the Statement of
Assets and Liabilities. The face or contract amounts of these instruments
reflect the extent of the Fund's exposure to off balance sheet risk. The
risks may be caused by an imperfect correlation between movements in the
price of the instrument and the price of the underlying securities and
interest rates.
3. Securities Transactions
Investment transactions: For the year ended August 31, 2000, purchases and
sales of investment securities, excluding US Government and Agency
obligations, short-term investments, futures contracts, and repurchase
agreements aggregated to $756,241,760 and $693,848,946, respectively.
For the year ended August 31, 2000, purchases and sales of US Government
and Agency obligations, excluding short-term investments and futures
contracts, aggregated to $56,062,016 and $147,303,868, respectively.
Written Options Contracts: Fund transactions in written options contracts
for the year ended August 31, 2000 were as follows:
Written Options
Notional Value (1) Premiums
(000) Received
------------------ ----------
Outstanding August 31, 1999 -- $ --
Opened 750 158,200
Closed (750) (158,200)
------------------ ----------
Outstanding August 31, 2000 -- --
================== ==========
(1) Each $2,500 notional value represents 1 contract.
Securities lending: The Investment Company has a securities lending
program whereby each Fund can loan securities with a value up to 33 1/3%
of its total assets to certain brokers. The Fund receives cash (U.S.
currency), U.S. Government or U.S. Government agency obligations as
collateral against the loaned securities. To the extent that a loan is
secured by cash collateral, such collateral shall be invested by State
Street Bank and Trust Company in short-term instruments, money market
mutual funds, and such other short-term investments, provided the
investments meet certain quality and diversification requirements. Under
the securities lending arrangement, the collateral received is recorded on
the Fund's statement of assets and liabilities along with the related
obligation to return the collateral. In those situations where the Company
has relinquished control of securities transferred, it derecognizes the
securities and records a receivable from the counterparty.
Income generated from the investment of cash collateral, less negotiated
rebate fees paid to participating brokers and transaction costs, is
divided between the Fund and State Street Bank and Trust Company and is
recorded as interest income for the Fund. To the extent that a loan is
secured by non-cash collateral, brokers pay the Fund negotiated lenders'
fees, which are divided between the Fund and State Street Bank and Trust
Company and are recorded as interest income for the Fund. All collateral
received will be in an amount at least equal to 102% (for loans of U.S.
securities) or 105% (for non-U.S. securities) of the market value of the
loaned securities at the inception of each loan. Should the borrower of
the securities fail financially, there is a risk of delay in recovery of
the securities or loss of rights in the collateral. Consequently, loans
are made only to borrowers which are deemed
18 Annual Report
<PAGE>
SSgA
Yield Plus Fund
Notes to Financial Statements, continued
August 31, 2000
to be of good financial standing. As of August 31, 2000, there were no
outstanding securities on loan and no income earned during the year.
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, through State Street Global Advisors, the investment management
group of 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.
In addition, the Fund has entered into arrangements with its Adviser
whereby custody credits realized as a result of uninvested cash balances
were used to reduce a portion of the Fund's expenses. During the year, the
Fund's custodian fees were reduced by $24,676 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly-owned subsidiary of The Northwestern Mutual Life Insurance Company,
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 for services supplied by the
Administrator pursuant to the Administration Agreement, an annual fee,
payable monthly on a pro rata basis. For the period September 1, 1999 to
April 30, 2000, it is 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 up to and including $1 billion -
.05%; over $1 billion - .03%. Effective May 1, 2000, the annual fee is
based on the following percentages of the average daily net assets of all
U.S. Fixed Income portfolios: $0 up to $1 billion - .0315%; over $1
billion - .029%. The Administrator will also charge a flat fee of $30,000
per year per Fund with less than $500 million in net assets and $1,500 per
year for monthly performance reports and use of Russell Performance
Universe software product. In addition, the Fund reimburses the
Administrator for out-of-pocket expenses and start-up costs for new funds.
Distributor and Shareholder Servicing: The Investment Company has 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 enter 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 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.
Annual Report 19
<PAGE>
SSgA
Yield Plus Fund
Notes to Financial Statements, continued
August 31, 2000
The Fund has Shareholder 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, 2000, the Fund
was charged shareholder servicing expenses of $135,030, $1,034, $17,459
and $104,875, by the Adviser, SSBSI, Commercial Banking, and Solutions,
respectively. The Fund did not incur any expenses from RIS during this
year.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets of the Fund on an
annual basis. The shareholder servicing payments shall not exceed .20% of
the average daily value of net assets of the Fund on an annual basis.
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, 2000.
Board of Trustees: The Investment Company paid each Trustee not affiliated
with the Investment Company an annual retainer, plus specified amounts for
board and committee meetings attended. 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, 2000 were
as follows:
Advisory fees $108,435
Administration fees 15,768
Custodian fees 2,348
Distribution fees 3,458
Shareholder servicing fees 16,983
Transfer agent fees 27,357
Trustees' fees 2,193
--------
$176,542
========
Beneficial Interest: As of August 31, 2000, two shareholders (who were
also affiliates of the Investment Company) were record owners of
approximately 54% and 11%, respectively, of the total outstanding shares
of the Fund.
20 Annual Report
<PAGE>
SSgA
Yield Plus Fund
Notes to Financial Statements, continued
August 31, 2000
5. Fund Share Transactions (amounts in thousands)
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
----------------------------------------------------
2000 1999
---------------------- -----------------------
Shares Dollars Shares Dollars
------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Proceeds from shares sold 69,488 $ 688,713 91,330 $ 905,446
Proceeds from reinvestment of distributions 3,014 29,869 3,008 29,841
Payments for shares redeemed (75,706) (750,366) (108,708) (1,078,788)
------- ----------- -------- -----------
Total net increase (decrease) (3,204) $ (31,784) (14,370) $ (143,501)
======= =========== ======== ===========
</TABLE>
6. Interfund Lending Program
The Fund and all other funds of the Investment Company received from the
Securities and Exchange Commission an exemptive order on December 23, 1999
to establish and operate an Interfund Credit Facility. This allows the
Funds to directly lend to and borrow money from the SSgA Money Market Fund
for temporary purposes in accordance with certain conditions. The
borrowing Funds are charged the average of the current Repo Rate and the
Bank Loan Rate. The Fund did not utilize the interfund lending program
during this year.
Annual Report 21
<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, Treasurer and CEO
Mark E. Swanson, Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Treasurer
Carla L. Anderson, Assistant 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
160 Federal Street
Boston, Massachusetts 02110
22 Annual Report
<PAGE>
[COVER GRAPHIC]
SSgA(R) funds
ANNUAL REPORT
Bond Market Fund
August 31, 2000
<PAGE>
SSgA(R) Funds
Bond Market Fund
Annual Report
August 31, 2000
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(R)" 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,
It is our pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 2000. The SSgA Fund Family has grown to include
twenty-four portfolios with over $21 billion in assets as of August 31, 2000.
The Fund Family provides a wide range of strategies covering the world's major
markets. The enclosed information provides an overview of the investment process
for the SSgA Bond Market Fund. This overview contains the portfolio management
discussion, performance updates and financial information for the Fund.
In an ongoing effort to develop competitive products and services that provide
investment solutions for our clients, we have added the SSgA Intermediate
Municipal Bond Fund to the SSgA Fund Family. This Fund's investment objective
seeks to provide federally tax-exempt current income by investing primarily in a
diversified portfolio of municipal debt securities with a dollar-weighted
average maturity between three and ten years.
We are also pleased with the success of our SSgA Emerging Markets and SSgA
Growth and Income Funds as they were included in Money(R) Magazine's June 2000
issue listing of the 'Top 100 Mutual Funds'. This is the second year in a row
that these funds have been selected.
Additionally, the SSgA Tax Free Money Market and the SSgA Active International
Funds have achieved five-year performance history during the 2000 fiscal year.
Currently, all of our SSgA Money Market Funds have at least a five-year
performance history. We strive to meet our clients' needs by providing funds
with long-term records and competitive performance.
We would like to thank you for choosing the SSgA Funds. Our reputation is based
on our tradition of designing and delivering exceptional financial services to
our clients. We look forward to continue sharing the benefit of our experience
with you.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
/s/ Timothy B. Harbert
Timothy B. Harbert
State Street Global Advisors
President and Chief Operating Officer, SSgA
4 Annual Report
<PAGE>
SSgA Bond Market Fund
--------------------------------------------------------------------------------
Management of the Funds
--------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
[PHOTO]
Timothy B. Harbert
President and Chief Operating 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 January 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
Cambridgeport Savings. He has a BA degree 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 and agencies, corporate bonds, asset-backed securities,
mortgage-backed securities and CMBS.
Strategy: Fund managers seek to 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.
--------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
Dates Bond Market Fund Lehman Brothers Aggregate Bond Index**
Inception* $10,000 $10,000
1996 $9,781 $9,824
1997 $10,707 $10,806
1998 $11,762 $11,949
1999 $11,770 $12,041
2000 $12,584 $12,953
================================================================================
Performance Review
For the year ended August 31, 2000, the SSgA Bond Market Fund returned 6.92% for
the year versus its benchmark, the Lehman Brothers Aggregate Bond Index, which
posted a return of 7.56%. The Fund's performance includes fifty basis points of
operating expenses, whereas the Index does not include expenses of any type.
This differential represents a benchmark-relative underperformance of 14 basis
points for the fiscal year.
While mortgage spreads widened and contributed slightly to this
underperformance, Corporate sector spreads widened to levels not seen in two
decades. The Fund's overweight allocation to this sector, and the resulting
underweight to the Treasury sector, was the dominant driver to the
underperformance of the portfolio.
--------------------------------------------------------------------------------
SSgA Bond Market Fund
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
-------------- ------------ -------
1 Year $ 10,692 6.92%
Inception $ 12,584 5.17%+
--------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
-------------- ------------ -------
1 Year $ 10,756 7.56%
Inception $ 12,953 5.81%+
See related Notes on following page.
6 Annual Report
<PAGE>
SSgA Bond Market Fund
--------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
--------------------------------------------------------------------------------
Market and Portfolio Highlights
The year was marked by the Federal Reserve increasing short-term rates to slow
down an overly robust economy. The resulting interest rate hikes implemented by
the Fed during the period, as well as the US Treasury's announcement of
aggressive bond buybacks and curtailed issuance in the future led to an inverted
Treasury yield curve. The two-year Treasury note ended the fiscal year at 6.17%,
while the thirty-year bond was at 5.67%. At the beginning of the year, these two
securities were yielding 5.73% and 6.07% respectively. As a result of this
inversion, longer corporate bond spreads widened relative to their Treasury
benchmarks.
Additionally, comments made by a Treasury department official in first quarter
2000 questioning the implicit government guarantee of the Federal Agencies, such
as FNMA and FHLMC, further aggravated spreads. Finally, the continued lower risk
profile on the part of the Wall Street dealer community, evidenced by less
inventory and reduced market making, made it much more difficult to buy and sell
corporate securities, encouraging wider spreads to persist in that sector.
The Fund continues to maintain an overweighting in spread product, although the
current positions constitute its lowest level of the year. Additionally, the
composition of that overweighting is changing, as the Fund sold longer corporate
bonds and invested in MBS, Agency, and CMBS securities during the period. The
Manager felt that it was prudent to lower Fund exposure in corporates, a very
technical and illiquid sector. As a result, the Manager moved the Fund into more
liquid sectors such as mortgage-backed securities, allowing it to continue
taking advantage of the unusually wide spreads. The Fund is now only slightly
overweight to Corporates, and primarily in the shorter end. The Fund continues
to be overweight in the Mortgage sector, which comprises the bulk of the
portfolio's overweight exposure to the spread sectors.
The Fund seeks to enhance returns through overweight allocations in the
Corporate and Mortgage-Backed sectors relative to its benchmark. These
weightings are reduced or increased throughout the year in response to our
outlook on the market. The Fund does not take explicit active interest rate
risk, but by utilizing duration as its measurement, seeks to match that of the
Index.
-----------------------------------------------------
Top Ten Issuers
(as a percent of Total Investments) August 31, 2000
-----------------------------------------------------
Federal National Mortgage Association 42.5%
United States Government Treasuries 21.4
Federal Home Loan Mortgage Corporation 8.1
Government National Mortgage Association 4.5
General Motors Acceptance Corp. 1.4
Ford Motor Credit Co. 1.0
Quebec, Province of 1.0
Korea Development Bank 0.8
Federal Home Loan Bank 0.7
Wal-Mart Stores, Inc. 0.6
-----------------------------------------------------
---------------------
Notes: The following notes relate to the Growth of $10,000 graph and table on
the 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, 2000, 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 7, 1996 (commencement of
operations) to August 31, 1996, in conformity with accounting principles
generally accepted in the United States of America. 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 auditing standards
generally accepted in the United States of America 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, 2000 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
Boston, Massachusetts
October 11, 2000
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
Bond Market Fund
Statement of Net Assets
August 31, 2000
Principal Market
Amount Value
(000) (000)
$ $
--------- ------
Long-Term Investments - 98.3%
Asset-Backed Securities - 2.2%
Citibank Credit Card Master Trust I
Series 1999-1 Class A
5.500% due 02/15/06 650 622
CNH Equipment Trust
Series 2000-A Class A4
7.340% due 02/15/07 1,000 1,007
Discover Card Master Trust I
Series 1996-3 Class A
6.050% due 08/18/08 200 191
Series 1998-7 Class A
5.600% due 05/16/06 1,000 959
First USA Credit Card Master Trust
Series 1997-6 Class A
6.420% due 03/17/05 1,000 993
Ford Credit Auto Owner Trust
Series 2000-B Class A5
7.070% due 04/15/04 1,000 1,004
Honda Automobile Lease Trust
Series 1999-A Class A5
6.650% due 07/15/05 1,100 1,097
MBNA Master Credit Card Trust
Series 2000-I Class A
6.900% due 01/15/08 1,350 1,343
--------
7,216
--------
Corporate Bonds and Notes - 14.9%
BankAmerica Corp.
5.875% due 02/15/09 1,250 1,129
Canadian National Railway Co.
6.900% due 07/15/28 750 659
Chase Manhattan Corp.
7.875% due 06/15/10 1,100 1,127
CIT Group, Inc.
5.800% due 03/26/02 500 489
5.910% due 11/10/03 1,000 958
Citigroup, Inc.
9.500% due 03/01/02 285 295
Clear Channel Communications
7.875% due 06/15/05 700 714
Continental Airlines Pass Through
Certificates
Series 981A
6.648% due 09/15/17 289 267
Continental Airlines, Inc.
Series 2000-1
8.048% due 11/01/20 300 306
DaimlerChrysler North America
Holding Corp.
Series B
6.630% due 09/21/01 2,000 1,989
El Paso Energy Corp.
6.750% due 05/15/09 500 473
Enron Corp.
9.125% due 04/01/03 1,000 1,041
EOP Operating, L.P.
6.500% due 01/15/04 250 241
6.800% due 01/15/09 750 693
Equitable Life Assurance Society
6.950% due 12/01/05 500 481
7.700% due 12/01/15 500 500
Financing Corp.
9.400% due 02/08/18 500 629
Ford Motor Credit Co.
7.000% due 09/25/01 500 498
6.110% due 12/28/01 900 889
7.500% due 01/15/03 1,000 1,005
5.750% due 02/23/04 1,050 999
7.875% due 06/15/10 750 753
GATX Capital Corp.
6.500% due 11/01/00 1,000 998
General Electric Capital Corp.
7.500% due 06/05/03 800 813
General Motors Acceptance Corp.
6.375% due 09/28/01 900 890
9.625% due 12/15/01 1,810 1,858
5.500% due 01/14/02 500 488
6.000% due 02/01/02 1,000 982
Annual Report 9
<PAGE>
SSgA
Bond Market Fund
Statement of Net Assets, continued
August 31, 2000
Principal Market
Amount Value
(000) (000)
$ $
--------- ------
5.950% due 03/14/03 1,000 971
5.750% due 11/10/03 1,000 961
Goldman Sachs Group, Inc.
7.625% due 08/17/05 750 757
Hartford Life, Inc.
7.100% due 06/15/07 1,000 979
International Business Machines
Corp.
6.500% due 01/15/28 1,000 912
International Paper Co.
8.000% due 07/08/03 835 845
Kemper Corp.
6.875% due 09/15/03 345 341
Lehman Brothers Holdings, Inc.
6.750% due 09/24/01 1,000 995
6.625% due 04/01/04 500 486
Lockheed Martin Corp.
7.950% due 12/01/05 700 711
Massachusetts Mutual Life
7.625% due 11/15/23 875 856
Mellon Financial Co.
5.750% due 11/15/03 500 482
Mellon Funding Corp.
7.500% due 06/15/05 1,000 1,013
Merrill Lynch & Co., Inc.
6.000% due 02/17/09 500 455
MidAmerican Funding LLC
6.339% due 03/01/09 400 366
Morgan Stanley Dean Witter & Co.
7.125% due 01/15/03 1,000 1,002
5.625% due 01/20/04 500 478
New York Life Insurance Co.
6.400% due 12/15/03 1,500 1,466
Norfolk Southern Corp.
8.375% due 05/15/05 375 388
7.800% due 05/15/27 850 828
Northwest Airlines Pass-Thru
Certificates
Series 2000-1 Class G
8.072% due 10/01/19 800 817
Phillips Petroleum Co.
8.500% due 05/25/05 385 404
Sprint Capital Corp.
6.500% due 11/15/01 2,000 1,980
6.875% due 11/15/28 500 431
Sun Life Canada (US) Capital Trust
8.526% due 05/29/49 (d) 500 457
SunTrust Banks, Inc.
6.125% due 02/15/04 1,300 1,250
Time Warner, Inc.
7.250% due 10/15/17 500 469
6.625% due 05/15/29 1,000 846
Tosco Corp.
8.125% due 02/15/30 600 606
United Mexican States
8.500% due 02/01/06 300 299
Vastar Resources, Inc.
6.500% due 04/01/09 500 480
Wal-Mart Stores, Inc.
6.875% due 08/10/09 1,000 990
7.550% due 02/15/30 1,500 1,556
Williams Cos., Inc.
7.625% due 07/15/19 450 438
--------
48,479
--------
Eurodollar Bonds - 4.1%
Alberta, Province of
4.875% due 10/29/03 500 472
Cable & Wireless Optus, Ltd.
8.000% due 06/22/10 310 316
Chile, Republic of
6.875% due 04/28/09 100 94
Deutsche Telekom International
Finance BV Step Up Bond
8.250% due 06/15/30 (e) 350 354
Korea Development Bank
7.125% due 04/22/04 1,060 1,035
Korea, Republic of
8.750% due 04/15/03 1,000 1,026
8.875% due 04/15/08 395 418
10 Annual Report
<PAGE>
SSgA
Bond Market Fund
Statement of Net Assets, continued
August 31, 2000
Principal Market
Amount Value
(000) (000)
$ $
--------- ------
Ontario, Province of Canada
7.375% due 01/27/03 1,070 1,080
7.625% due 06/22/04 585 598
Quebec, Province of Canada
5.750% due 02/15/09 4,500 4,109
Telekomunikacja Polska SA
7.125% due 12/10/03 1,000 971
7.750% due 12/10/08 560 538
United Mexican States
8.625% due 03/12/08 500 501
10.375% due 02/17/09 1,255 1,379
11.500% due 05/15/26 160 199
Vodafone Airtouch PLC
7.875% due 02/15/30 325 324
--------
13,414
--------
Mortgage-Backed Securities - 43.6%
Capco America Securitization Corp.
Series 1998-D7 Class A1A
5.860% due 12/15/07 1,733 1,654
DLJ Commercial Mortgage Corp.
Series 1998-CF2 Class A1A
5.880% due 11/12/31 2,050 1,950
Federal Home Loan Mortgage Corp.(b)
6.500% 30 Year TBA 11,745 11,228
7.500% 30 Year TBA 18,390 18,281
Federal Home Loan Mortgage Corp.
Pools
8.500% due 2025 25 25
Federal Home Loan Mortgage Corp.
Participation Certificate
7.000% due 08/01/01 43 43
9.000% due 12/01/04 25 25
9.000% due 08/01/05 182 186
9.000% due 03/01/10 231 239
8.000% due 09/01/11 52 53
6.000% due 12/01/11 72 70
7.000% due 10/01/28 2,780 2,713
7.000% due 08/01/29 1,941 1,894
Federal National Mortgage
Association (b)
6.000% 15 Year TBA 5,600 5,353
6.500% 15 Year TBA 4,920 4,791
6.500% 30 Year TBA 18,015 17,204
7.000% 30 Year TBA 8,700 8,480
8.000% 30 Year TBA 20,305 20,483
Federal National Mortgage
Association Pools
6.000% due 01/01/09 104 101
7.125% due 06/15/10 8,240 8,389
6.000% due 03/01/11 109 105
6.000% due 10/01/11 22 21
5.500% due 10/01/14 146 137
7.000% due 03/01/15 4,866 4,811
7.500% due 05/01/15 363 364
7.500% due 06/01/15 1,767 1,170
8.000% due 02/01/23 3 3
8.500% due 12/01/24 9 9
7.500% due 07/01/25 65 65
9.000% due 06/01/26 43 45
6.500% due 02/01/27 150 144
8.000% due 12/01/27 2,926 2,954
6.500% due 01/01/29 4,553 4,351
6.500% due 03/01/29 95 90
6.500% due 06/01/29 260 249
6.500% due 07/01/29 1,801 1,721
6.500% due 08/01/29 527 503
6.500% due 09/01/29 524 501
7.000% due 09/01/29 35 34
6.500% due 01/01/30 299 285
7.000% due 02/01/30 1,545 1,490
Government National Mortgage Association (b)
7.500% 30 Year TBA 3,000 2,998
8.000% 30 Year TBA 3,000 3,041
Government National Mortgage
Association Pools
8.000% due 02/15/08 80 81
8.000% due 03/15/12 955 975
Annual Report 11
<PAGE>
SSgA
Bond Market Fund
Statement of Net Assets, continued
August 31, 2000
Principal Market
Amount Value
(000) (000)
$ $
--------- ------
10.000% due 11/15/13 14 14
10.000% due 04/15/14 2 2
7.500% due 12/15/22 9 9
7.000% due 08/15/23 66 65
7.000% due 10/15/23 1,611 1,586
7.500% due 10/15/23 27 27
6.500% due 01/15/24 27 26
7.500% due 02/15/24 152 152
7.500% due 05/15/24 547 548
8.500% due 06/15/25 133 137
9.500% due 06/15/25 83 87
7.500% due 12/15/27 322 322
8.500% due 06/15/28 148 151
8.500% due 07/15/28 941 964
6.500% due 09/15/28 1,151 1,105
7.500% due 09/15/28 350 350
8.500% due 09/15/28 114 117
7.500% due 10/15/28 290 290
8.500% due 10/15/28 783 794
6.000% due 11/15/28 343 321
7.000% due 11/15/28 419 411
7.500% due 11/15/28 388 387
8.500% due 11/15/28 50 51
6.500% due 12/15/28 315 302
8.500% due 12/15/28 32 32
8.500% due 09/15/29 847 867
8.500% due 11/15/29 876 897
8.500% due 03/15/30 1,308 1,340
8.500% due 04/15/30 868 889
Nomura Asset Securities Corp.
6.590% due 03/17/28 385 370
--------
141,922
--------
Non-US Bonds - 0.2%
Kowloon-Canton Railway
8.000% due 03/15/10 565 577
--------
United States Government Agencies - 2.4%
Federal Home Loan Bank
Series-157
6.875% due 07/18/02 3,000 3,008
Federal National Mortgage
Association
6.560% due 11/26/07 400 382
6.400% due 05/14/09 1,000 947
7.250% due 05/15/30 3,450 3,632
--------
7,969
--------
United States Government
Treasuries - 28.2%
United States Treasury Bonds
10.000% due 05/15/10 320 368
12.000% due 08/15/13 3,000 4,091
11.250% due 02/15/15 4,500 6,779
9.875% due 11/15/15 380 527
8.125% due 08/15/19 2,745 3,415
8.125% due 08/15/21 7,355 9,260
7.625% due 11/15/22 635 767
7.125% due 02/15/23 3,600 4,132
6.750% due 08/15/26 4,600 5,122
5.250% due 02/15/29 535 493
6.125% due 08/15/29 1,590 1,666
6.250% due 05/15/30 205 222
United States Treasury Notes
6.625% due 05/31/02 30 30
6.375% due 06/30/02 3,800 3,809
3.625% due 07/15/02 2,689 2,678
6.250% due 07/31/02 8,125 8,131
6.125% due 08/31/02 7,000 6,996
5.250% due 08/15/03 500 489
5.875% due 11/15/04 250 249
7.875% due 11/15/04 750 800
6.750% due 05/15/05 16,090 16,588
6.500% due 08/15/05 450 459
5.875% due 11/15/05 500 497
6.875% due 05/15/06 850 885
12 Annual Report
<PAGE>
SSgA
Bond Market Fund
Statement of Net Assets, continued
August 31, 2000
Principal Market
Amount Value
(000) (000)
$ $
--------- ------
6.500% due 10/15/06 600 615
6.500% due 02/15/10 6,895 7,199
5.750% due 08/15/10 5,615 5,619
--------
91,886
--------
Yankee Bonds - 2.7%
Abitibi-Consolidated, Inc.
8.300% due 08/01/05 750 763
8.850% due 08/01/30 500 503
Apache Finance Canada Corp.
7.750% due 12/15/29 700 697
AT&T Canada, Inc.
12.000% due 08/15/07 500 563
Banco Santiago SA
7.000% due 07/18/07 200 184
Korea Development Bank
7.625% due 10/01/02 2,570 2,569
Metronet Communications Corp.
10.750% due 11/01/07 585 530
Step Up Bond
Orange PLC
9.000% due 06/01/09 425 445
Quebec, Province of
7.500% due 09/15/29 1,000 998
Saskatchewan, Province of
6.625% due 07/15/03 1,000 991
Svenska Handelsbanken
8.350% due 07/15/04 500 515
--------
8,758
--------
Total Long-Term Investments
(cost $319,258) 320,221
--------
Short-Term Investments - 33.3%
Federal National Mortgage
Association Discount Note
6.402% due 09/14/00 (a)(c) 93,300 93,084
Federated Investors Prime Cash
Obligations Fund (a) 15,226 15,226
--------
Total Short-Term Investments
(cost $108,310) 108,310
--------
Total Investments - 131.6%
(identified cost $427,568) 428,531
Other Assets and Liabilities,
Net - (31.6%) (102,904)
--------
Net Assets - 100.0% 325,627
========
(a) At amortized cost, which approximates market.
(b) Forward commitment.
(c) Rate noted is yield-to-maturity from date of acqusition.
(d) Perpetual floating rate note.
(e) Adjustable or floating rate security.
Abbreviations:
TBA - To Be Announced Security.
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 13
<PAGE>
SSgA
Bond Market Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amount) August 31, 2000
<TABLE>
<S> <C> <C>
Assets
Investments at market (identified cost $427,568) ................................. $ 428,531
Receivables:
Dividends and interest ........................................................ 2,708
Investments sold .............................................................. 4,070
Fund shares sold .............................................................. 361
---------
Total assets ............................................................... 435,670
Liabilities
Payables:
Investments purchased (regular settlement) ........................ $ 15,294
Investments purchased (delayed settlement) ........................ 94,325
Fund shares redeemed .............................................. 261
Accrued fees to affiliates ........................................ 136
Other accrued expenses ............................................ 27
---------
Total liabilities .......................................................... 110,043
---------
Net Assets ....................................................................... $ 325,627
=========
Net Assets Consist of:
Undistributed net investment income .............................................. $ 4,736
Accumulated net realized gain (loss) ............................................. (12,388)
Unrealized appreciation (depreciation) on investments ............................ 963
Shares of beneficial interest .................................................... 34
Additional paid-in capital ....................................................... 332,282
---------
Net Assets ....................................................................... $ 325,627
=========
Net Asset Value, offering and redemption price per share:
($325,627,247 divided by 33,582,550 shares of $.001 par value
shares of beneficial interest outstanding) ................................. $ 9.70
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
14 Annual Report
<PAGE>
SSgA
Bond Market Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 2000
<TABLE>
<S> <C> <C>
Investment Income
Interest ......................................................................... $ 18,649
Dividends ........................................................................ 494
--------
Total investment income ....................................................... 19,143
Expenses
Advisory fees ......................................................... $ 871
Administrative fees ................................................... 102
Custodian fees ........................................................ 127
Distribution fees ..................................................... 93
Transfer agent fees ................................................... 50
Professional fees ..................................................... 17
Registration fees ..................................................... 37
Shareholder servicing fees ............................................ 93
Trustees' fees ........................................................ 10
Miscellaneous ......................................................... 11
--------
Expenses before reductions ............................................ 1,411
Expense reductions .................................................... (3)
--------
Expenses, net ................................................................. 1,408
--------
Net investment income ............................................................... 17,735
--------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on investments ............................................. (7,086)
Net change in unrealized appreciation (depreciation) on investments ................. 8,406
--------
Net realized and unrealized gain (loss) ............................................. 1,320
--------
Net increase (decrease) in net assets from operations ............................... $ 19,055
========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Annual Report 15
<PAGE>
SSgA
Bond Market Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Years Ended August 31,
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ............................................... $ 17,735 $ 12,073
Net realized gain (loss) ............................................ (7,086) (3,422)
Net change in unrealized appreciation (depreciation) ................ 8,406 (9,931)
--------- ---------
Net increase (decrease) in net assets from operations ............ 19,055 (1,280)
--------- ---------
Distributions
From net investment income .......................................... (16,896) (10,558)
From net realized gain (loss) ....................................... (9) (3,345)
--------- ---------
Net decrease in net assets from distributions .................... (16,905) (13,903)
--------- ---------
Share Transactions
Net increase (decrease) in net assets from share transactions ....... 54,193 94,316
--------- ---------
Total net increase (decrease) in net assets ............................ 56,343 79,133
Net Assets
Beginning of period ................................................. 269,284 190,151
--------- ---------
End of period (including undistributed net investment income of
$4,736 and $3,831, respectively) ................................. $ 325,627 $ 269,284
========= =========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
16 Annual Report
<PAGE>
SSgA
Bond Market Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
--------------------------------------------------------
2000 1999 1998 1997 1996*
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ............ $ 9.63 $ 10.35 $ 9.97 $ 9.63 $ 10.00
-------- -------- -------- -------- --------
Income From Operations
Net investment income (a) .................... .58 .54 .55 .53 .27
Net realized and unrealized gain (loss) ...... .06 (.52) .40 .35 (.49)
-------- -------- -------- -------- --------
Total income from operations .............. .64 .02 .95 .88 (.22)
-------- -------- -------- -------- --------
Distributions
From net investment income ................... (.57) (.54) (.54) (.54) (.15)
From net realized gain ....................... -- (.20) (.03) -- --
-------- -------- -------- -------- --------
Total distributions ....................... (.57) (.74) (.57) (.54) (.15)
-------- -------- -------- -------- --------
Net Asset Value, End of Period .................. $ 9.70 $ 9.63 $ 10.35 $ 9.97 $ 9.63
======== ======== ======== ======== ========
Total Return (%)(b) ............................. 6.92 .07 9.86 9.47 (2.19)
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ..... 325,627 269,284 190,151 87,670 29,015
Ratios to average net assets (%)(c):
Operating expenses, net ................... .48 .50 .48 .50 .63
Operating expenses, gross ................. .48 .50 .52 .74 .93
Net investment income ..................... 6.09 5.50 5.74 6.05 5.66
Portfolio turnover rate (%)(c) ............... 248.34 327.83 300.77 375.72 253.30
</TABLE>
* For the period February 7, 1996 (commencement of operations) to August 31,
1996.
(a) For the periods subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for the period ended August 31, 1996 are annualized.
Annual Report 17
<PAGE>
SSgA
Bond Market Fund
Notes to Financial Statements
August 31, 2000
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 24 investment portfolios which are in operation as
of August 31, 2000. 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 accounting
principles generally accepted in the United States 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.
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.
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.
18 Annual Report
<PAGE>
SSgA
Bond Market Fund
Notes to Financial Statements, continued
August 31, 2000
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, 2000, the Fund had net tax basis capital loss carryover of
$5,633,442, which may be applied against any realized net taxable gains in
each succeeding year or until its expiration date of August 31, 2008. As
permitted by tax regulations, the Fund intends to defer a net realized
capital loss of $6,556,689 incurred from November 1, 1999 to August 31,
2000, and treat it as arising in the fiscal year 2001.
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, 2000 are as follows:
Net Unrealized
Federal Tax Unrealized Unrealized Appreciation
Cost Appreciation (Depreciation) (Depreciation)
------------ ------------ -------------- --------------
$427,724,958 $ 2,376,558 $(1,570,902) $805,656
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 year may differ significantly from
distributions during such year. The differences between tax regulations
and GAAP relate primarily to investment in certain fixed income securities
purchased at a discount, mortgage-backed securities and certain securities
sold at a loss. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting
its net asset value.
Expenses: Most expenses can be directly attributed to the Fund. Expenses
of the investment company which cannot be directly attributed are
allocated among all funds based principally on their relative net assets.
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
Annual Report 19
<PAGE>
SSgA
Bond Market Fund
Notes to Financial Statements, continued
August 31, 2000
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, 2000, purchases and
sales of investment securities, excluding US Government and Agency
obligations and short-term investments, aggregated to $129,902,130 and
$162,119,898, respectively.
For the year ended August 31, 2000, purchases and sales of US Government
and Agency obligations, excluding short-term investments, aggregated to
$588,199,279 and $544,925,279, respectively.
Securities lending: The Investment Company has a securities lending
program whereby each Fund can loan securities with a value up to 33 1/3%
of its total assets to certain brokers. The Fund receives cash (U.S.
currency), U.S. Government or U.S. Government agency obligations as
collateral against the loaned securities. To the extent that a loan is
secured by cash collateral, such collateral shall be invested by State
Street Bank and Trust Company in short-term instruments, money market
mutual funds, and such other short-term investments, provided the
investments meet certain quality and diversification requirements. Under
the securities lending arrangement, the collateral received is recorded on
the Fund's statement of assets and liabilities along with the related
obligation to return the collateral. In those situations where the Company
has relinquished control of securities transferred, it derecognizes the
securities and records a receivable from the counterparty.
Income generated from the investment of cash collateral, less negotiated
rebate fees paid to participating brokers and transaction costs, is
divided between the Fund and State Street Bank and Trust Company and is
recorded as interest income for the Fund. To the extent that a loan is
secured by non-cash collateral, brokers pay the Fund negotiated lenders'
fees, which are divided between the Fund and State Street Bank and Trust
Company and are recorded as interest income for the Fund. All collateral
received will be in an amount at least equal to 102% (for loans of U.S.
securities) or 105% (for non-U.S. securities) of the market value of the
loaned securities at the inception of each loan. Should the borrower of
the securities fail financially, there is a risk of delay in recovery of
the securities or loss of rights in the collateral. Consequently, loans
are made only to borrowers which are deemed to be of good financial
standing. As of August 31, 2000, there were no outstanding securities on
loan and no income earned during the year.
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, through State Street Global Advisors, the investment management
group of 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
.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.
20 Annual Report
<PAGE>
SSgA
Bond Market Fund
Notes to Financial Statements, continued
August 31, 2000
In addition, the Fund has entered into arrangements with its Adviser
whereby custody credits realized as a result of uninvested cash balances
were used to reduce a portion of the Fund's expenses. During the year, the
Fund's custodian fees were reduced by $2,925 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly-owned subsidiary of The Northwestern Mutual Life Insurance Company,
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 for services supplied by the
Administrator pursuant to the Administration Agreement, an annual fee,
payable monthly on a pro rata basis. For the period September 1, 1999 to
April 30, 2000, it is 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 up to and including $1 billion - .05%;
over $1 billion - .03%. Effective May 1, 2000, the annual fee is based on
the following percentages of the average daily net assets of all U.S.
Fixed Income portfolios: $0 up to $1 billion - .0315%; over $1 billion -
.029%. The Administrator will also charge a flat fee of $30,000 per year
per Fund with less than $500 million in net assets and $1,500 per year for
monthly performance reports and use of Russell Performance Universe
software product. In addition, the Fund reimburses the Administrator for
out-of-pocket expenses and start-up costs for new funds.
Distributor and Shareholder Servicing: The Investment Company has 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 enter 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 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 Shareholder 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, 2000, the Fund was charged shareholder servicing expenses
of $55,859 and $24,662, by the Adviser and Solutions.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets of the Fund on an
annual basis. The shareholder servicing payments shall not exceed .20% of
the average daily value of net assets of the Fund on an annual basis.
Payments that exceed the maximum amount of
Annual Report 21
<PAGE>
SSgA
Bond Market Fund
Notes to Financial Statements, continued
August 31, 2000
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, 2000.
Board of Trustees: The Investment Company paid each Trustee not affiliated
with the Investment Company an annual retainer, plus specified amounts for
board and committee meetings attended. 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, 2000 were
as follows:
Advisory fees $ 80,663
Administration fees 11,030
Custodian fees 12,014
Distribution fees 4,483
Shareholder servicing fees 19,760
Transfer agent fees 6,127
Trustees' fees 1,742
--------
$135,819
========
5. Fund Share Transactions (amounts in thousands)
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
---------------------------------------------
2000 1999
------------------- -------------------
Shares Dollars Shares Dollars
------ --------- ------ ---------
<S> <C> <C> <C> <C>
Proceeds from shares sold ........................ 13,702 $ 130,845 18,503 $ 184,824
Proceeds from reinvestment of distributions ...... 856 8,083 934 9,418
Payments for shares redeemed ..................... (8,927) (84,735) (9,860) (99,926)
------ --------- ------ ---------
Total net increase (decrease) .................... 5,631 $ 54,193 9,577 $ 94,316
====== ========= ====== =========
</TABLE>
6. Interfund Lending Program
The Fund and all other funds of the Investment Company received from the
Securities and Exchange Commission an exemptive order on December 23, 1999
to establish and operate an Interfund Credit Facility. This allows the
Funds to directly lend to and borrow money from the SSgA Money Market Fund
for temporary purposes in accordance with certain conditions. The
borrowing Funds are charged the average of the current Repo Rate and the
Bank Loan Rate. The Fund did not utilize the interfund lending program
during this year.
22 Annual Report
<PAGE>
SSgA
Bond Market Fund
Notes to Financial Statements, continued
August 31, 2000
7. Dividends
On September 1, 2000, the Board of Trustees declared a dividend of $.1397
from net investment income, payable on September 8, 2000 to shareholders
of record on September 5, 2000.
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, Treasurer and CEO
Mark E. Swanson, Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Treasurer
Carla L. Anderson, Assistant 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
160 Federal Street
Boston, Massachusetts 02110
24 Annual Report
<PAGE>
[COVER GRAPHIC]
SSgA(R) funds
ANNUAL REPORT
S&P 500 Index Fund
August 31, 2000
<PAGE>
SSgA(R) Funds
S&P 500 Index Fund
Annual Report
August 31, 2000
Table of Contents
Page
Chairman's Letter......................................................... 4
Portfolio Management Discussion and Analysis.............................. 6
Report of Independent Accountants......................................... 8
Financial Statements...................................................... 9
Financial Highlights...................................................... 12
Notes to Financial Statements............................................. 13
Tax Information........................................................... 19
Fund Management and Service Providers..................................... 20
"SSgA(R)" 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,
It is our pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 2000. The SSgA Fund Family has grown to include
twenty-four portfolios with over $21 billion in assets as of August 31, 2000.
The Fund Family provides a wide range of strategies covering the world's major
markets. The enclosed information provides an overview of the investment process
for the SSgA S&P 500 Index Fund. This overview contains the portfolio management
discussion, performance updates and financial information for the Fund.
Effective June 1, 2000, the SSgA S&P 500 Index Fund began investing all of its
assets in the State Street Equity 500 Index Portfolio (the "Portfolio"). Under
this structure, sometimes referred to as a "master/feeder" arrangement, the SSgA
S&P 500 Fund is, in effect, a participating shareholder in the Portfolio. The
SSgA S&P 500 Index Fund was converted with the best interests of our
shareholders in mind, and it is anticipated that the Fund should indirectly
benefit from the economies of scale associated with this type of arrangement.
The most recent financial statement for the Portfolio is included in this book.
In an ongoing effort to develop competitive products and services that provide
investment solutions for our clients, we have added the SSgA Intermediate
Municipal Bond Fund to the SSgA Fund Family. This Fund's investment objective
seeks to provide federally tax-exempt current income by investing primarily in a
diversified portfolio of municipal debt securities with a dollar-weighted
average maturity between three and ten years.
We are also pleased with the success of our SSgA Emerging Markets and SSgA
Growth and Income Funds as they were included in Money(R) Magazine's June 2000
issue listing of the 'Top 100 Mutual Funds'. This is the second year in a row
that these funds have been selected.
Additionally, the SSgA Tax Free Money Market and the SSgA Active International
Funds have achieved five-year performance history during the 2000 fiscal year.
Currently, all of our SSgA Money Market Funds have at least a five-year
performance history. We strive to meet our clients' needs by providing funds
with long-term records and competitive performance.
We would like to thank you for choosing the SSgA Funds. Our reputation is based
on our tradition of designing and delivering exceptional financial services to
our clients. We look forward to continue sharing the benefit of our experience
with you.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
/s/ Timothy B. Harbert
Timothy B. Harbert
State Street Global Advisors
President and Chief Operating Officer, SSgA
4 Annual Report
<PAGE>
SSgA S&P 500 Index Fund
--------------------------------------------------------------------------------
Management of the Funds
--------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
[PHOTO]
Timothy B. Harbert
President and Chief Operating 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, has been the portfolio manager primarily responsible
for investment decisions regarding the SSgA S&P 500 Index Fund since May 1995.
Mr. May has been a portfolio manager in the US Structured Products Group of
State Street since January 1994. He served as an Investment Support Analyst in
the US Passive Services Group from 1991 to 1993. He holds a BS in Finance from
Bentley College and an MBA from Boston College. There are four other 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(R)500 Index before expenses.
Invests in: Shares of the State Street Equity 500 Index Portfolio.
Strategy: The Portfolio's holdings are composed of the 500 stocks in the S&P
500(R) Index. The Index is designed to capture the price performance of a large
cross-section of the US publicly traded stock market.
--------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
Dates S&P 500 Index Fund S&P 500(R) Index**
Inception* $10,000 $10,000
1993 $10,806 $10,842
1994 $11,377 $11,435
1995 $13,779 $13,887
1996 $16,323 $16,488
1997 $22,901 $23,191
1998 $24,713 $25,068
1999 $34,480 $35,054
2000 $40,086 $40,775
================================================================================
Performance Review
The SSgA S&P 500 Fund closed the fiscal year ended August 31, 2000 with a 16.26%
return, which closely mirrors the S&P 500(R) Index return of 16.33% for the same
period. The Fund's slight deviation from the benchmark return is attributable
principally to the payment of fund operating expenses. Index results do not
reflect expenses of any kind.
Effective June 1, 2000, the SSgA S&P 500 Fund began investing all of its assets
in the State Street Equity 500 Index Portfolio (the "Portfolio"). As a result,
substantially all of the investable assets of the SSgA S&P 500 Fund were
exchanged, in whole, for beneficial interest in the Portfolio. Under this
arrangement, the SSgA S&P 500 Fund does not hold any individual securities, but
based on its shares outstanding in the Portfolio, receives an allocation of
income, expenses, and capital gains/losses generated by the Portfolio.
The SSgA S&P 500 Fund continues to seek returns which replicate the total return
of the S&P 500(R) Index. The stocks of
--------------------------------------------------------------------------------
SSgA S&P 500 Index Fund
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
------------ ----------- -----------
1 Year $ 11,626 16.26%
5 Years $ 29,092 23.81%+
Inception $ 40,086 19.85%+
--------------------------------------------------------------------------------
Standard & Poor's(R) 500 Composite Stock Price Index
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
------------ ----------- -----------
1 Year $ 11,633 16.33%
5 Years $ 29,362 24.04%+
Inception $ 40,775 20.12%+
See related Notes on following page.
6 Annual Report
<PAGE>
SSgA S&P 500 Index Fund
--------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
--------------------------------------------------------------------------------
the S&P 500(R) 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 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.
Market and Portfolio Highlights
The US equity market rally that began in 1994 limped forward for much of the
past fiscal year, as most of the return was gained in the last quarter of 1999.
Inflation continued to remain somewhat subdued as Alan Greenspan and the Federal
Open Market Committee (FOMC) attempted to engineer a "soft landing" for the US
economy. The FOMC has increased the Fed Funds rate a full 1%, to 6.5%, since
February 2000. Earnings surprises and extreme market volatility have also helped
to keep the reigns on the once high flying US equity markets. Softening retail
numbers and soaring energy prices increased the inflation fears of equity
investors as the fiscal year came to a close.
A majority of the S&P 500(R) Index return of 16.33% can be attributed to the
last calendar quarter of 1999 when the Index was up 14.88%. Further evidence of
a cooling stock market and a cautious investing community was the fact that the
first six months of 2000 resulted in a decline of 0.42%, the first semi-annual
loss for the Index since 1994.
Over the past fiscal year, Technology remained the hot sector to watch. The
weight of the Technology sector in the S&P 500(R) Index increased from 23% at
the end of last fiscal year, to 32% at August 31, 2000. Much of that growth was
provided by the sector's excellent return of 41.78% over the past fiscal year.
Impressive as that return is, it is not even half of the 99.54% the sector
returned in fiscal year ended August 31, 1999.
The Tech sector also had major additions during the period. Yahoo was added to
the Index in December 1999, with JDS Uniphase joining in July 2000. At nearly
1.00% of the overall sector, JDS Uniphase was the largest addition, as measured
by cap weight in the Index, since Microsoft was added. Microsoft's well
publicized antitrust battle with the Federal Government decreased its market
capitalization enough to take it out of contention for the largest capitalized
company in the Index.
Some of the best performing stocks came from the Technology sector. Computer
network, software, and communications equipment companies such as Network
Appliance, Oracle and Corning provided the best returns for the past fiscal
year, with incredible gains of 612.46%, 398.29%, and 394.49%, respectively.
However, the past year was not pleasant for every Tech stock, as some of the
worst performers in the Index came from that sector as well. This is evidenced
by dismal returns from both Unysis and Compuware, posting losses of 69.77% and
65.01%, respectively.
Technology was not the only sector that performed well. The Financial sector,
comprising nearly 20% of the Index, provided a return of 29.18%. The sector was
led by firms such as Morgan Stanley, Northern Trust and State Street Corp, all
posting strong returns of 152.37%, 100.06%, and 97.73% respectively.
The Capital Goods sector dragged the S&P 500(R) Index as the worst performing
sector with a loss of 14.85% for the current period. Two of the worst performing
stocks in the Index are in the Capital Goods sector. Owens Corning had the worst
return, dropping 80.49%, while McDermott International was not far behind
posting a loss of 65.04%.
---------------------
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(R) 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(R)", "S&P(R)", "S&P 500(R)", "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, 2000, 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 accounting principles generally
accepted in the United States of America. 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 auditing standards
generally accepted in the United States of America 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 the security at
August 31, 2000 by correspondence with the custodian, provide a reasonable basis
for our opinion.
Boston, Massachusetts
October 11, 2000
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
S&P 500 Index Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amount) August 31, 2000
Assets
Investment in State Street Equity 500 Index Portfolio, at value ... $3,108,325
Receivables:
Fund shares sold ............................................... 2,077
Miscellaneous receivables ...................................... 23
From Advisor ................................................... 34
Prepaid expenses .................................................. 15
----------
Total assets ................................................ 3,110,474
Liabilities
Payables:
Fund shares redeemed .............................. $ 4,631
Accrued fees to affiliates ........................ 656
Other accrued expenses ............................ 20
----------
Total liabilities ........................................... 5,307
----------
Net Assets ........................................................ $3,105,167
==========
Net Assets Consist of:
Undistributed net investment income ............................... $ 7,507
Accumulated net realized gain (loss) .............................. 120,531
Unrealized appreciation (depreciation) on:
Portfolio investments .......................................... 844,232
Portfolio futures contracts .................................... 2,266
Shares of beneficial interest ..................................... 118
Additional paid-in capital ........................................ 2,130,513
----------
Net Assets ........................................................ $3,105,167
==========
Net Asset Value, offering and redemption price per share:
($3,105,166,699 divided by 117,575,679 shares of $.001 par value
shares of beneficial interest outstanding) .................. $ 26.41
==========
See accompanying notes which are an integral part of the financial statements.
Annual Report 9
<PAGE>
SSgA
S&P 500 Index Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 2000
Investment Income
Dividends (a) ................................................. $ 27,833
Interest (a) .................................................. 495
Dividends allocated from Portfolio ............................ 8,131
Interest allocated from Portfolio ............................. 589
Expenses allocated from Portfolio ............................. (336)
----------
Total investment income .................................... 36,712
Expenses
Advisory fees ..................................... $ 2,189
Administrative fees ............................... 816
Custodian fees .................................... 406
Distribution fees ................................. 1,019
Transfer agent fees ............................... 287
Professional fees ................................. 66
Registration fees ................................. 113
Shareholder servicing fees ........................ 1,547
Trustees' fees .................................... 56
Miscellaneous ..................................... 115
----------
Expenses before reductions ........................ 6,614
Expense reductions ................................ (1,666)
----------
Expenses, net .............................................. 4,948
----------
Net investment income ............................................ 31,764
----------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investment transactions allocated from Portfolio .... (24,066)
Futures transactions allocated from Portfolio ....... 308
Futures transactions (a) ............................ (134)
Investment transactions (a) ......................... 271,023
----------
Futures transactions (a) ............................ 247,131
Net change in unrealized appreciation (depreciation) on:
Investments allocated from Portfolio ................ 844,232
Futures contracts allocated from Portfolio .......... 2,266
Futures (a) ......................................... 750
Investments (a) ..................................... (678,384) 168,864
---------- ----------
Net realized and unrealized gain (loss) .......................... 415,995
----------
Net increase (decrease) in net assets from operations ............ $ 447,759
==========
(a) Amount represents results from operations prior to June 1, 2000
(conversion to Master-Feeder structure).
See accompanying notes which are an integral part of the financial statements.
10 Annual Report
<PAGE>
SSgA
S&P 500 Index Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Years Ended August 31,
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ......................................... $ 31,764 $ 30,644
Net realized gain (loss) ...................................... 247,131 165,310
Net change in unrealized appreciation (depreciation) .......... 168,864 480,768
----------- -----------
Net increase (decrease) in net assets from operations ...... 447,759 676,722
----------- -----------
Distributions
From net investment income .................................... (32,901) (28,913)
From net realized gain ........................................ (83,817) (211,531)
----------- -----------
Net decrease in net assets from distributions .............. (116,718) (240,444)
----------- -----------
Share Transactions
Net increase (decrease) in net assets from share transactions . 100,163 621,772
----------- -----------
Total net increase (decrease) in net assets ...................... 431,204 1,058,050
Net Assets
Beginning of period ........................................... 2,673,963 1,615,913
----------- -----------
End of period (including undistributed net investment income of
$7,507 and $8,644, respectively) ........................... $ 3,105,167 $ 2,673,963
=========== ===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Annual Report 11
<PAGE>
SSgA
S&P 500 Index Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
----------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ........ $ 23.74 $ 19.42 $ 18.96 $ 14.41 $ 12.81
---------- ---------- ---------- ---------- --------
Income From Operations
Net investment income (a) ................ .27 .29 .31 .32 .32
Net realized and unrealized gain (loss) 3.40 6.74 1.18 5.22 1.98
---------- ---------- ---------- ---------- --------
Total income from operations .......... 3.67 7.03 1.49 5.54 2.30
---------- ---------- ---------- ---------- --------
Distributions
From net investment income ............... (.28) (.29) (.32) (.32) (.31)
From net realized gain ................... (.72) (2.42) (.71) (.67) (.39)
---------- ---------- ---------- ---------- --------
Total distributions ................... (1.00) (2.71) (1.03) (.99) (.70)
---------- ---------- ---------- ---------- --------
Net Asset Value, End of Period .............. $ 26.41 $ 23.74 $ 19.42 $ 18.96 $ 14.41
========== ========== ========== ========== ========
Total Return (%) ............................ 16.26 39.52 7.91 40.30 18.46
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) . 3,105,167 2,673,963 1,615,913 1,299,571 704,683
Ratios to average net assets (%):
Operating expenses, net (b)(c) ........ .18 .18 .17 .16 .18
Operating expenses, gross (b)(c) ...... .24 .28 .27 .26 .28
Net investment income ................. 1.08 1.29 1.50 2.00 2.32
Portfolio turnover of the Fund (%)(d) .... 16.43 13.80 26.17 7.54 28.72
Portfolio turnover of the Portfolio ...... 14.00 N/A N/A N/A N/A
</TABLE>
(a) For the periods subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.
(b) See Note 4 for current period amounts.
(c) Expense ratios for the fiscal year ended August 31, 2000 includes the
Fund's share of the Portfolio's allocated expenses for the period June 1,
2000 (commencement of the Master-Feeder structure) to August 31, 2000.
(d) Portfolio turnover represents the rate of portfolio activity, for the
period September 1, 1999 through May 31, 2000, while the Fund was making
investments directly in securities.
12 Annual Report
<PAGE>
SSgA
S&P 500 Index Fund
Notes to Financial Statements
August 31, 2000
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 24 investment portfolios which are in operation as
of August 31, 2000. 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.
The Fund invests all of its investable assets in interests in State Street
Equity 500 Index Portfolio (the "Portfolio"). The investment objective and
policies of the Portfolio are the same as the Fund. On June 1, 2000, the
Fund transferred substantially all of its investable assets with a value
of $2,846,508,871, including unrealized appreciation of $625,464,206 to
the Portfolio in exchange for interests in the Portfolio. The value of the
Fund's investment in the Portfolio reflects the Fund's proportionate
interest in the net assets of the Portfolio (approximately 87.0% at August
31, 2000). The performance of the Fund is directly affected by the
performance of the Portfolio. The financial statements of the Portfolio,
including the portfolio of investments, are included elsewhere in this
report and should be read in conjunction with the Fund's financial
statements.
2. Significant Accounting Policies
The Fund's financial statements are prepared in accordance with accounting
principles generally accepted in the United States 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 records its investment in the Portfolio at
value. Valuation of securities held by the Portfolio is discussed in Note
2 of the Portfolio's Notes to Financial Statements which are included
elsewhere in this report.
Securities transactions: Securities transactions were recorded on a trade
date basis. Realized gains and losses from securities transactions were
recorded on the basis of identified cost.
Investment income: Dividend income was recorded on the ex-dividend date
and interest income was recorded daily on the accrual basis through May
31, 2000. Currently, the Fund's net investment income consists of the
Fund's pro rata share of the net investment income of the Portfolio, less
all expenses of the Fund determined in accordance with accounting
principles generally accepted in the United States.
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.
Annual Report 13
<PAGE>
SSgA
S&P 500 Index Fund
Notes to Financial Statements, continued
August 31, 2000
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 quarterly. 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. Accordingly, the Fund
reclassifications among certain of its capital accounts without impacting
its net asset value made the following:
Undistributed Net Investment Income $ (156)
Accumulated Net Realized Gain (Loss) (123,519,583)
Additional Paid-in Capital 123,519,739
Expenses: Most expenses can be directly attributed to the individual Fund.
Additionally, expenses allocated from the Portfolio are recorded and
identified separately in the Statement of Operations. Expenses of the
investment company which cannot be directly attributed are allocated among
all funds based principally on their relative net assets.
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 participated in various
derivative-based transactions through May 31, 2000. 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 used 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 used
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 utilized exchange-traded futures contracts through May
31, 2000. 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 period September 1, 1999 to May 31, 2000,
purchases and sales of investment securities, excluding short-term
investments and futures contracts, aggregated to $469,903,949 and
$524,456,924, respectively. Subsequent to the transfer of assets to the
Portfolio on June 1, 2000, increases and decreases in the
14 Annual Report
<PAGE>
SSgA
S&P 500 Index Fund
Notes to Financial Statements, continued
August 31, 2000
Fund's investment in the Portfolio aggregated $87,602,381 and $148,124,655
respectively, for the period June 1, 2000 to August 31, 2000. Two
redemptions in-kind of securities resulted in a realized gain of
$123,883,217.
Securities Lending: The Investment Company has a securities lending
program whereby each Fund can loan securities with a value up to 33 1/3%
of its total assets to certain brokers. The Fund receives cash (U.S.
currency), U.S. Government or U.S. Government agency obligations as
collateral against the loaned securities. To the extent that a loan is
secured by cash collateral, such collateral shall be invested by State
Street Bank and Trust Company in short-term instruments, money market
mutual funds, and such other short-term investments, provided the
investments meet certain quality and diversification requirements. Under
the securities lending arrangement, the collateral received is recorded on
the Fund's statement of assets and liabilities along with the related
obligation to return the collateral. In those situations where the Company
has relinquished control of securities transferred, it derecognizes the
securities and records a receivable from the counterparty.
Income generated from the investment of cash collateral, less negotiated
rebate fees paid to participating brokers and transaction costs, is
divided between the Fund and State Street Bank and Trust Company and is
recorded as interest income for the Fund. To the extent that a loan is
secured by non-cash collateral, brokers pay the Fund negotiated lenders'
fees, which are divided between the Fund and State Street Bank and Trust
Company and are recorded as interest income for the Fund. All collateral
received will be in an amount at least equal to 102% (for loans of U.S.
securities) or 105% (for non-U.S. securities) of the market value of the
loaned securities at the inception of each loan. Should the borrower of
the securities fail financially, there is a risk of delay in recovery of
the securities or loss of rights in the collateral. Consequently, loans
are made only to borrowers which are deemed to be of good financial
standing. The Fund participated in the securities lending program up to
May 31, 2000. Included in interest income is securities lending income of
$245,161 for the period September 1, 1999 to May 31, 2000.
4. Related Parties
Adviser: The Investment Company had an investment advisory agreement with
State Street Bank and Trust Company (the "Adviser") under which the
Adviser, through State Global Advisors, the investment management group of
the Adviser, directed the investments of the Fund in accordance with its
investment objectives, policies, and limitations through May 31, 2000. For
these services, the Fund paid a fee to the Adviser, calculated daily and
paid monthly, at the annual rate of .10% of its average daily net assets.
For the period September 1, 1999 to December 31, 1999, the Adviser
voluntarily agreed to waive up to the full amount of its advisory fee to
the extent that total expenses exceeded .18% of its average daily net
assets on an annual basis. For the period January 1, 2000 to May 31, 2000,
the Adviser agreed to reimburse the Fund for all expenses in excess of
.18% of average daily net assets on an annual basis and has also agreed to
waive .07% of its .10% management fee. Effective June 1, 2000, the Fund is
allocated a charge for a management fee from the Portfolio, calculated
daily at an annual rate of .045% of its average daily net assets. This fee
relates to the advisory, custody and administrative fees provided by the
Portfolio on behalf of its investors. For the period June 1, 2000 to
August 31, 2000, the Adviser agreed to reimburse the Fund for all fund and
allocated portfolio expenses that exceed .18%. The total amount of the
waiver and the reimbursement for the year ended August 31, 2000 were
$1,513,796 and $139,830, respectively. As of August 31, 2000, the
receivable due from the Adviser for reimbursed expenses in excess of the
expense cap has been netted against the Advisory fee payable. See Note 4
of the Portfolio's Notes to Financial Statements which
Annual Report 15
<PAGE>
SSgA
S&P 500 Index Fund
Notes to Financial Statements, continued
August 31, 2000
are included elsewhere in this report. The Investment Company also has
contracts with the Adviser to provide fund accounting, shareholder
servicing and transfer agent services to the Fund. These amounts are
presented on the accompanying Statement of Operations.
In addition, the Fund has entered into arrangements with its Adviser
whereby custody credits realized as a result of uninvested cash balances
were used to reduce a portion of the Fund's expenses. During the year, the
Fund's custodian fees were reduced by $12,316 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly-owned subsidiary of The Northwestern Mutual Life Insurance Company,
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 for services supplied by the
Administrator pursuant to the Administration Agreement, an annual fee,
payable monthly on a pro rata basis. For the period September 1, 1999 to
April 30, 2000, it is 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 up to and including $1 billion - .05%;
over $1 billion - .03%. For the period May 1, 2000 to May 31, 2000, the
annual fee is based on the following percentages of the daily net assets
of all U.S. Equity portfolios: $0 to $2 billion - .0315%; over $2 billion
- .029%. Effective June 1, 2000, the annual fee is based on the following
percentages of the average daily net assets of the Fund: $0 to $1 billion
- .0315%; over $1 billion - .01%. The Administrator will also charge a
flat fee of $30,000 per year per Fund with less than $500 million in net
assets and $1,500 per year for monthly performance reports and use of
Russell Performance Universe software product. In addition, the Fund
reimburses the Administrator for out-of-pocket expenses and start-up costs
for new funds.
Distributor and Shareholder Servicing: The Investment Company has 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 enter 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 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 Shareholder 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
16 Annual Report
<PAGE>
SSgA
S&P 500 Index Fund
Notes to Financial Statements, continued
August 31, 2000
Agents. For the year ended August 31, 2000, the Fund was charged
shareholder servicing expenses of $729,441, $123,434, $371, and $185,204,
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 of the Fund on an
annual basis. The shareholder servicing payments shall not exceed .20% of
the average daily value of net assets of the Fund on an annual basis.
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, 2000.
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 $96,304 for the period September 1, 1999 to May 31, 2000.
Board of Trustees: The Investment Company paid each Trustee not affiliated
with the Investment Company an annual retainer, plus specified amounts for
board and committee meetings attended. 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, 2000 were
as follows:
Administration fees $ 45,125
Fund accounting fees 3,036
Distribution fees 44,623
Shareholder servicing fees 538,503
Transfer agent fees 23,044
Trustees' fees 1,695
----------
$ 656,026
==========
Beneficial Interest: As of August 31, 2000, one shareholder was a record
owner of approximately 10% of the total outstanding shares of the Fund.
5. Fund Share Transactions (amounts in thousands)
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
-----------------------------------------------------------
2000 1999
--------------------------- ---------------------------
Shares Dollars Shares Dollars
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Proceeds from shares sold 52,321 $ 1,287,105 66,940 $ 1,498,677
Proceeds from reinvestment of distributions 4,965 110,904 11,888 232,051
Payments for shares redeemed (52,339) (1,297,846) (49,413) (1,108,956)
------- ----------- ------- -----------
Total net increase (decrease) 4,947 $ 100,163 29,415 $ 621,772
======= =========== ======= ===========
</TABLE>
Annual Report 17
<PAGE>
SSgA
S&P 500 Index Fund
Notes to Financial Statements, continued
August 31, 2000
6. Interfund Lending Program
The Fund and all other funds of the Investment Company received from the
Securities and Exchange Commission an exemptive order on December 23, 1999
to establish and operate an Interfund Credit Facility. This allows the
Funds to directly lend to and borrow money from the SSgA Money Market Fund
for temporary purposes in accordance with certain conditions. The
borrowing Funds are charged the average of the current Repo Rate and the
Bank Loan Rate. The Fund did not utilize the interfund lending program
during this year.
7. Dividends
On September 1, 2000, the Board of Trustees declared a dividend of $.0641
from net investment income, payable on September 8, 2000 to shareholders
of record on September 5, 2000.
18 Annual Report
<PAGE>
SSgA
S&P 500 Index Fund
Tax Information
August 31, 2000 (Unaudited)
The Fund paid distributions of $75,475,294 from net long-term capital
gains during its taxable year ended August 31, 2000.
Please consult a tax advisor for questions about federal or state income
tax laws.
Annual Report 19
<PAGE>
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, Treasurer and CEO
Mark E. Swanson, Treasurer and Principal
Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Treasurer
Carla L. Anderson, Assistant 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
160 Federal Street
Boston, Massachusetts 02110
Annual Report 20
<PAGE>
State Street Equity 500 Index Portfolio
Portfolio of Investments
August 31, 2000
<TABLE>
<CAPTION>
Market
Value
(000)
Shares $
--------- -----------
<S> <C> <C>
Common Stocks - 97.9%
Aerospace - 0.8%
Boeing Co. 239,576 12,847
General Dynamics Corp. 52,200 3,286
Lockheed Martin Corp. 113,346 3,216
Northrop Grumman Corp. 18,400 1,432
United Technologies Corp. 123,900 7,736
---------
28,517
---------
Basic Industries - 2.3%
Air Products & Chemicals, Inc. 59,100 2,146
Alcan Aluminum, Ltd. 56,200 1,844
Alcoa, Inc. 227,560 7,566
Allegheny Technologies, Inc. 18,988 413
B.F. Goodrich Co. 29,000 1,184
Barrick Gold Corp. 104,600 1,667
Bemis Co., Inc. 14,800 496
Bethlehem Steel Corp. (a) 32,300 113
Boise Cascade Corp. 15,400 460
Crown Cork & Seal Co., Inc. 34,300 444
Dow Chemical Co. 179,400 4,698
du Pont (E.I.) de Nemours & Co. 275,341 12,356
Eastman Chemical Co. 21,225 915
Engelhard Corp. 32,725 614
FMC Corp. (a) 8,800 597
Freeport-McMoRan Copper
& Gold, Inc. Class B (a) 45,600 447
Great Lakes Chemical Corp. 15,600 526
Hercules, Inc. 27,400 363
Homestake Mining Co. 71,800 399
Illinois Tool Works, Inc. 79,000 4,429
Inco, Ltd. (a) 49,100 878
International Paper Co. 126,445 4,030
Kimberly-Clark Corp. 146,436 8,566
Mead Corp. 27,500 737
Minnesota Mining &
Manufacturing Co. 104,400 9,709
Newmont Mining Corp. 46,867 870
Nucor Corp. 23,000 845
Owens-Illinois, Inc. (a) 40,300 526
Phelps Dodge Corp. 21,339 950
</TABLE>
<TABLE>
<CAPTION>
Market
Value
(000)
Shares $
--------- -----------
<S> <C> <C>
Placer Dome, Inc. 89,100 791
Potlatch Corp. 7,000 235
PPG Industries, Inc. 45,800 1,855
Praxair, Inc. 40,500 1,792
Rohm & Haas Co. 57,220 1,656
Sealed Air Corp. (a) 22,443 1,152
Sigma Aldrich Corp. 23,200 676
Temple-Inland, Inc. 14,700 624
Union Carbide Corp. 36,600 1,466
USX-U.S. Steel Group 23,000 400
W.R. Grace & Co. (a) 18,000 143
Westvaco Corp. 27,800 761
Willamette Industries, Inc. 29,400 897
Worthington Industries, Inc. 21,900 229
---------
81,465
---------
Capital Goods - 6.0%
Allied Waste Industries, Inc.(a) 50,100 460
Ball Corp. 7,900 274
Boston Scientific Corp. (a) 107,200 2,030
Briggs & Stratton Corp. 5,500 238
Caterpillar, Inc. 91,000 3,344
Cooper Industries, Inc. 24,400 862
Crane Co. 17,600 442
Cummins Engine Co., Inc. 11,600 412
Deere & Co. 61,500 2,026
Dover Corp. 54,500 2,664
Emerson Electric Co. 112,400 7,439
Fluor Corp. 19,900 596
General Electric Co. 2,601,500 152,675
Grainger (W.W.), Inc. 25,300 731
HCA-Healthcare Corp. (The) 146,232 5,045
Ingersoll-Rand Co. 41,700 1,900
ITT Industries, Inc. 23,400 787
Johnson Controls, Inc. 22,000 1,176
Millipore Corp. 12,700 773
National Service Industries, Inc. 11,300 225
Pall Corp. 34,200 731
Parker-Hannifin Corp. 30,250 1,053
Raytheon Co. Class B 88,000 2,447
</TABLE>
See notes to financial statements.
Annual Report 21
<PAGE>
State Street Equity 500 Index Portfolio
Portfolio of Investments, continued
August 31, 2000
<TABLE>
<CAPTION>
Market
Value
(000)
Shares $
--------- -----------
<S> <C> <C>
Timken Co. 14,500 236
TRW, Inc. 33,200 1,517
Tyco International, Ltd. 442,948 25,248
---------
215,331
---------
Consumer Basics - 15.7%
Abbott Laboratories 405,900 17,758
Albertson's, Inc. 110,603 2,378
Allergan, Inc. 33,500 2,450
ALZA Corp. (a) 27,700 2,095
American Home Products Corp. 341,800 18,521
Amgen, Inc. (a) 269,200 20,426
Archer-Daniels-Midland Co. 170,923 1,506
Bard (C.R.), Inc. 13,800 674
Bausch & Lomb, Inc. 14,300 511
Baxter International, Inc. 76,300 6,352
Becton, Dickinson & Co. 66,400 2,000
Bestfoods 72,000 5,085
Biogen, Inc. (a) 39,200 2,710
Biomet, Inc. 46,050 1,557
Black & Decker Corp. 23,700 950
Bristol-Myers Squibb Co. 517,900 27,449
Campbell Soup Co. 110,000 2,791
Cardinal Health, Inc. 72,212 5,908
Clorox Co. (The) 63,400 2,294
Coca-Cola Co. (The) 650,300 34,222
Coca-Cola Enterprises, Inc. 106,400 1,982
Colgate-Palmolive Co. 151,900 7,737
ConAgra, Inc. 127,900 2,342
Corning, Inc. 77,100 25,284
Costco Wholesale Corp. (a) 116,500 4,012
CVS Corp. 102,100 3,790
Fort James Corp. 56,000 1,771
General Mills, Inc. 75,500 2,425
Gillette Co. (The) 275,000 8,250
HEALTHSOUTH Corp. (a) 110,600 677
Heinz (H.J.) Co. 94,150 3,590
Hershey Foods Corp. 36,100 1,541
Humana, Inc. (a) 43,900 376
Johnson & Johnson 365,400 33,594
</TABLE>
<TABLE>
<CAPTION>
Market
Value
(000)
Shares $
--------- -----------
<S> <C> <C>
Kellogg Co. 105,500 2,446
Kroger Co. (The) (a) 218,800 4,964
Lilly (Eli) & Co. 296,300 21,630
Mallinckrodt, Inc. 18,700 843
Manor Care, Inc. (a) 29,200 391
McKesson HBOC, Inc. 74,051 1,847
MedImmune, Inc. (a) 55,000 4,637
Medtronic, Inc. 314,700 16,128
Merck & Co., Inc. 604,300 42,226
Nabisco Group Holdings Corp. 85,800 2,408
Pactiv Corp. (a) 45,200 497
PE Corp. 54,600 5,371
PepsiCo, Inc. 377,500 16,091
Pfizer, Inc. 1,655,525 71,601
Pharmacia & Upjohn, Inc. 332,732 19,486
Philip Morris Cos., Inc. 599,400 17,757
Procter & Gamble Co. 343,100 21,208
Quaker Oats Co. 33,900 2,303
Ralston-Purina Group 82,800 1,873
Safeway, Inc. (a) 130,500 6,435
Sara Lee Corp. 227,300 4,234
Schering-Plough Corp. 385,000 15,448
Snap-On Tools Corp. 15,900 490
St. Jude Medical, Inc. (a) 23,250 921
Stanley Works 24,600 658
SYSCO Corp. 86,900 3,677
Tenet Healthcare Corp. 81,200 2,517
Tupperware Corp. 14,600 295
Unilever NV ADR 150,428 7,108
UnitedHealth Group, Inc. 42,400 4,007
UST Corp. 42,700 923
Watson Pharmaceuticals, Inc. (a) 26,300 1,622
Wellpoint Health Networks, Inc. (a) 16,800 1,450
Winn-Dixie Stores, Inc. 40,600 566
Wrigley (Wm.), Jr. Co. 30,000 2,222
---------
561,288
---------
Consumer Durables - 1.3%
AutoZone, Inc. (a) 36,500 821
Avery Dennison Corp. 30,600 1,654
</TABLE>
See notes to financial statements.
22 Annual Report
<PAGE>
State Street Equity 500 Index Portfolio
Portfolio of Investments, continued
August 31, 2000
<TABLE>
<CAPTION>
Market
Value
(000)
Shares $
--------- -----------
<S> <C> <C>
Best Buy Co. (a) 53,400 3,297
Cooper Tire & Rubber Co. 18,900 228
Dana Corp. 41,465 1,024
Danaher Corp. 37,300 2,096
Delphi Automotive Systems Corp. 148,041 2,433
Eaton Corp. 19,100 1,268
Ford Motor Co. 492,878 11,921
General Motors Corp. 141,098 10,186
Genuine Parts Co. 47,650 980
Goodyear Tire & Rubber Co. 43,500 1,017
Harley-Davidson, Inc. 79,100 3,940
Leggett & Platt, Inc. 52,800 934
Maytag Corp. 19,400 740
PACCAR, Inc. 20,890 887
Pitney Bowes, Inc. 66,600 2,435
Visteon Corp. 30,250 475
Whirlpool Corp. 20,300 771
---------
47,107
---------
Consumer Non-Durables - 5.0%
Alberto Culver Co. Class B 16,000 453
Anheuser-Busch Cos., Inc. 119,200 9,395
Avon Products, Inc. 61,400 2,406
Bed Bath & Beyond, Inc. (a) 72,200 1,268
Brown-Forman Distillers, Inc.
Class B 18,800 996
Brunswick Corp. 23,800 446
Circuit City Stores, Inc. 55,700 1,445
Consolidated Stores Corp. (a) 28,942 394
Coors (Adolph) Co. Class B 9,400 560
Dillard's, Inc. Class A 28,000 359
Dollar General Corp. 85,616 1,761
Eastman Kodak Co. 81,200 5,055
Federated Department Stores, Inc. (a) 58,500 1,616
Fortune Brands, Inc. 43,400 1,107
Gap, Inc. 223,475 5,014
Hasbro, Inc. 46,400 571
Home Depot, Inc. (The) 608,297 29,236
International Flavors &
Fragrances, Inc. 28,200 726
</TABLE>
<TABLE>
<CAPTION>
Market
Value
(000)
Shares $
--------- -----------
<S> <C> <C>
JC Penney & Co., Inc. 70,700 990
Kmart Corp. (a) 131,900 923
Kohl's Corp. (a) 85,500 4,788
Limited, Inc. (The) 108,836 2,177
Liz Claiborne, Inc. 12,900 567
Longs Drug Stores, Inc. 9,700 183
Lowe's Cos., Inc. 100,100 4,486
Mattel, Inc. 116,187 1,147
May Department Stores Co. 89,900 2,062
Newell Rubbermaid, Inc. 72,657 1,885
NIKE, Inc. Class B 71,200 2,817
Nordstrom, Inc. 36,600 631
Office Depot, Inc. (a) 88,400 646
Polaroid Corp. 12,200 207
Radioshack Corp. 48,700 2,873
Reebok International, Ltd. (a) 13,700 263
Russell Corp. 7,600 145
Seagram Co., Ltd. 114,700 6,904
Sears Roebuck & Co. 91,800 2,863
Springs Industries, Inc. 5,300 158
Staples, Inc. (a) 128,850 1,981
Starbucks Corp. (a) 49,600 1,810
SuperValu, Inc. 36,900 551
Target Corp. 240,000 5,580
Tiffany & Company 39,400 1,640
TJX Cos., Inc. 81,800 1,539
Toys "R" Us, Inc. (a) 59,000 1,073
V.F. Corp. 31,900 730
Wal-Mart Stores, Inc. 1,171,900 55,592
Walgreen Co. 265,700 8,735
---------
178,754
---------
Consumer Services - 1.5%
AMR Corp. 40,100 1,316
Carnival Corp. 157,800 3,146
Convergys Corp. (a) 40,300 1,577
Darden Restaurants, Inc. 34,100 603
Delta Air Lines, Inc. 33,300 1,648
Disney (Walt) Co. 544,886 21,217
Harrah's Entertainment, Inc. (a) 32,100 911
</TABLE>
See notes to financial statements.
Annual Report 23
<PAGE>
State Street Equity 500 Index Portfolio
Portfolio of Investments, continued
August 31, 2000
<TABLE>
<CAPTION>
Market
Value
(000)
Shares $
--------- -----------
<S> <C> <C>
Hilton Hotels Corp. 103,200 1,032
Marriot International, Inc. Class A 62,000 2,449
McDonald's Corp. 352,900 10,543
Sabre Holdings Corporation Class A 35,123 979
Sapient Corp. (a) 31,800 1,677
Southwest Airlines Co. 129,287 2,925
Tricon Global Restaurants, Inc. (a) 38,810 1,130
USAirways Group, Inc. (a) 18,700 636
Wendy's International, Inc. 32,900 621
---------
52,410
---------
Electrical Equipment - 1.0%
American Power Conversion Corp. (a) 52,400 1,248
Molex, Inc. 50,775 2,682
Tektronix, Inc. 12,400 945
Texas Instruments, Inc. 453,430 30,351
Thomas & Betts Corp. 14,900 279
---------
35,505
---------
Electronics - 3.5%
Agilent Technologies, Inc. (a) 118,700 7,159
Altera Corp. (a) 104,600 6,773
Analog Devices, Inc. (a) 93,100 9,357
Broadcom Corp. (a) 56,600 14,146
Conexant Systems, Inc. (a) 57,100 2,123
JDS Uniphase Corp. (a) 245,000 30,503
KLA Tencor Corporation (a) 48,200 3,157
Lexmark International Group, Inc.
Class A (a) 34,000 2,306
Linear Technology Corp. 81,600 5,855
Maxim Integrated Products, Inc. (a) 74,200 6,502
Novellus Systems, Inc. (a) 34,200 2,103
QUALCOMM, Inc. (a) 195,800 11,724
Sanmina Corp. (a) 38,700 4,564
Solectron Corp. (a) 156,700 7,100
Teradyne, Inc. 45,100 2,923
Xilinx, Inc. (a) 84,500 7,510
---------
123,805
---------
</TABLE>
<TABLE>
<CAPTION>
Market
Value
(000)
Shares $
--------- -----------
<S> <C> <C>
Energy - 5.4%
Amerada Hess Corp. 22,600 1,547
Anadarko Petroleum Corp. 63,468 4,174
Apache Corp. 29,700 1,871
Ashland, Inc. 18,900 666
Baker Hughes, Inc. 85,880 3,140
Burlington Resources, Inc. 58,222 2,289
Chevron Corp. 171,400 14,483
Conoco, Inc. Class B 163,400 4,269
Constellation Energy Group 37,100 1,419
Devon Energy Corp. 34,000 1,991
El Paso Energy Corp. 60,400 3,518
Exxon Mobil Corp. 915,705 74,744
Halliburton Co. 116,600 6,180
Kerr-McGee Corp. 23,356 1,476
McDermott International, Inc. 15,400 118
Occidental Petroleum Corp. 95,300 2,061
ONEOK, Inc. 8,000 256
Phillips Petroleum Co. 67,700 4,189
Rowan Cos., Inc. (a) 25,200 781
Royal Dutch Petroleum Co. ADR 563,300 34,467
Schlumberger, Ltd. 150,300 12,822
Sempra Energy 55,250 1,077
Sunoco, Inc. 24,055 654
Texaco, Inc. 145,300 7,483
Tosco Corp. 39,000 1,190
Transocean Sedco Forex, Inc. 53,952 3,224
Unocal Corp. 62,700 2,093
USX-Marathon Group 80,500 2,209
---------
194,391
---------
Finance - 14.5%
Aetna, Inc. 37,102 2,075
AFLAC, Inc. 69,200 3,737
Allstate Corp. 195,788 5,690
American Express Co. 350,300 20,711
American General Corp. 65,087 4,739
American International Group, Inc. 607,867 54,176
AmSouth Bancorp 106,850 1,950
AON Corp. 66,450 2,479
</TABLE>
See notes to financial statements.
24 Annual Report
<PAGE>
State Street Equity 500 Index Portfolio
Portfolio of Investments, continued
August 31, 2000
<TABLE>
<CAPTION>
Market
Value
(000)
Shares $
--------- -----------
<S> <C> <C>
Associates First Capital Corp.
Class A 191,016 5,372
Bank of America Corp. 434,795 23,289
Bank of New York Co., Inc. 194,600 10,204
Bank One Corp. 302,668 10,669
BB&T Corp. 96,400 2,609
Bear Stearns Cos., Inc. 30,168 2,023
Capital One Financial Corp. 50,100 3,022
Charter One Financial, Inc. 55,100 1,309
Chase Manhattan Corp. 341,442 19,078
Chubb Corp. (The) 45,500 3,484
CIGNA Corp. 42,600 4,143
Cincinnati Financial Corp. 41,700 1,624
CIT Group, Inc. (The) Class A 71,400 1,249
Citigroup, Inc. 1,183,367 69,079
Comerica, Inc. 40,350 2,272
Conseco, Inc. 91,545 772
Countrywide Credit Industries, Inc. 30,800 1,167
Dun & Bradstreet Corp. 43,700 1,442
Equifax, Inc. 39,200 997
Federal National Mortgage
Association 264,900 14,238
Federal Home Loan Mortgage Corp. 183,100 7,713
Fifth Third Bancorp 121,925 5,631
First Union Corp. 258,212 7,472
Firstar Corp. 254,976 6,088
FleetBoston Financial Corp. 237,764 10,150
Franklin Resources, Inc. 61,700 2,345
Golden West Financial Corp. 42,800 2,038
Hartford Financial Services
Group, Inc. (The) 56,000 3,731
Household International Corp. 124,299 5,966
Huntington Bancshares, Inc. 66,047 1,115
Jefferson-Pilot Corp. 27,875 1,845
KeyCorp 110,098 2,223
Lehman Brothers Holdings, Inc. 31,600 4,582
Lincoln National Corp. 51,800 2,797
Loews Corp. 24,900 2,015
Marsh & McLennan Cos., Inc. 71,050 8,437
MBIA, Inc. 26,600 1,749
MBNA Corp. 216,782 7,655
</TABLE>
<TABLE>
<CAPTION>
Market
Value
(000)
Shares $
--------- -----------
<S> <C> <C>
Mellon Financial Corp. 128,900 5,833
Merrill Lynch & Co., Inc. 102,000 14,790
MGIC Investment Corp. 28,600 1,682
Morgan (J.P.) & Co., Inc. 42,700 7,139
Morgan Stanley Dean Witter & Co. 297,612 32,012
National City Corp. 158,100 3,310
Northern Trust Corp. 58,200 4,907
Old Kent Financial Corp. 37,375 1,096
Paine Webber Group, Inc. 38,900 2,781
Paychex, Inc. 97,125 4,334
PNC Bank Corp. 76,000 4,479
Price (T. Rowe) & Associates, Inc. 32,200 1,457
Progressive Corp. 20,000 1,516
Providian Financial Corp. 37,200 4,276
Regions Financial Corp. 59,300 1,290
SAFECO Corp. 34,800 916
Schwab (Charles) Corp. 358,050 13,673
SouthTrust Corp. 45,800 1,291
St. Paul Cos., Inc. 54,972 2,618
State Street Corp. 42,100 4,957
Stilwell Financial, Inc. (a) 57,900 2,801
Summit Bancorp 47,300 1,310
SunTrust Banks, Inc. 79,100 3,906
Synovus Financial Corp. 74,100 1,459
Torchmark Corp. 34,700 974
U.S. Bancorp 196,417 4,272
Union Planters Corp. 35,600 1,079
UnumProvident Corp. 63,228 1,371
USA Education, Inc. 41,200 1,615
Wachovia Corp. 52,800 3,026
Washington Mutual, Inc. 143,498 5,022
Wells Fargo Co. 422,360 18,241
---------
516,584
---------
General Business - 2.9%
American Greetings Corp. Class A 17,800 332
Automatic Data Processing, Inc. 165,400 9,862
Block (H&R) Co., Inc. 26,600 954
Cendant Corp. (a) 189,636 2,501
</TABLE>
See notes to financial statements.
Annual Report 25
<PAGE>
State Street Equity 500 Index Portfolio
Portfolio of Investments, continued
August 31, 2000
<TABLE>
<CAPTION>
Market
Value
(000)
Shares $
--------- -----------
<S> <C> <C>
Clear Channel Communications,
Inc. (a) 151,100 10,936
Comcast Corp. Special Class A 236,400 8,806
Computer Sciences Corp. (a) 44,000 3,479
Deluxe Corp. 19,900 438
Donnelley (R.R.) & Sons Co. 33,300 857
Dow Jones & Co., Inc. 24,000 1,502
Ecolab, Inc. 34,700 1,351
First Data Corp. 108,200 5,160
Gannett Co., Inc. 69,600 3,941
Harcourt General, Inc. 19,700 1,168
IMS Health, Inc. 80,400 1,518
Interpublic Group Cos., Inc. 77,600 2,968
Knight-Ridder, Inc. 20,500 1,120
McGraw-Hill, Inc. 49,800 3,084
Meredith Corp. 14,000 382
New York Times Co. Class A 44,500 1,744
Omnicom Group, Inc. 47,400 3,955
Quintiles Transnational Corp. (a) 31,100 433
Time Warner, Inc. 346,000 29,583
Tribune Co. 78,845 2,814
Waste Management, Inc. 161,859 3,065
Young & Rubicam, Inc. 19,400 1,135
---------
103,088
---------
Shelter - 0.3%
Armstrong World Industries, Inc. 10,600 169
Centex Corp. 14,600 422
Georgia-Pacific Group 46,900 1,255
Kaufman & Broad Home Corp. 11,100 276
Louisiana Pacific Corp. 29,100 307
Masco Corp. 113,700 2,217
Owens Corning 15,300 79
Pulte Corp. 11,600 382
Sherwin-Williams Co. 44,200 1,017
Vulcan Materials Co. 26,500 1,174
Weyerhaeuser Co. 60,700 2,811
---------
10,109
---------
</TABLE>
<TABLE>
<CAPTION>
Market
Value
(000)
Shares $
--------- -----------
<S> <C> <C>
Technology - 24.5%
Adaptec, Inc. (a) 25,100 615
Adobe Systems, Inc. 31,300 4,069
Advanced Micro Devices, Inc. (a) 78,600 2,957
America Online, Inc. (a) 604,098 35,415
Apple Computer, Inc. (a) 85,600 5,216
Applied Materials, Inc. (a) 211,600 18,264
Autodesk, Inc. 15,900 447
BMC Software, Inc. (a) 62,400 1,685
Cabletron Systems, Inc. (a) 49,300 1,846
Ceridian Corp. (a) 40,400 977
Cisco Systems, Inc. (a) 1,829,100 125,636
Citrix Systems, Inc. (a) 48,800 1,074
COMPAQ Computer Corp. 446,529 15,210
Computer Associates
International, Inc. 154,062 4,891
Compuware Corp. (a) 97,500 1,030
Dell Computer Corp. (a) 675,800 29,482
Electronic Data Systems Corp. 122,500 6,102
EMC Corp. (a) 570,524 55,911
Gateway, Inc. (a) 84,400 5,748
Guidant Corp. (a) 80,300 5,405
Hewlett-Packard Co. 263,000 31,757
Honeywell International, Inc. 210,037 8,100
Intel Corp. 1,761,200 131,870
International Business
Machines Corp. 466,100 61,525
LSI Logic Corp. (a) 81,900 2,943
Mercury Interactive Corp. (a) 18,500 2,260
Micron Technology, Inc. (a) 146,500 11,976
Microsoft Corp. (a) 1,384,500 96,655
National Semiconductor Corp. (a) 46,600 2,074
NCR Corp. (a) 26,300 1,062
Network Appliance, Inc. (a) 80,200 9,383
Novell, Inc. (a) 88,800 1,088
Oracle Systems Corp. (a) 746,410 67,830
Palm, Inc. (a) 148,473 6,524
Parametric Technology Corp.(a) 75,400 1,008
PeopleSoft, Inc. (a) 73,100 2,358
PerkinElmer, Inc. 13,600 1,223
</TABLE>
See notes to financial statements.
26 Annual Report
<PAGE>
State Street Equity 500 Index Portfolio
Portfolio of Investments, continued
August 31, 2000
<TABLE>
<CAPTION>
Market
Value
(000)
Shares $
--------- -----------
<S> <C> <C>
Rockwell International Corp. 48,400 1,957
Scientific-Atlanta, Inc. 41,400 3,227
Seagate Technology (a) 60,400 3,586
Siebel Systems, Inc. (a) 52,600 10,405
Sun Microsystems, Inc. (a) 417,100 52,946
Tellabs, Inc. (a) 107,700 6,051
Textron, Inc. 36,500 2,046
Thermo Electron Corp. (a) 43,200 1,004
Unisys Corp. (a) 86,200 1,121
VERITAS Software Corp. (a) 103,100 12,424
Xerox Corp. 177,600 2,853
Yahoo!, Inc. (a) 142,400 17,302
---------
876,538
---------
Telecommunications - 9.6%
ADC Telecommunications, Inc. (a) 177,700 7,275
Andrew Corp. (a) 20,868 618
AT&T Corp. 986,714 31,082
BellSouth Corp. 493,100 18,399
CenturyTel, Inc. 37,950 1,093
Comverse Technology, Inc. (a) 39,700 3,650
Global Crossing, Ltd. (a) 232,010 6,975
Lucent Technologies, Inc. 856,292 35,804
Motorola, Inc. 564,421 20,354
Nextel Communications, Inc.
Class A (a) 200,100 11,093
Nortel Networks Corp. 779,020 63,539
Qwest Communications
International, Inc. (a) 428,015 22,096
SBC Communications, Inc. 893,645 37,310
Verizon Communications 715,306 31,205
Viacom, Inc. Class B (a) 401,014 26,993
WorldCom, Inc. (a) 751,383 27,425
---------
344,911
---------
Transportation - 0.3%
Burlington Northern, Inc. 111,407 2,493
CSX Corp. 56,200 1,342
FedEx Corp. (a) 75,540 3,048
Navistar International Corp. (a) 17,550 658
</TABLE>
<TABLE>
<CAPTION>
Market
Value
(000)
Shares $
--------- -----------
<S> <C> <C>
Norfolk Southern Corp. 104,500 1,678
Ryder Systems, Inc. 17,100 328
Union Pacific Corp. 64,500 2,564
---------
12,111
---------
Utilities - 3.3%
AES Corp. (a) 112,100 7,147
Alltel Corp. 82,700 4,182
Ameren Corp. 36,077 1,459
American Electric Power Co., Inc. 83,800 2,954
Cinergy Corp. 42,626 1,252
CMS Energy Corp. 30,800 805
Coastal Corp. 55,900 3,850
Columbia Energy Group 21,700 1,523
Consolidated Edison, Inc. 57,800 1,810
CP & L, Inc. 43,200 1,598
Dominion Resources, Inc. 61,008 3,233
DTE Energy Co. 38,600 1,341
Duke Energy Corp. NPV 96,674 7,232
Eastern Enterprises, Inc. 6,800 430
Edison International 90,500 1,872
Enron Corp. 191,800 16,279
Entergy Corp. 60,500 1,842
FirstEnergy Corp. 60,700 1,502
Florida Progress Corp. 27,100 1,406
FPL Group, Inc. 46,800 2,498
GPU, Inc. 33,500 1,026
KeySpan Corp. 37,000 1,274
Niagara Mohawk Holdings,
Inc. (a) 41,800 538
NICOR, Inc. 13,300 491
Peco Energy Co. 44,600 2,149
Peoples Energy Corp. 8,300 270
PG&E Corp. 100,300 2,903
Pinnacle West Capital Corp. 22,000 906
PPL Corp. 36,200 1,213
Public Service Enterprise Group,
Inc. 56,900 2,063
Reliant Energy, Inc. 78,810 2,926
Southern Co. 169,800 5,083
</TABLE>
See notes to financial statements.
Annual Report 27
<PAGE>
State Street Equity 500 Index Portfolio
Portfolio of Investments, continued
August 31, 2000
<TABLE>
<CAPTION>
Market
Value
(000)
Shares $
--------- -----------
<S> <C> <C>
Sprint Corp. (Fon Group) 230,900 7,735
Sprint Corp. (PCS Group) (a) 241,900 12,140
TXU Corp. 66,930 2,338
Unicom Corp. 46,700 2,134
Williams Cos. (The) 115,980 5,342
Xcel Energy, Inc. 89,260 2,237
----------
116,983
----------
Total Common Stocks
(cost $2,542,341)(000) 3,498,897
----------
</TABLE>
<TABLE>
<CAPTION>
Market
Shares/Par Value
Amount (000)
(000) $
----------- ----------
<S> <C> <C>
Short Term Investments - 2.0%
AIM Short Term Investment Prime
Portfolio 61,772 61,772
Federated Investors Prime Cash
Obligations Fund 3 3
United States Treasury Bills:
5.69% due 09/14/00 (b)(c) $ 1,500 1,497
5.70% due 09/14/00 (b)(c) 1,535 1,532
5.75% due 09/14/00 (b)(c) 200 200
5.97% due 09/14/00 (b)(c) 5,000 4,989
----------
</TABLE>
<TABLE>
<CAPTION>
Market
Shares/Par Value
Amount (000)
(000) $
---------- ----------
<S> <C> <C>
Total Short Term Investments
(cost $69,993)(000) 69,993
----------
Total Investments - 99.9%
(identified cost $2,612,334)(000) 3,568,890
Other Assets and Liabilities
Net - 0.1% 3,556
----------
Net Assets - 100% $3,572,446
==========
</TABLE>
(a) Non-income producing security.
(b) Held as collateral in connection with futures contracts purchased by the
Fund.
(c) Rate represents annualized yield at date of purchase.
Abbreviations
ADR - American Depositary Receipt
NPV - No Par Value
NV - Non-voting
<TABLE>
<CAPTION>
Number Unrealized
of Appreciation
Contracts (000)
--------- ------------
<S> <C> <C>
Schedule of Futures Contracts
S&P 500 Financial Futures Contracts
Expiration date 09/2000 222 $ 1,835
----------
Total unrealized appreciation
on Open futures contracts
purchased $ 1,835
==========
</TABLE>
See notes to financial statements.
28 Annual Report
<PAGE>
State Street Equity 500 Index Portfolio
Statement of Assets and Liabilities
(Amounts in thousands) August 31, 2000
<TABLE>
<S> <C> <C>
Assets
Investments at market (identified cost $2,612,334) ........................ $3,568,890
Receivables:
Investments sold ......................................................... 5,121
Daily variation margin on futures contracts .............................. 977
Dividends and interest ................................................... 4,738
----------
Total assets ............................................................ 3,579,726
Liabilities
Payables:
Investments purchased .......................................... $6,847
Management fees (Note 4) ....................................... 433
------
Total liabilities ....................................................... 7,280
----------
Net Assets ................................................................ $3,572,446
==========
Composition of Net Assets
Paid-in capital ........................................................... $2,614,055
Net unrealized appreciation on investments and futures contracts .......... 958,391
----------
Net Assets ................................................................ $3,572,446
==========
</TABLE>
See notes to financial statements.
Annual Report 29
<PAGE>
State Street Equity 500 Index Portfolio
Statement of Operations
(Amounts in thousands) For the Period Ended August 31, 2000*
<TABLE>
<S> <C> <C>
Investment Income
Dividends (net of foreign taxes withheld of $124) ........................ $ 11,830
Interest ................................................................. 1,037
---------
Total Investment Income ................................................. 12,867
Expenses
Management fees (Note 4) .................................... $ 483
---------
Total Expenses .......................................................... 483
---------
Net Investment Income ..................................................... 12,384
---------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments ................................................. (28,849)
Futures contracts ........................................... 1,133
---------
(27,716)
Net change in unrealized appreciation on:
Investments ................................................. 283,765
Futures contracts ........................................... 1,835
---------
285,600
---------
Net realized and unrealized gain ............................. 257,884
---------
Net increase in net assets resulting from operations ......... $ 270,268
=========
</TABLE>
-----------
* The Portfolio commenced operations on March 1, 2000.
See notes to financial statements.
30 Annual Report
<PAGE>
State Street Equity 500 Index Portfolio
Statement of Changes in Net Assets
(Amounts in thousands) For the Period Ended August 31, 2000*
<TABLE>
<S> <C>
Increase (Decrease) in Net Assets From:
Operations
Net investment income ......................................... $ 12,384
Net realized gain (loss) ...................................... (27,716)
Net change in unrealized appreciation ......................... 285,600
----------
Net increase in net assets resulting from operations ......... 270,268
----------
Capital Transactions (Note 3)
Proceeds from contributions ................................... 3,697,388
Fair value of withdrawals ..................................... (395,210)
----------
Net increase in net assets from capital transactions ......... 3,302,178
----------
Total Net Increase in Net Assets ............................... 3,572,446
Net Assets
Beginning of period ........................................... --
----------
End of period ................................................. $3,572,446
==========
</TABLE>
-----------
* The Portfolio commenced operations on March 1, 2000.
See notes to financial statements.
Annual Report 31
<PAGE>
State Street Equity 500 Index Portfolio
Financial Highlights
For the Period Ended August 31, 2000*
The following table includes selected supplemental data and ratios to average
net assets:
<TABLE>
<S> <C>
Supplemental Data and Ratios:
Net assets, end of period (in thousands) ......... $3,572,446
Ratios to average net assets:
Operating expenses** ............................ 0.045%
Net investment income** ......................... 1.16%
Portfolio turnover rate*** ....................... 14%
Total return*** .................................. 11.74%
</TABLE>
-----------
* The Portfolio commenced operations on March 1, 2000.
** Annualized.
*** Not Annualized.
See notes to financial statements.
32 Annual Report
<PAGE>
State Street Equity 500 Index Portfolio
Notes to Financial Statements
August 31, 2000
1. Organization
State Street Master Funds (the "Trust") is a registered and diversified
open-end management investment company, as defined in the Investment Company
Act of 1940, as amended (the "1940 Act"), that was organized under the laws
of The Commonwealth of Massachusetts on July 27, 1999. The Trust is comprised
of 5 investment portfolios. Information presented in these financial
statements pertains only to the State Street Equity 500 Index Portfolio (the
"Portfolio"). At August 31, 2000, the other portfolios had not commenced
operations. The Declaration of the Trust permits the Board of Trustees to
issue an unlimited number of shares of beneficial interest.
2. Significant Accounting Policies
The Portfolio's financial statements are prepared in accordance with
generally accepted accounting principles that require the use of management
estimates. Actual results could differ from those estimates. The following is
a summary of the significant accounting policies consistently followed by the
Portfolio in the preparation of its financial statements.
Security valuation: The Portfolio's investments are valued each business day
by an independent pricing service approved by the Trustees. 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. Investments
in other mutual funds are valued at the net asset value per share.
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.
Money market instruments maturing within 60 days of the valuation date are
valued at amortized cost, a method by which each money market instrument is
initially valued at cost, and thereafter a constant accretion or amortization
of any discount or premium is recorded until maturity of the security.
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 and investment income: Securities transactions are
recorded on a trade date basis. Dividend income is recorded on the
ex-dividend date. Interest income is recorded daily on the accrual basis and
includes amortization of premium and accretion of discounts on investments.
Realized gains and losses from securities transactions are recorded on the
basis of identified cost.
All of the net investment income and realized and unrealized gains and losses
from the security transactions of the Portfolio are allocated pro rata among
the investors in the Portfolio based on each investor's average net assets.
Federal income taxes: The Portfolio is not required to pay federal income
taxes on its net investment income and net capital gains because it is
treated as a partnership for federal income tax purposes. All interest,
dividends, gain and loss of the Portfolio are deemed to have been "passed
through" to the Portfolio's interest holders in proportion to their holdings
in the portfolio, regardless of whether such items have been distributed by
the Portfolio. Each partner is responsible for tax liability based on his/her
distributive share; therefore no provision has been made for federal income
taxes.
Annual Report 33
<PAGE>
State Street Equity 500 Index Portfolio
Notes to Financial Statements, continued
August 31, 2000
Futures: The Portfolio may enter into financial futures contracts. Upon
entering into a futures contract, the Portfolio is required to deposit with
the broker cash or securities in an amount equal to a certain percentage of
the contract amount. Variation margin payments are made or received by the
Portfolio each day, depending on the daily fluctuations in the value of the
underlying security, and are recorded for financial statement purposes as
unrealized gains or losses by the portfolio. The Portfolio recognizes a
realized gain or loss when the contract is closed. The Fund is required to
segregate securities in an amount equal to the outstanding value of the open
futures contracts in accordance with SEC requirements.
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.
3. Securities Transactions and Capital Transactions
For the period ended August 31, 2000, purchases and sales of investment
securities, excluding short-term investments and futures contracts,
aggregated to $387,637,175 and $353,684,809, respectively. The aggregate
gross unrealized appreciation and depreciation were $1,116,600,115 and
$160,044,012 respectively as of August 31, 2000.
During the period ended August 31, 2000, investment securities were received
by the Fund as proceeds from capital invested. Net contributions, at cost,
amounted to $2,779,406,282, and unrealized gains assumed by the Fund at the
time of purchase amounted to $672,790,394.
4. Related Party Fees and Transactions
The Portfolio has entered into an investment advisory agreement with State
Street Bank and Trust Company ("State Street") under which State Street, as
the investment advisor, directs the investments of the Portfolio in
accordance with its investment objectives, policies, and limitations. The
Trust also has contracts with State Street to provide Custody, Administration
and Transfer Agent services to the Portfolio. In compensation for these
services and for the assumption of ordinary operating expenses of the
Portfolio, State Street receives a management fee, calculated daily, at the
annual rate of 0.045% of the Portfolio's average daily net assets.
34 Annual Report
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
To the Board of Trustees of State Street Master Funds and
Owners of Beneficial Interest of State Street Equity 500 Index Portfolio:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments and schedule of futures contracts, of State Street
Equity 500 Index Portfolio (the "Portfolio"), as of August 31, 2000, and the
related statement of operations, the statement of changes in net assets, and
financial highlights for the period from March 1, 2000 (commencement of
operations) to August 31, 2000. These financial statements and financial
highlights are the responsibility of the Portfolio's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of August 31, 2000, by correspondence with the custodian and brokers,
or other appropriate auditing procedures where replies from brokers were not
received. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of State
Street Equity 500 Index Portfolio as of August 31, 2000, and the results of its
operations, the changes in its net assets, and the financial highlights for the
period from March 1, 2000 (commencement of operations) to August 31, 2000, in
conformity with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
October 6, 2000
Annual Report 35
<PAGE>
[COVER GRAPHIC]
SSgA(R) Funds
ANNUAL REPORT
Active International Fund
August 31, 2000
<PAGE>
SSgA(R) Funds
Active International Fund
Annual Report
August 31, 2000
Table of Contents
Page
Chairman's Letter........................................................... 4
Portfolio Management Discussion and Analysis................................ 6
Report of Independent Accountants........................................... 8
Financial Statements........................................................ 9
Financial Highlights........................................................ 22
Notes to Financial Statements............................................... 23
Tax Information............................................................. 29
Fund Management and Service Providers....................................... 30
"SSgA(R)" 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,
It is our pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 2000. The SSgA Fund Family has grown to include
twenty-four portfolios with over $21 billion in assets as of August 31, 2000.
The Fund Family provides a wide range of strategies covering the world's major
markets. The enclosed information provides an overview of the investment process
for the SSgA Active International Fund. This overview contains the portfolio
management discussion, performance updates and financial information for the
Fund.
In an ongoing effort to develop competitive products and services that provide
investment solutions for our clients, we have added the SSgA Intermediate
Municipal Bond Fund to the SSgA Fund Family. This Fund's investment objective
seeks to provide federally tax-exempt current income by investing primarily in a
diversified portfolio of municipal debt securities with a dollar-weighted
average maturity between three and ten years.
We are also pleased with the success of our SSgA Emerging Markets and SSgA
Growth and Income Funds as they were included in Money(R) Magazine's June 2000
issue listing of the 'Top 100 Mutual Funds'. This is the second year in a row
that these funds have been selected.
Additionally, the SSgA Tax Free Money Market and the SSgA Active International
Funds have achieved five-year performance history during the 2000 fiscal year.
Currently, all of our SSgA Money Market Funds have at least a five-year
performance history. We strive to meet our clients' needs by providing funds
with long-term records and competitive performance.
We would like to thank you for choosing the SSgA Funds. Our reputation is based
on our tradition of designing and delivering exceptional financial services to
our clients. We look forward to continue sharing the benefit of our experience
with you.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
/s/ Timothy B. Harbert
Timothy B. Harbert
State Street Global Advisors
President and Chief Operating Officer, SSgA
4 Annual Report
<PAGE>
SSgA Active International Fund
--------------------------------------------------------------------------------
Management of the Funds
--------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
[PHOTO]
Timothy B. Harbert
President and Chief Operating 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. Geoff Benarick, Principal, has been the portfolio manager primarily
responsible for investment decisions regarding the SSgA Active International
Fund since December 1999. Mr. Benarick joined SSgA in 1995 as an Investment
Support Associate in Global Advisor's Active International Operations area. He
is responsible for research and portfolio management support for SSgA's active
international developed markets strategies. Prior to joining SSgA, he worked for
State Street Corporation, Luxembourg as a Senior Portfolio Administrator in the
Global Portfolio Operations area. He holds a BA in Economics from Boston
College. There are seven other portfolio managers working with Mr. Benarick.
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
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.
--------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
Dates Active International Fund MSCI EAFE Index **
Inception* $10,000 $10,000
1995 $10,890 $10,933
1996 $11,567 $11,794
1997 $11,703 $12,862
1998 $10,591 $12,844
1999 $13,438 $16,141
2000 $14,257 $17,683
================================================================================
Performance Review
For the fiscal year ended August 31, 2000, the SSgA Active International Fund
posted a return of 6.09% versus the MSCI EAFE Index return of 9.55%. The Fund's
performance is net of operating expenses, whereas Index results do not include
expenses of any kind.
Of the 3.4% difference between the performance of the Fund and the Index
results, 1.00% results from the payment of expenses by the Fund. The remainder
of the underperformance can be attributed to poor performance in the Fund's
Japanese portfolio.
The United States' economy continued to post strong performance throughout the
fiscal year, acting as a catalyst to improve economic conditions and fuel growth
throughout the world. The heavily technology-laden NASDAQ market returned almost
52% for the five month period ended December 31, 1999. These incredible results
helped to drive performance of technology stocks around the globe.
--------------------------------------------------------------------------------
SSgA Active International Fund
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
-------------- ------------ -------
1 Year $10,609 6.09%
5 Years $13,092 5.54%+
Inception $14,257 6.68%+
--------------------------------------------------------------------------------
Morgan Stanley Capital International
Europe, Australia, Far East Index (Net Dividend)
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
-------------- ------------ -------
1 Year $10,955 9.55%
5 Years $16,173 10.09%+
Inception $17,683 10.92%+
See related Notes on following page.
6 Annual Report
<PAGE>
SSgA Active International Fund
--------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
--------------------------------------------------------------------------------
Additionally, cross-border merger and acquisition activity in Europe, rising oil
prices, and a series of Federal Reserve interest rate hikes in the US all
affected the performance of Fund.
Market and Portfolio Highlights
Europe was the biggest contributor to performance during the past year. Although
underweight to the region as a whole, specific security overweights in Media and
Health Care, such as Prosieben (up 240%) and Smith and Nephew (up 60%) helped
the Fund outperform in this region over the past year. The MSCI Europe returned
close to 30% in local terms over the past fiscal year, although stated in dollar
terms, the return was only 7%. The substantial decline in the Euro affected
year-end results, and was due primarily to relative economic growth in Euro
participating countries. Even with the positive growth data coming out of the
Euro economies, they could not keep pace with the momentum in the US.
Returns across Europe, and the Fund's European holdings, this year continued to
be driven by accelerating merger and acquisition activity, with large notable
deals across sectors including Vodafone/Mannesman, Total/Elf and Glaxo/
Smithkline. Technology, Media, and Telecom stocks also drove returns over the
year as many firms floated Internet and mobile subsidiaries in order to unlock
value and finance the increasing cost of third generation mobile phone
investments. Portfolio holdings in these industries, such as Nokia, Mannesmann,
and Siemens were among the biggest contributors to the portfolio's performance.
The Fund also benefited from underweight securities in the Transportation
industry that were negatively affected by increasing oil prices.
Japan continued to be a challenging investment environment during the past year.
The disappointingly modest cash flow into the equities markets from the maturing
Postal Savings Program, the political uncertainty after Prime Minister Obuchi's
stroke, continued corporate restructurings, and the abolishment of the zero
interest rate policy all added to the uncertainty of the local Japanese markets.
Their economic recovery continued to progress during the year, but at an
extremely slow pace. Corporate spending picked up during the first quarter of
2000, followed by increased consumer spending during the second quarter of 2000.
However, both factors will need to continue in order to sustain a true economic
recovery. Once this recovery is established, the Manager expects foreign funds
to flow back into Japan and further sustain the economy. The Fund is currently
at a moderate overweight to Japan and is well positioned to take advantage of an
upturn in the economy. The Fund's biggest contributors in Japan came from the
Technology sector, with Kyocera and Taiyo Yuden returning significant gains of
175% and 170%, respectively.
The Fund's exposure to emerging markets contributed favorable overall
performance results during the past fiscal year. Fund allocations in Israel,
South Africa, and Brazil all provided beneficial returns, with Israeli
pharmaceutical and software companies performing particularly well during the
year. The Fund's weight in Korea was the only emerging markets exposure that had
a negative effect on the Fund, with continuing concerns over large corporate
restructuring dragging that market down during the period.
--------------------------------------------------------
Top Ten Equity Holdings
(as a percent of Total Investments) August 31, 2000
--------------------------------------------------------
Vodafone Airtouch PLC 2.9%
Nokia Oyj 2.0
BP Amoco PLC 1.5
Nippon Telegraph & Telephone Corp. 1.5
Toyota Motor Corp. 1.2
Siemens AG 1.2
Telefonaktiebolaget LM Ericsson AB 1.1
Novartis AG 1.1
France Telecom SA 1.0
ING Groep 1.0
--------------------------------------------------------
--------------------------
Notes: The following notes relate to the Growth of $10,000 graph and table on
the preceding page.
* The Fund commenced operations on March 7, 1995. Index comparison began
March 1, 1995.
** 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, 2000, 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 accounting principles generally
accepted in the United States of America. 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 auditing standards
generally accepted in the United States of America 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, 2000 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
Boston, Massachusetts
October 11, 2000
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
Active International Fund
Statement of Net Assets
August 31, 2000
Market
Number Value
of (000)
Shares $
------ -------
Common Stocks - 83.9%
Australia - 0.9%
AMP, Ltd. 3,572 37
Aristocrat Leisure, Ltd. 3,100 11
Australia & New Zealand Bank Group, Ltd. 600 5
Australian Gas & Light Co. 2,667 16
Brambles Industries, Ltd. 1,470 42
BRL Hardy, Ltd. 2,227 10
Broken Hill Proprietary Co. 6,242 68
Commonwealth Bank of Australia 4,520 72
Computershare, Ltd. 3,200 15
CSL, Ltd. 1,037 21
Foster's Brewing Group, Ltd. 8,162 19
Futuris Corp., Ltd. 6,748 6
Harvey Norman Holdings, Ltd. 5,200 12
Lang Corp., Ltd. 4,038 21
Lend Lease Corp. 2,300 27
National Australia Bank, Ltd. 6,238 91
News Corp., Ltd. 14,435 188
Publishing Broadcasting, Ltd. 600 5
QBE Insurance Group 4,350 22
Rio Tinto, Ltd. 1,275 20
Santos, Ltd. 3,868 13
Sonic Healthcare, Ltd. 2,200 9
Telstra Corp., Ltd. 32,488 106
Westfield Holdings, Ltd. 700 5
Westpac Banking Corp. 6,912 50
WMC, Ltd. 6,302 30
Woolworths, Ltd. 6,683 26
---------
947
---------
Austria - 0.1%
Austria Tabak AG 3,360 129
---------
Belgium - 0.4%
Fortis B 8,605 261
UCB SA 4,480 171
---------
432
---------
Brazil - 0.3%
Banco Itau SA 628,200 54
Brasil Telecom Participacoes S.A - ADR 800 56
Centrais Eletricas Brasileiras
Electrobras SA - ADR 4,000 37
Companhia de Saneamento Basico do
Estado de Sao Paulo 343,500 37
Companhia Siderurgica Nacional - ADR 1,000 36
Petroleo Brasileiro SA 2,377 75
Tele Norte Leste Participacoes SA 2,554,500 50
---------
345
---------
Denmark - 0.2%
Tele Danmark A/S 2,800 168
---------
Finland - 2.5%
Nokia Oyj 46,452 2,036
Pohjola Group Insurance Corp. Series B 2,800 106
Sampo Insurance Co., Ltd. Series A 5,300 215
Sonera Group Oyj 1,240 41
UPM-Kymmene Oyj 10,200 258
---------
2,656
---------
France - 9.8%
Alcatel (a) 9,266 757
Atos SA (a) 600 61
AXA 3,116 443
Banque Nationale Paris 9,388 863
Banque Nationale Paris 2002 Warrants (a) 1,742 8
Cap Gemini Sogeti 660 138
Carrefour SA 1,562 114
Chargeurs International SA 1,944 106
Christian Dior (a) 2,400 132
Cie de St. Gobain 2,512 334
Credit Lyonnais 7,200 291
France Telecom SA 8,607 982
Annual Report 9
<PAGE>
SSgA
Active International Fund
Statement of Net Assets, continued
August 31, 2000
Market
Number Value
of (000)
Shares $
------ -------
Groupe Air France (a) 29,650 568
L'Oreal SA (a) 5,000 361
Lafarge SA 2,236 166
Lagardere Europe (Regd) S.C.A 2,701 192
Pernod-Ricard 1,697 89
Peugeot SA 2,927 542
Pinault Printemps-Redoute SA 562 106
Remy Cointreau SA 6,900 224
Renault (Regie Nationale) 5,955 259
Rhone-Poulenc SA Class A - ADR 2,819 211
Sanofi-Synthelabo SA 2,068 101
Societe Generale Series A (a) 3,313 196
Societe Television Francaise (a) 5,500 401
Sommer Allibert 1,400 54
STMicroelectronics N.V 13,700 839
Suez Lyonnaise des Eaux SA 3,418 342
Thomson Multimedia (a) 3,400 206
Total Co. SA Class B 5,534 821
Total Fina SA 1,620 120
Usinor Sacilor 17,639 189
Usinor Sacilor (d) 7 0
Vivendi 2,048 167
---------
10,383
---------
Germany - 5.1%
Allianz AG 1,419 478
AMB Aachener & Muenchener Beteiligungs AG 2,200 176
BASF AG 5,100 189
Bayer AG 3,500 148
DaimlerChrysler AG 993 51
Deutsche Bank AG 7,450 648
Deutsche Lufthansa AG 4,518 100
Deutsche Telekom AG 22,146 850
Infineon Technologies AG (a) 3,550 236
MAN AG 3,000 84
SAP AG 1,515 296
Schering AG 3,000 160
Siemens AG 7,600 1,217
T-Online International AG (a) 10,910 291
Thyssen Krupp AG 4,604 70
Veba AG 7,150 343
---------
5,337
---------
Hong Kong - 1.7%
ASM Pacific Technology 4,000 13
Cathay Pacific Airways 37,000 72
Cheung Kong Holdings, Ltd. 8,000 105
China Unicom, Ltd. (a) 58,000 135
Citic Pacific, Ltd. 3,000 14
CLP Holdings, Ltd. 9,500 43
Dah Sing Financial Group 9,600 45
Esprit Holdings, Ltd. 1,484 1
Giordano International, Ltd. 20,000 11
Hang Seng Bank 13,500 145
Henderson Land Development Co., Ltd 13,000 72
Hong Kong Electric Holding, Ltd. 4,265 14
Hutchison Whampoa, Ltd. 34,100 481
Jardine Matheson Holdings, Ltd. - ADR (a) 4,917 24
Johnson Electric Holdings, Ltd. (a) 6,000 12
Li & Fung, Ltd. 4,000 17
Pacific Century CyberWorks, Ltd. (a) 159,300 296
SmarTone Telecommunications
Holdings, Ltd. 24,000 47
Sun Hung Kai Properties, Ltd. 17,000 160
Swire Pacific, Ltd. Class A 10,500 72
Television Broadcast 3,000 17
---------
1,796
---------
Ireland - 0.3%
Bank of Ireland 42,001 248
CRH PLC 5,880 98
---------
346
---------
10 Annual Report
<PAGE>
SSgA
Active International Fund
Statement of Net Assets, continued
August 31, 2000
Market
Number Value
of (000)
Shares $
------ -------
Israel - 1.5%
Africa - Israel Investments, Ltd. (a) 125 143
Agis Industries, Ltd. 8,745 86
Bank Hapoalim, Ltd. 61,495 196
Bank Leumi Le-Israel 41,500 96
Bezeq Israeli Telecommunication Corp., Ltd. 30,950 191
ECI Telecom, Ltd. 4,340 136
Elco Holdings, Ltd. 8,810 88
IDB Holding Corp., Ltd. 2,530 107
Israel Chemicals, Ltd. 46,275 58
Koor Industries, Ltd. 620 66
RT-SET, Ltd. (a) 6,900 104
Scitex Corp., Ltd. (a) 3,560 44
Teva Pharmaceutical Industries, Ltd 4,500 276
---------
1,591
---------
Italy - 1.8%
Banca Pop di Milano 11,396 80
Compagnia Assicuratrice Unipol
2005 Warrants (a) 3,036 4
Enel SPA 35,560 141
Ente Nazionale Idrocarburi SPA 110,400 644
Parmalat Finanziaria SPA 152,500 208
Telecom Italia Mobile SPA di Risp 50,300 250
Telecom Italia SPA 100,325 596
---------
1,923
---------
Japan - 21.8%
Advantest Corp. 400 82
Aoyama Trading Co. 10,000 133
Asahi Bank, Ltd. 33,000 130
Asahi Glass Co., Ltd. 11,000 103
Autobacs Seven Co., Ltd. 6,500 187
Azel Corp. 19,000 55
Bank of Tokyo - Mitsubishi, Ltd. 47,000 576
Bank of Yokohama 22,000 97
Benesse Corp. 2,200 131
Bridgestone Tire Corp. 4,000 52
Canon, Inc. 8,000 358
Casio Computer Co., Ltd. 9,000 105
Chiba Bank, Ltd. 27,000 110
Chubu Electric Power Co., Inc. 1,400 24
Chugoku Electric Power 7,300 114
Crayfish Co., Ltd. (a) 1 28
Crayfish Co., Ltd. - ADR (a) 200 1
Dai Ichi Pharmaceutical Co. 7,000 165
Dai Nippon Screen Manufacturing Co. (a) 9,000 75
Dai-Tokyo Fire & Marine 57,000 202
Daiei, Inc. (a) 75,000 215
Dainippon Ink and Chemicals, Inc. 17,000 60
Daito Trust Construction 7,500 126
Daiwa Bank 103,000 259
Daiwa House Industries Co. 19,000 125
Daiwa Industries, Ltd. 6,000 20
Daiwa Securities Group, Inc. 20,000 249
Denki Kagaku Kogyo 37,000 149
Eiden Sakakiya Co., Ltd. 10,000 83
Fuji Bank, Ltd. 29,000 221
Fuji Heavy Industries, Ltd. 13,000 86
Fuji Photo Film Co. 3,000 107
Fujitsu, Ltd. 17,000 493
Heiwa Corp. 3,000 61
Hikari Tsushin, Inc. 250 12
Hisamitsu Pharmaceutical Co. 11,000 172
Hitachi, Ltd. 35,000 414
Hokkaido Electric Power Co., Inc. 4,600 65
Hokkaido Takushoku Bank, Ltd. (a)(d) 130,000 0
Honda Motor Co., Ltd. 10,000 366
Industrial Bank of Japan, Ltd. 23,000 174
Internet Initiative Japan, Inc. - ADR (a) 5,309 190
Ito-Yokado Co., Ltd. 2,000 99
Itochu Corp. (a) 20,000 88
Itochu Fuel Corp. 21,000 74
Itochu Techno Science Corp. 400 70
Japan Air Lines Co. 42,000 151
Annual Report 11
<PAGE>
SSgA
Active International Fund
Statement of Net Assets, continued
August 31, 2000
Market
Number Value
of (000)
Shares $
------ -------
Japan Tobacco, Inc. 14 107
JGC Corp. 61,000 292
Kamigumi Co., Ltd. 26,000 123
Kansai Electric Power Co., Inc. 8,800 144
Kawasaki Kisen 94,000 175
Kawasho Corp. 15,000 17
Kinden Corp. 14,000 90
Kirin Brewery Co. 4,000 44
Komatsu Forklift Co., Ltd. 16,000 103
Konica Corp. 14,000 112
Kyocera Corp. 1,700 303
Maeda Corp. 27,000 103
Marubeni Corp. 59,000 163
Matsushita Electric Industrial Co., Ltd. 18,000 493
Mazda Motor Corp. 37,000 88
Mitsubishi Corp. 38,000 278
Mitsubishi Electric Corp. 22,000 205
Mitsubishi Heavy Industries 33,000 116
Mitsubishi Rayon 24,000 63
Mitsukoshi (a) 39,000 134
Morita Corp. 17,000 48
Murata Manufacturing Co., Ltd. 3,000 459
Mycal Corp. 17,000 49
NEC Corp. 17,000 486
Nichia Steel Works 800 3
Nichirei Corp. 33,000 124
Nikko Securities Co., Ltd. 12,000 116
Nippon Electric Glass 5,000 114
Nippon Express Co., Ltd. 10,000 56
Nippon Hodo Co., Ltd. 26,000 115
Nippon Kayaku Co., Ltd. 16,000 91
Nippon Paint Co., Ltd. 66,000 208
Nippon Shinpan Co. 90,000 191
Nippon Shokubai Kagaku Kogyo Co. 18,000 91
Nippon Steel Corp. 53,000 99
Nippon Suisan 47,000 83
Nippon Telegraph & Telephone Corp. 124 1,477
Nishimatsu Construction 15,000 49
Nissan Motor Co., Ltd. (a) 26,000 131
Nissho Corp. 15,000 124
Nissin Food Products 6,000 156
Nittoc Construction Co. 19,000 35
Nomura Securities Co., Ltd. 26,000 608
NTT Mobile Communication Network, Inc 5 132
Olympus Optical Co. 3,000 53
Ono Pharmaceutical 3,000 120
Orient Corp. 56,000 228
Ricoh Co., Ltd. 1,000 17
Rohm Co. 1,000 285
Sakura Bank, Ltd. 29,000 216
Sanshin Electronics 11,000 81
Santen Pharmaceutical Co., Ltd. 5,000 113
Sanwa Bank 10,000 95
Sanwa Shutter Corp. 41,000 125
Sanyo Electric Co., Ltd. 6,000 51
Sanyo Shinpan Finance Co. 5,900 171
Secom Co. 1,000 73
Seino Transportation 6,000 32
Sekisui House, Ltd. 9,000 91
Sharp Corp. 10,000 159
Showa Denko (a) 67,000 94
Showa Shell Sekiyu 30,000 148
Sintokogio 22,000 61
Softbank Corp. 3,100 410
Sony Corp. 5,500 614
Sumitomo Bank 27,000 334
Sumitomo Chemical 13,000 60
Sumitomo Metal Mining Co., Ltd. 24,000 132
Sumitomo Realty & Development 48,000 208
Sumitomo Rubber Industries 27,000 155
Taiheiyo Cement Corp. 84,000 135
Taio Daio Paper Co. 5,000 50
Taisei Corp. 74,000 108
Taiyo Yuden Co., Ltd. 2,000 115
Takeda Chemical Industries 5,000 296
Takefuji Corp. 1,400 138
12 Annual Report
<PAGE>
SSgA
Active International Fund
Statement of Net Assets, continued
August 31, 2000
Market
Number Value
of (000)
Shares $
------ -------
Takuma Co. 9,000 65
Toenec Corp. 9,000 35
Tohoku Electric Power 7,200 103
Tokai Bank 15,000 76
Tokio Marine & Fire Insurance Co. 12,000 122
Tokyo Electric Power 11,400 255
Tokyo Electron, Ltd. 400 56
Toshiba Corp. 34,000 334
Toyo Seikan Kaisha, Ltd. 15,000 257
Toyo Trust & Banking Co., Ltd. (The) 14,000 49
Toyota Motor Corp. 28,000 1,218
Uniden Corp. 17,000 108
Yamaha Motor Co. 17,000 121
Yamanouchi Pharmaceutical 1,000 50
Yokogawa Electric Co. 20,000 207
---------
23,079
---------
Luxembourg - 1.0%
Carrier 1 International SA (a) 800 35
Lehman Brothers Finance SA 2001
Warrants (a) 8,820 1,002
---------
1,037
---------
Netherlands - 4.9%
ABN Amro Holding 35,709 888
Aegon NV 8,810 343
DSM 7,586 232
Fortis (NL) 61 2
Getronics (a) 6,408 80
Heineken 1,286 65
ING Groep 14,512 971
Koninklijke (Royal) Philips
Electronics NV (a) 12,876 626
Koninklijke Ahold 4,923 139
Koninklijke Boskalis Westminster 11,498 260
Koninklijke KPN (a) 6,420 171
Koninklijke Vopak 3,051 64
Royal Dutch Petroleum Co. 15,341 933
Unilever 6,439 305
World Online International (a) 4,600 65
---------
5,144
---------
Norway - 0.6%
Christiania Bank OG Kreditkasse 48,012 252
Den Norske Creditbank ASA 36,600 166
Norsk Hydro AS 4,200 180
---------
598
---------
Portugal - 0.0%
PT Multimedia.com (a) 1,700 10
---------
Singapore - 2.4%
Chartered Semiconductor
Manufacturing, Ltd (a) 44,000 368
City Developments 24,000 119
Creative Technology, Ltd. 3,000 65
Cycle & Carriage, Ltd. 6,000 13
DBS Group Holdings, Ltd. 32,350 392
DBS Land 66,000 107
Keppel Corp. 14,000 32
Natsteel Electronics, Ltd. 13,000 43
Natsteel, Ltd. 14,000 19
Oversea-Chinese Banking Corp., Ltd 25,905 179
Overseas Union Bank 15,074 76
SembCorp Industries, Ltd. 49,000 52
Singapore Airlines, Ltd. (Alien Market) 37,000 357
Singapore Press Holdings, Ltd. 10,090 162
Singapore Technologies
Engineering, Ltd. 77,000 104
Singapore Telecommunications, Ltd. 167,000 276
United Overseas Bank, Ltd. 25,344 199
---------
2,563
---------
Annual Report 13
<PAGE>
SSgA
Active International Fund
Statement of Net Assets, continued
August 31, 2000
Market
Number Value
of (000)
Shares $
------ -------
South Africa - 0.5%
Amalgamated Banks of South Africa 7,300 30
Anglo American Platinum Corp., Ltd 900 35
AngloGold, Ltd. 300 12
De Beers Centenary Linked Units 2,100 58
Driefontein Consolidated 5,200 19
FirstRand, Ltd. 20,300 22
Impala Platinum Holdings, Ltd. 700 33
Imperial Holdings, Ltd. (a) 2,527 24
Metropolitan Life, Ltd. 18,300 25
Murray & Roberts Holdings, Ltd. 36,000 17
Nedcor, Ltd. 1,400 32
Rembrandt Group, Ltd. 2,900 29
Reunert, Ltd. 25,600 43
Sanlam, Ltd. 27,200 33
Sappi, Ltd. 2,500 22
Sasol 4,600 38
Standard Bank Investment
Corporation, Ltd. 6,100 26
Tongaat-Hulett Group, Ltd. 3,600 19
---------
517
---------
South Korea - 1.1%
Dacom Corp. (a) 180 16
Daewoo Corp. (a) 6,420 2
Dongwon Securities 1,829 12
Hana Bank 1,950 10
H & CB 1,687 36
Hyundai Electronics Industries Co. (a) 3,040 56
Kookmin Bank 4,020 49
Koram Bank (a) 2,190 11
Korea Electric Power Corp. 2,360 69
Korea Telecom Corp. 1,060 73
Korea Telecom Corp. - ADR 300 11
Korean Air 1,113 8
LG Chemical, Ltd. 1,450 24
LG Electronics 1,440 37
LG Securities 1,590 17
Pohang Iron & Steel Co., Ltd. 590 44
Samsung Corp. 2,710 25
Samsung Display Devices Co. 560 25
Samsung Electro-Mechanics Co. (a) 688 29
Samsung Electronics 1,530 378
Samsung Fire & Marine Insurance 765 20
Samsung Securities Co., Ltd. 1,820 37
SK Telecom Co., Ltd. (a) 430 95
Ssangyong Oil Refining Co. 1,180 27
---------
1,111
---------
Spain - 1.8%
Arceralia Corporacion Siderurgica SA 18,600 154
Banco Bilbao Vizcaya SA 7,964 118
Banco Santander Central Hispano SA 8,132 87
Endesa SA 19,293 377
Hidroelectrica del Cantabrico SA 3,150 57
Iberdrola SA 21,395 246
Repsol SA 11,277 223
Telefonica de Espana SA - ADR (a) 7,194 412
Telefonica SA (a) 3,761 72
Union Electrica Fenosa SA 10,492 195
---------
1,941
---------
Sweden - 2.4%
Electrolux AB Series B 7,188 89
Europolitan Holdings AB 6,300 67
Nordbanken Holding AB 39,000 271
Nordic Baltic Holding AB (a) 26,804 185
Skanska AB Series B 6,283 214
Svenska Handelsbanken AB Series A 35,674 590
Telefonaktiebolaget LM Ericsson AB (a) 55,988 1,130
---------
2,546
---------
14 Annual Report
<PAGE>
SSgA
Active International Fund
Statement of Net Assets, continued
August 31, 2000
Market
Number Value
of (000)
Shares $
------ -------
Switzerland - 5.8%
ABB, Ltd. 1,630 182
Ares Serono SA Series B (a) 140 164
Baloise Holding, Ltd. 410 416
Credit Suisse Group 2,309 482
Jelmoli Holding AG (Regd) 710 177
Nestle SA 281 606
Novartis AG 746 1,128
Roche Holdings Genusscheine AG 66 591
Schweiz Ruckversicher (Regd) 259 532
Schweizerische
Lebensversicherungs-und
Rentenanstalt 265 204
SGS Holding (BR) 64 115
Swisscom AG 580 164
Synthes-Stratec, Inc. 275 174
UBS AG (a) 3,002 437
Vontobel Holding AG 88 235
Zurich Allied AG 963 496
---------
6,103
---------
Thailand - 0.0%
Finance One Public Co., Ltd.
(Alien Market) (a)(d) 31,600 0
---------
United Kingdom - 17.0%
Allied Domecq PLC 54,200 252
Allied Zurich AG 23,721 290
Anglian Water PLC 14,368 117
Barclays PLC 20,074 501
BP Amoco PLC 169,090 1,547
British Energy PLC 24,008 81
British Telecom PLC 44,403 564
Cable & Wireless PLC 17,763 328
Caradon PLC 58,379 150
CMG PLC (a) 12,400 246
Commercial Union Assurance Co. PLC 23,522 362
De La Rue PLC 26,391 147
Debenhams PLC 124,900 367
Enterprise Oil PLC 20,636 164
FKI PLC 64,829 216
Glaxo Wellcome PLC 28,825 829
Hanson PLC 33,464 198
HSBC Holdings PLC 85,427 1,225
Hyder PLC 33,397 175
Imperial Chemical Industries PLC 45,033 304
Invesco PLC 25,300 536
Kingston Communication (Hull) PLC 8,900 65
LASMO PLC 204,167 450
Logica PLC 4,000 126
Millennium & Copthorne Hotel PLC 3,742 25
Northern Foods PLC 65,746 102
Pilkington Brothers PLC 195,128 259
PowerGen PLC 26,200 222
Reckitt Benckiser PLC 10,200 122
Reuters Group PLC 9,403 188
Royal Bank of Scotland Group PLC 31,418 567
Safeway PLC 66,685 255
Severn Trent PLC 25,783 253
Signet Group PLC 197,900 158
Smith & Nephew PLC (a) 23,482 96
SmithKline Beecham PLC 58,135 757
Tate & Lyle, Ltd. PLC 72,895 270
Taylor Woodrow PLC 133,595 316
Tesco Store Holdings PLC 74,052 233
Thames Water PLC 16,354 198
Tomkins PLC 32,800 103
United Utilities PLC 10,909 101
Vodafone Airtouch PLC 735,711 2,969
WPP Group PLC 30,600 433
Yorkshire Water PLC 36,258 176
Zeneca Group PLC 19,853 904
---------
17,947
---------
Annual Report 15
<PAGE>
SSgA
Active International Fund
Statement of Net Assets, continued
August 31, 2000
Market
Number Value
of (000)
Shares $
------ -------
Total Common Stocks
(cost $80,714) 88,649
---------
Preferred Stocks - 1.0%
Brazil - 0.4%
Banco Bradesco SA 4,989,500 42
Banco do Estado de Sao Paulo 498,000 17
Companhia Brasileira de
Distribuicao Grupo Pao de
Acucar - ADR 900 34
Companhia Siderurgica de Tubarao 1,187,400 16
Companhia Vale Do Rio Doce - ADR 900 25
Companhia Vale Do Rio Doce Series A 1,500 41
Companmia Cervejaria Brahma 41,200 41
Embratel Participacoes SA 1,780,000 40
Embratel Participacoes SA - ADR 1,700 37
Itausa Investimentos Itau SA 16,700 18
Petrobras Distribuidora 1,515,700 24
Petroleo Brasileiro SA 2,182 64
Telesp Celular Participacoes SA (a) 3,102,700 47
---------
446
---------
Germany - 0.5%
M.A.N. AG 6,650 135
ProSieben Media AG 2,650 397
---------
532
---------
South Korea - 0.1%
Samsung Electronic, Ltd. 500 59
---------
Total Preferred Stocks
(cost $793) 1,037
---------
Principal Market
Amount Value
(000) (000)
$ $
--------- -------
Long-Term Investments - 0.2%
Germany - 0.1%
Deutsche Finance BV (conv.)
1.000% due 05/02/01 (a) DEM 60 51
---------
Japan - 0.1%
MTI Capital (Cayman), Ltd. (conv.)
0.500% due 10/01/07 (a) JPY39,000 134
---------
Total Long-Term Investments
(cost $261) 185
---------
Short-Term Investments - 10.4%
United States - 10.4%
AIM Short-Term Investment Prime
Portfolio Class A (b) 4,000 4,000
Federal Home Loan Mortgage
Discount Notes
6.430% due 09/05/00 (b)(c) 4,200 4,197
Federated Investors Prime Cash
Obligations Fund (b) 2,775 2,775
---------
10,972
---------
Total Short-Term Investments
(cost $10,972) 10,972
---------
Total Investments - 95.5%
(identified cost $92,740) 100,843
Other Assets and Liabilities,
Net - 4.5% 4,802
---------
Net Assets - 100.0% 105,645
=========
See the accompanying notes which are an integral part of the financial
statements.
16 Annual Report
<PAGE>
SSgA
Active International Fund
Statement of Net Assets, continued
August 31, 2000
(a) Nonincome-producing security.
(b) At amortized cost, which approximates market.
(c) Rate noted is yield-to-maturity from date of acqusition.
(d) These securities have been valued by the Security Valuation Committee of
the Board of Trustees. It is possible that the estimated value may differ
significantly from the amount that might ultimately be realized.
(e) At August 31, 2000, $1,020 cash was held as collateral in connection with
open futures contracts held by the Fund.
Abbreviations:
ADR - American Depositary Receipt
BR - Bearer
NV - Nonvoting
Foreign Currency Abbreviations:
AUD - Australian dollar
DEM - German mark
EUR - Eurodollar
GBP - British pound
JPY - Japanese yen
SEK - Swedish krona
SGD - Singapore dollar
USD - United States dollar
Unrealized
Number Appreciation
of (Depreciation)
Futures Contracts Contracts (000)
--------- --------------
FTSE - 100 Index (UK)
expiration date 09/00 21 $ 88
TOPIX Index (Japan)
expiration date 09/00 37 71
DJ EURO STOXX Index (EMU countries)
expiration date 09/00 87 48
------
Total Unrealized Appreciation
(Depreciation) on Open
Futures Contracts Purchased
(e) $ 207
======
--------------------------------------------------------------------------------
Forward Foreign Currency Exchange Contracts
--------------------------------------------------------------------------------
Unrealized
Appreciation
Contracts to In Exchange (Depreciation)
Deliver For Settlement (000)
(000) (000) Date $
-------------- -------------- ---------- --------------
USD 1,044 AUD 1,745 10/05/00 (37)
USD 327 AUD 555 10/05/00 (7)
USD 2,993 EUR 3,166 10/05/00 (177)
USD 1,630 EUR 1,730 10/05/00 (92)
USD 1,831 EUR 2,030 10/05/00 (25)
USD 952 GBP 635 10/05/00 (30)
USD 700 GBP 466 10/05/00 (23)
USD 2,070 JPY 221,302 10/05/00 18
USD 1,107 SEK 9,709 10/05/00 (76)
SEK 9,709 USD 1,052 10/05/00 21
SGD 2,139 USD 1,248 10/05/00 (1)
-----
(429)
=====
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 17
<PAGE>
SSgA
Active International Fund
Statement of Net Assets, continued
August 31, 2000
Market
% of Value
Industry Diversification Net (000)
(Unaudited) Assets $
------ -------
Basic Industries 4.5% 4,708
Capital Goods 6.0 6,345
Consumer Basics 9.3 9,809
Consumer Discretionary 0.5 566
Consumer Durables 4.2 4,399
Consumer Non-Durables 2.6 2,779
Consumer Services 1.4 1,429
Energy 5.6 5,905
Finance 20.9 22,131
General Business 2.4 2,561
Miscellaneous 3.0 3,122
Shelter 1.6 1,727
Technology 7.0 7,382
Transportation 0.4 390
Utilities 15.7 16,618
Short-Term Investments 10.4 10,972
----- -------
Total Investments 95.5 100,843
Other Assets and Liabilities, Net 4.5 4,802
----- -------
Net Assets 100.0% 105,645
===== =======
Market
% of Value
Geographic Diversification Net (000)
(Unaudited) Assets $
------ -------
Africa 0.5% 517
Europe 37.2 39,335
Japan 22.0 23,213
Latin America 0.8 790
Middle East 1.5 1,591
Pacific Basin 6.1 6,474
United Kingdom 17.0 17,951
Short-Term Investments 10.4 10,972
----- -------
Total Investments 95.5 100,843
Other Assets and Liabilities, Net 4.5 4,802
----- -------
Net Assets 100.0% 105,645
===== =======
See the accompanying notes which are an integral part of the financial
statements.
18 Annual Report
<PAGE>
SSgA
Active International Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amount) August 31, 2000
<TABLE>
<S> <C> <C>
Assets
Investments at market (identified cost $92,740) ............................................... $100,843
Cash .......................................................................................... 1,020
Foreign currency holdings (identified cost $785) .............................................. 773
Unrealized appreciation on forward foreign currency exchange contracts ........................ 39
Receivables:
Dividends and interest ..................................................................... 256
Investments sold ........................................................................... 619
Fund shares sold ........................................................................... 4,190
Short-term investments held as collateral for securities loaned, at market .................... 9,931
--------
Total assets ............................................................................ 117,671
Liabilities
Payables:
Investments purchased .......................................................... $ 965
Fund shares redeemed ........................................................... 523
Accrued fees to affiliates ..................................................... 112
Other accrued expenses ......................................................... 21
Daily variation margin on futures contracts .................................... 6
Unrealized depreciation on forward foreign currency exchange contracts ............ 468
Payable upon return of securities loaned, at market ............................... 9,931
------
Total liabilities ....................................................................... 12,026
--------
Net Assets .................................................................................... $105,645
========
Net Assets Consist of:
Undistributed net investment income ........................................................... $ 302
Accumulated net realized gain (loss) .......................................................... 11,893
Unrealized appreciation (depreciation) on:
Investments ................................................................................ 8,103
Futures contracts .......................................................................... 207
Foreign currency-related transactions ...................................................... (450)
Shares of beneficial interest ................................................................. 10
Additional paid-in capital .................................................................... 85,580
--------
Net Assets .................................................................................... $105,645
========
Net Asset Value, offering and redemption price per share:
($105,645,287 divided by 9,719,878 shares of $.001 par value
shares of beneficial interest outstanding) .............................................. $ 10.87
========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Annual Report 19
<PAGE>
SSgA
Active International Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 2000
<TABLE>
<S> <C> <C>
Investment Income
Dividends (net of foreign taxes withheld of $251) .......................................... $ 1,789
Interest ................................................................................... 134
--------
Total investment income ................................................................. 1,923
Expenses
Advisory fees .................................................................. $ 807
Administrative fees ............................................................ 85
Custodian fees ................................................................. 289
Distribution fees .............................................................. 39
Transfer agent fees ............................................................ 45
Professional fees .............................................................. 27
Registration fees .............................................................. 30
Shareholder servicing fees ..................................................... 36
Trustees' fees ................................................................. 7
Amortization of deferred organization expenses ................................. 5
Miscellaneous .................................................................. 6
-------
Expenses before reductions ..................................................... 1,376
Expense reductions ............................................................. (300)
-------
Expenses, net ........................................................................... 1,076
--------
Net investment income ......................................................................... 847
--------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 16,476
Futures contracts (305)
Foreign currency-related transactions (1,221) 14,950
-------
Net change in unrealized appreciation (depreciation) on:
Investments (7,598)
Futures contracts 207
Foreign currency-related transactions (22) (7,413)
------- --------
Net realized and unrealized gain (loss) 7,537
--------
Net increase (decrease) in net assets from operations $ 8,384
========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
20 Annual Report
<PAGE>
SSgA
Active International Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Years Ended August 31,
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ....................................................... $ 847 $ 1,221
Net realized gain (loss) .................................................... 14,950 1,365
Net change in unrealized appreciation (depreciation) ........................ (7,413) 20,360
-------- -------
Net increase (decrease) in net assets from operations .................... 8,384 22,946
-------- -------
Distributions
From net investment income .................................................. (1,269) (3,396)
From net realized gain ...................................................... -- (5,999)
-------- -------
Net decrease in net assets from distributions ............................ (1,269) (9,395)
-------- -------
Share Transactions
Net increase (decrease) in net assets from share transactions ............... (1,386) 9,800
-------- -------
Total net increase (decrease) in net assets .................................... 5,729 23,351
Net Assets
Beginning of period ......................................................... 99,916 76,565
-------- -------
End of period (including undistributed net investment income of
$302 and $731, respectively) ............................................. $105,645 $99,916
======== =======
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Annual Report 21
<PAGE>
SSgA
Active International Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
--------------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ......... $ 10.37 $ 9.24 $ 10.85 $ 10.96 $ 10.89
-------- -------- -------- -------- --------
Income From Operations
Net investment income (a) ................. .09 .12 .16 .10 .36
Net realized and unrealized gain (loss) ... .54 2.09 (1.13) .03 .28
-------- -------- -------- -------- --------
Total income from operations ........... .63 2.21 (.97) .13 .64
-------- -------- -------- -------- --------
Distributions
From net investment income ................ (.13) (.39) (.15) (.18) (.57)
From net realized gain .................... -- (.69) (.49) (.06) --
-------- -------- -------- -------- --------
Total distributions .................... (.13) (1.08) (.64) (.24) (.57)
-------- -------- -------- -------- --------
Net Asset Value, End of Period ............... $ 10.87 $ 10.37 $ 9.24 $ 10.85 $ 10.96
======== ======== ======== ======== ========
Total Return (%) ............................. 6.09 26.88 (9.50) 1.17 6.22
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) .. 105,645 99,916 76,565 83,930 54,595
Ratios to average net assets (%):
Operating expenses, net (b) ............ 1.00 1.00 1.00 1.00 1.00
Operating expenses, gross (b) .......... 1.28 1.37 1.29 1.40 1.47
Net investment income .................. .79 1.30 1.23 1.12 1.16
Portfolio turnover rate (%) ............... 64.05 62.02 74.79 48.29 22.02
</TABLE>
(a) For the periods subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.
(b) See Note 4 for current period amounts.
22 Annual Report
<PAGE>
SSgA
Active International Fund
Notes to Financial Statements
August 31, 2000
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 24 investment portfolios which are in operation as
of August 31, 2000. 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 accounting
principles generally accepted in the United States 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.
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.
Annual Report 23
<PAGE>
SSgA
Active International Fund
Notes to Financial Statements, continued
August 31, 2000
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, 2000 are as follows:
Net Unrealized
Unrealized Unrealized Appreciation
Federal Tax Cost Appreciation (Depreciation) (Depreciation)
---------------- ------------ -------------- --------------
$92,954,276 $14,773,633 $(6,885,219) $7,888,414
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 year
may differ significantly from distributions during such year. 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.
Expenses: Most expenses can be directly attributed to the individual Fund.
Expenses of the investment company 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. These costs were 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
24 Annual Report
<PAGE>
SSgA
Active International Fund
Notes to Financial Statements, continued
August 31, 2000
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 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 foreign currency exchange
contracts at August 31, 2000 are presented in 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.
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, 2000, purchases and
sales of investment securities, excluding short-term investments and
futures contracts, aggregated to $64,966,199 and $83,805,755,
respectively.
Annual Report 25
<PAGE>
SSgA
Active International Fund
Notes to Financial Statements, continued
August 31, 2000
Securities lending: The Investment Company has a securities lending
program whereby each Fund can loan securities with a value up to 33 1/3%
of its total assets to certain brokers. The Fund receives cash (U.S.
currency), U.S. Government or U.S. Government agency obligations as
collateral against the loaned securities. To the extent that a loan is
secured by cash collateral, such collateral shall be invested by State
Street Bank and Trust Company in short-term instruments, money market
mutual funds, and such other short-term investments, provided the
investments meet certain quality and diversification requirements. Under
the securities lending arrangement, the collateral received is recorded on
the Fund's statement of assets and liabilities along with the related
obligation to return the collateral. In those situations where the Company
has relinquished control of securities transferred, it derecognizes the
securities and records a receivable from the counterparty.
Income generated from the investment of cash collateral, less negotiated
rebate fees paid to participating brokers and transaction costs, is
divided between the Fund and State Street Bank and Trust Company and is
recorded as interest income for the Fund. To the extent that a loan is
secured by non-cash collateral, brokers pay the Fund negotiated lenders'
fees, which are divided between the Fund and State Street Bank and Trust
Company and are recorded as interest income for the Fund. All collateral
received will be in an amount at least equal to 102% (for loans of U.S.
securities) or 105% (for non-U.S. securities) of the market value of the
loaned securities at the inception of each loan. Should the borrower of
the securities fail financially, there is a risk of delay in recovery of
the securities or loss of rights in the collateral. Consequently, loans
are made only to borrowers which are deemed to be of good financial
standing. As of August 31, 2000, the value of outstanding securities on
loan and the value of collateral amounted to $9,443,727 and $9,931,085,
respectively. Included in interest income is securities lending income of
$81,328 for the year ended August 31, 2000.
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, through State Global Advisors, the investment management group of
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. 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 total amount of the waiver for the year
ended August 31, 2000 was $298,667. 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.
In addition, the Fund has entered into arrangements with its Adviser
whereby custody credits realized as a result of uninvested cash balances
were used to reduce a portion of the Fund's expenses. During the year, the
Fund's custodian fees were reduced by $1,046 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly-owned subsidiary of The Northwestern Mutual Life Insurance Company,
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 for services supplied by the
Administrator pursuant to the Administration Agreement, an
26 Annual Report
<PAGE>
SSgA
Active International Fund
Notes to Financial Statements, continued
August 31, 2000
annual fee, payable monthly on a pro rata basis. For the period September
1, 1999 to April 30, 2000, it is 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 up to and including $1
billion - .06%, over $1 billion up to and including $1.5 billion - .04%,
over $1.5 billion - .03%. Effective May 1, 2000, the annual fee is based
on the following percentages of the average daily net assets of all
International portfolios: $0 to $1 billion - .07%; over $1 billion - .05%.
The Administrator will charge a flat fee of $30,000 per year per Fund with
less than $500 million in net assets and $1,500 per year for monthly
performance reports and use of Russell Performance Universe software
product. In addition, the Fund reimburses the Administrator for
out-of-pocket expenses and start-up costs for new funds.
Distributor and Shareholder Servicing: The Investment Company has 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 enter 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 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 Shareholder 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, 2000, the Fund
was charged shareholder servicing expenses of $20,982, $1,681, $68, $17
and $8,501, 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 of the Fund on an
annual basis. The shareholder servicing payments shall not exceed .20% of
the average daily value of net assets of the Fund on an annual basis.
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, 2000.
Annual Report 27
<PAGE>
SSgA
Active International Fund
Notes to Financial Statements, continued
August 31, 2000
Board of Trustees: The Investment Company paid each Trustee not affiliated
with the Investment Company an annual retainer, plus specified amounts for
board and committee meetings attended. 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, 2000 were
as follows:
Advisory fees $ 37,109
Administration fees 7,950
Custodian fees 42,735
Distribution fees 2,878
Shareholder servicing fees 11,960
Transfer agent fees 7,860
Trustees' fees 1,610
--------
$112,102
========
5. Fund Share Transactions (amounts in thousands)
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
------------------------------------------------
2000 1999
---------------------- ----------------------
Shares Dollars Shares Dollars
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Proceeds from shares sold ..................... 22,664 $ 252,670 8,857 $ 81,077
Proceeds from reinvestment of distributions ... 56 575 879 7,304
Payments for shares redeemed .................. (22,639) (254,631) (8,387) (78,581)
--------- --------- --------- ---------
Total net increase (decrease) ................. 81 $ (1,386) 1,349 $ 9,800
========= ========= ========= =========
</TABLE>
6. Interfund Lending Program
The Fund and all other funds of the Investment Company received from the
Securities and Exchange Commission an exemptive order on December 23, 1999
to establish and operate an Interfund Credit Facility. This allows the
Funds to directly lend to and borrow money from the SSgA Money Market Fund
for temporary purposes in accordance with certain conditions. The
borrowing Funds are charged the average of the current Repo Rate and the
Bank Loan Rate. Miscellaneous Expenses on the Statement of Operations
include $7,789 of interest expense paid under the interfund lending
program.
28 Annual Report
<PAGE>
SSgA
Active International Fund
Tax Information
August 31, 2000 (Unaudited)
The Fund paid foreign taxes of $243,667 and recognized $1,830,726 of
foreign source income during the taxable year ended August 31, 2000.
Pursuant to Section 853 of the Internal Revenue Code, the Fund designates
$.0251 per share of foreign taxes paid and $.1883 of gross income earned
from foreign sources in the taxable year ended August 31, 2000.
Please consult a tax advisor for questions about federal or state income
tax laws.
Annual Report 29
<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, Treasurer and CEO
Mark E. Swanson, Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Treasurer
Carla L. Anderson, Assistant 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
160 Federal Street
Boston, Massachusetts 02110
30 Annual Report
<PAGE>
[COVER GRAPHIC]
SSgA(R) funds
ANNUAL REPORT
Tax Free Money Market Fund
August 31, 2000
<PAGE>
SSgA(R) Funds
Tax Free Money Market Fund
Annual Report
August 31, 2000
Table of Contents
Page
Chairman's Letter......................................................... 4
Portfolio Management Discussion and Analysis.............................. 6
Report of Independent Accountants......................................... 8
Financial Statements...................................................... 9
Financial Highlights...................................................... 22
Notes to Financial Statements............................................. 23
Tax Information........................................................... 27
Fund Management and Service Providers..................................... 28
"SSgA(R)" 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,
It is our pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 2000. The SSgA Fund Family has grown to include
twenty-four portfolios with over $21 billion in assets as of August 31, 2000.
The Fund Family provides a wide range of strategies covering the world's major
markets. The enclosed information provides an overview of the investment process
for the SSgA Tax Free Money Market Fund. This overview contains the portfolio
management discussion, performance updates and financial information for the
Fund.
In an ongoing effort to develop competitive products and services that provide
investment solutions for our clients, we have added the SSgA Intermediate
Municipal Bond Fund to the SSgA Fund Family. This Fund's investment objective
seeks to provide federally tax-exempt current income by investing primarily in a
diversified portfolio of municipal debt securities with a dollar-weighted
average maturity between three and ten years.
We are also pleased with the success of our SSgA Emerging Markets and SSgA
Growth and Income Funds as they were included in Money(R) Magazine's June 2000
issue listing of the 'Top 100 Mutual Funds'. This is the second year in a row
that these funds have been selected.
Additionally, the SSgA Tax Free Money Market and the SSgA Active International
Funds have achieved five-year performance history during the 2000 fiscal year.
Currently, all of our SSgA Money Market Funds have at least a five-year
performance history. We strive to meet our clients' needs by providing funds
with long-term records and competitive performance.
We would like to thank you for choosing the SSgA Funds. Our reputation is based
on our tradition of designing and delivering exceptional financial services to
our clients. We look forward to continue sharing the benefit of our experience
with you.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
/s/ Timothy B. Harbert
Timothy B. Harbert
State Street Global Advisors
President and Chief Operating Officer, SSgA
4 Annual Report
<PAGE>
SSgA Tax Free Money Market Fund
--------------------------------------------------------------------------------
Management of the Funds
--------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
[PHOTO]
Timothy B. Harbert
President and Chief Operating 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 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 joining SSgA, 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 tax; preservation
of capital and liquidity.
Invests in: High quality federally tax exempt short-term municipal securities,
including: general obligation bonds and notes, revenue bonds and notes,
commercial paper, industrial development and private activity bonds and private
placements.
Strategy: Fund Managers base their decisions on the relative attractiveness of
different municipal money market instruments, which vary depending on the
general level of interest rates as well as supply and demand imbalances in the
market.
--------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
Dates Tax Free Money Market Fund
Inception* $10,000
1995 $10,254
1996 $10,568
1997 $10,884
1998 $11,219
1999 $11,523
2000 $11,911
================================================================================
Performance Review
For the fiscal year ended August 31, 2000, the SSgA Tax Free Money Market Fund
had a return of 3.37%.
In March 2000, the Fund received a AAA rating from Standard & Poor's
Corporation. S&P assigns AAA ratings to funds where safety of principal value is
paramount and exposure to loss is limited. This rating corresponds with the
underlying investments and the management style of the Fund.
Market and Portfolio Highlights
During the past fiscal year, the Federal Reserve took a cautious bias with
regard to interest rates. To prevent the economy from growing too quickly, the
Fed raised interest rates a total of 175 basis points during the year, to 6.5%
at
--------------------------------------------------------------------------------
SSgA Tax Free Money Market Fund
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
------------ ----------- -----------
1 Year $10,337 3.37%
5 Years $11,617 3.04%+
Inception $11,911 3.09%+
* The Fund commenced operations on December 1, 1994.
+ Annualized.
6 Annual Report
<PAGE>
SSgA Tax Free Money Market Fund
--------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
--------------------------------------------------------------------------------
August 31, 2000. The short-term tax-exempt markets focus on seasonal supply and
demand factors to determine the level of interest rates, and as a result, are
less affected by actions of the Federal Reserve. In the one year maturity range,
interest rates rose from 3.68% to a peak of 4.64% in mid May, closing in August
at 4.20% as tracked by the Bond Buyer 1-Year Note Index. Weekly notes,
represented in the BMA Muni swap, show an even more dramatic response to supply
and demand fluctuations. Weekly rates began the fiscal year at 3.15%, rising
slightly over the subsequent quarter. However, year-end rates spiked to 5.46%,
higher than many taxable security rates at that time, attracting potential
buyers. Weekly rates peaked in early May 2000 at 5.84%, immediately following
the tax season, reducing cash in money funds and effectively lowering demand for
the notes. The average weekly rate for the past year was 3.93% and closed at
4.23% at August 31, 2000.
Assets for the Fund fluctuated between $262 million in August 1999 to a high of
$368 million in April, and back down to $272 million at August 31, 2000. During
the period, average weighted maturity traded in a tight range between 21 and 30
days, extending to 39 days at fiscal year end. With the yield curve relatively
flat for much of the period, the Fund maintained a short duration. The Fund is
managed so that if the yield curve begins to steepen, the Fund should have the
flexibility to take advantage of higher rates and extend the average duration.
--------------------------------------------------------------------------------
Top Ten Issuers
(as a percent of Total Investments) August 31, 2000
--------------------------------------------------------------------------------
Kentucky Economic Development Finance Authority
Pooled Hospital Loan Revenue 5.1%
New York, New York Transitional Finance Authority Revenue 4.7
Missouri, State of, Health & Educational Facilities
Authority Revenue 4.5
Texas, State of, Tax & Revenue Anticipation Notes 3.7
Wichita, Kansas General Obligation 3.7
Franklin County, Ohio Hospital Revenue 3.2
Louisiana Public Facilities Authority Revenue 2.8
Iowa Finance Authority Hospital Facility Revenue 2.6
Ohio, State of, Public Facilities Commission Revenue 2.0
Salt Lake City, Utah Revenue 2.0
--------------------------------------------------------------------------------
---------------------
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, 2000, 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 accounting principles generally
accepted in the United States of America. 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 auditing standards
generally accepted in the United States of America 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, 2000 by correspondence with the custodian, provide a reasonable basis for
our opinion.
Boston, Massachusetts
October 11, 2000
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
Tax Free Money Market Fund
Statement of Net Assets
August 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity* $
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Municipal Bonds - 99.6%
Alabama - 2.0%
Montgomery, Alabama Baptist Medical Center Special Care
Facilities Financing Authority Revenue, Series A,
weekly demand (a) 1,000 4.250 12/01/30 1,000
Montgomery, Alabama Baptist Medical Center Special Care
Facilities Financing Authority Revenue, Series G,
weekly demand (a) 700 4.250 12/01/30 700
University of Alabama Revenue, Series A, weekly demand 3,800 4.300 10/01/07 3,800
--------
5,500
--------
Alaska - 1.2%
Alaska Industrial Development & Export Authority Revenue
Lot 5, weekly demand 2,035 4.800 07/01/03 2,035
Alaska Industrial Development & Export Authority Revenue
Lot 6, weekly demand 1,355 4.800 07/01/01 1,355
--------
3,390
--------
Arkansas - 1.1%
Arkansas, State of, Development Financial Authority Health
Care Facilities Revenue, Series B, weekly demand 3,100 4.250 06/01/12 3,100
--------
Colorado - 1.3%
Colorado Health Facilities Authority Revenue, Series A 1,450 7.250 02/15/16 1,497
Jefferson County, Colorado School District Number R-001
General Obligation (a) 2,075 5.250 12/15/00 2,083
--------
3,580
--------
Connecticut - 0.9%
Connecticut, State of, Health & Educational Facilities
Authority Revenue, Series T-2, weekly demand 2,500 3.900 07/01/29 2,500
--------
District of Columbia - 0.7%
District of Columbia Revenue, weekly demand (a) 1,900 4.350 10/01/15 1,900
--------
Florida - 7.5%
Broward County, Florida Professional Sports Facilities Tax
Revenue, Series SGA38, weekly demand (a) 5,000 4.300 09/01/21 5,000
Dade County, Florida Industrial Development Authority
Revenue, Series A, weekly demand 950 4.250 01/01/16 950
</TABLE>
Annual Report 9
<PAGE>
SSgA
Tax Free Money Market Fund
Statement of Net Assets, continued
August 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity* $
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Dade County, Florida Industrial Development Authority Revenue,
Series B, weekly demand 885 4.250 01/01/16 885
Dade County, Florida Industrial Development Authority Revenue,
Series C, weekly demand 475 4.250 01/01/16 475
Dade County, Florida Industrial Development Authority Revenue,
Series D, weekly demand 100 4.250 01/01/16 100
Jacksonville, Florida Electric Authority Revenue, Series 3,
(pre-refunded 10/01/00)(b) 1,000 6.650 10/01/02 1,017
Jacksonville, Florida Electric Authority Revenue, Series A 2,065 4.100 10/01/00 2,065
Putnam County, Florida Development Authority Pollution
Control Revenue, Series D, semiannual demand 2,000 4.350 12/15/09 2,000
Putnam County, Florida Development Authority Pollution
Control Revenue, Series H-4, semiannual demand 2,830 4.050 03/15/14 2,830
St. Lucie County, Florida Pollution Control Commercial Paper 5,000 4.300 12/18/00 5,000
--------
20,322
--------
Georgia - 2.9%
Burke County, Georgia Development Authority Pollution
Control Revenue, Series A, weekly demand (a) 650 4.200 01/01/19 650
Clayton County, Georgia Housing Authority Multi-family
Housing Revenue, Series A, weekly demand 2,315 4.350 01/01/21 2,315
Clayton County, Georgia Housing Authority Multi-family
Housing Revenue, Series D, weekly demand 2,215 4.350 01/01/21 2,215
De Kalb County, Georgia Housing Authority Multi-family
Housing Revenue, weekly demand 1,200 4.200 06/15/25 1,200
Georgia, State of, General Obligation, Series D 1,500 6.800 08/01/01 1,533
--------
7,913
--------
Hawaii - 2.3%
Hawaii, State of, General Obligation, Series BS
(pre-refunded 09/01/00)(b) 1,100 7.000 09/01/03 1,111
Honolulu, Hawaii City & County General Obligation,
Series A, weekly demand 5,125 4.250 01/01/18 5,125
--------
6,236
--------
</TABLE>
10 Annual Report
<PAGE>
SSgA
Tax Free Money Market Fund
Statement of Net Assets, continued
August 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity* $
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Illinois - 3.2%
Illinois Development Finance Authority, Economic
Development Revenue, weekly demand 700 4.350 12/01/09 700
Illinois Health Facilities Authority Revenue Series B,
weekly demand 5,000 4.200 08/01/20 5,000
Illinois Student Assistance Commission, Student Loan
Revenue Series A, weekly demand 2,900 4.300 03/01/16 2,900
--------
8,600
--------
Indiana - 2.3%
Marion County, Indiana Convention & Recreational
Facilities Authority
Excise Tax Revenue, Series B (pre-refunded 06/01/01)(a)(b) 1,000 7.000 06/01/21 1,039
North Harrison, Indiana High School Building Corp. Revenue
(pre-refunded 01/15/01)(b) 5,000 7.300 01/15/13 5,156
--------
6,195
--------
Iowa - 3.9%
Des Moines, Iowa Commercial Development Revenue, Series E,
weekly demand 3,400 4.200 04/01/15 3,400
Iowa Finance Authority Hospital Facility Revenue, Series B,
weekly demand (a) 3,300 4.250 07/01/07 3,300
Iowa Finance Authority Hospital Facility Revenue, Series B,
weekly demand (a) 3,800 4.250 01/01/28 3,800
--------
10,500
--------
Kansas - 3.7%
Wichita, Kansas General Obligation 10,000 5.000 02/22/01 10,032
--------
Kentucky - 6.3%
Kentucky Economic Development Finance Authority Pooled
Hospital Loan Revenue, weekly demand 13,895 4.450 08/01/18 13,895
Lexington-Fayette, Kentucky Urban County Government Public
Facilities Corp. Mortgage Revenue 2,000 4.375 02/01/01 2,002
University of Kentucky Revenue, Series L 1,140 6.600 05/01/05 1,179
--------
17,076
--------
Louisiana - 3.0%
Ascension Parish, Louisiana Pollution Control Revenue,
weekly demand 700 4.250 12/01/09 700
Louisiana Public Facilities Authority Revenue, weekly
demand 7,500 4.350 05/15/30 7,500
--------
8,200
--------
</TABLE>
Annual Report 11
<PAGE>
SSgA
Tax Free Money Market Fund
Statement of Net Assets, continued
August 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity* $
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Maine - 1.4%
Maine Health & Higher Education Facilities Authority
Revenue, Series C, weekly demand (a) 1,700 4.250 12/01/25 1,700
Maine Regional Waste System, Inc. Solid Waste Resource
Recovery Revenue, Series M, weekly demand 2,035 4.350 07/01/04 2,035
--------
3,735
--------
Maryland - 3.0%
Maryland, State of, Health & Higher Educational Facilities
Authority Revenue, Series A, weekly demand 4,000 4.200 04/01/35 4,000
Prince George's County, Maryland Certificates of
Participation,
Series A (a) 4,050 5.000 10/15/00 4,054
--------
8,054
--------
Massachusetts - 1.6%
Massachusetts, State of, Health & Educational Facilities
Authority Revenue, Series D, weekly demand (a) 1,000 4.000 10/01/27 1,000
Massachusetts, State of, Health & Educational Facilities
Authority Revenue, Series G-1, weekly demand (a) 600 4.100 01/01/19 600
Massachusetts, State of, Health & Educational Facilities
Authority Revenue, Series SGA 65, daily demand 2,700 4.350 07/01/26 2,700
--------
4,300
--------
Michigan - 2.1%
Jackson County, Michigan Economic Development Corp.
Limited Obligation Revenue, weekly demand 1,500 4.325 12/01/14 1,500
Michigan, State of, Building Authority Revenue, Series II
(pre-refunded 09/01/00)(b) 1,880 7.250 09/01/00 1,880
Okemos, Michigan Public School District, General Obligation,
Series I (pre-refunded 05/01/01)(a)(b) 2,200 6.900 05/01/11 2,279
--------
5,659
--------
Minnesota - 1.5%
Minnesota, State of, Housing Finance Agency, Series G,
semiannual demand 3,000 4.350 07/01/25 3,000
Olmsted County, Minnesota Housing & Redevelopment
Authority Revenue (pre-refunded 02/01/01)(b) 1,025 7.000 02/01/05 1,036
--------
4,036
--------
</TABLE>
12 Annual Report
<PAGE>
SSgA
Tax Free Money Market Fund
Statement of Net Assets, continued
August 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity* $
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Missouri - 5.7%
Kansas City, Missouri Industrial Development Authority
Multi-family Housing Revenue, monthly demand 2,220 4.600 12/01/15 2,220
Kansas City, Missouri Municipal Assistance Corp. Revenue,
Series B (pre-refunded 4/15/01)(a)(b) 1,030 6.000 04/15/20 1,041
Missouri, State of, Health & Educational Facilities
Authority Revenue, Series A, weekly demand 1,800 4.200 09/01/10 1,800
Missouri, State of, Health & Educational Facilities
Authority Revenue, Series A, weekly demand 1,000 4.250 12/01/19 1,000
Missouri, State of, Health & Educational Facilities
Authority Revenue, Series B, weekly demand 1,100 4.250 06/01/14 1,100
Missouri, State of, Health & Educational Facilities
Authority Revenue, Series C, weekly demand 3,200 4.250 06/01/19 3,200
Missouri, State of, Health & Educational Facilities
Authority Revenue, Series C, weekly demand 1,100 4.250 12/01/19 1,100
Missouri, State of, Health & Educational Facilities
Authority Revenue, Series D, weekly demand 4,100 4.250 06/01/19 4,100
--------
15,561
--------
Nevada - 1.0%
Las Vegas, Nevada General Obligation, Series A (a) 1,210 4.750 11/01/00 1,211
Nevada Housing Division Revenue, Series A, weekly demand 1,030 4.400 10/01/30 1,030
Nevada Housing Division Revenue, Series E, weekly demand 400 4.400 10/01/30 400
--------
2,641
--------
New Hampshire - 0.7%
New Hampshire, State of, Business Finance Authority
Resource Recovery Revenue, Series A, weekly demand 300 4.250 01/01/18 300
New Hampshire, State of, Higher Educational & Health
Facilities Authority Revenue, Series A, weekly demand (a) 600 4.250 12/01/25 600
New Hampshire, State of, Higher Educational & Health
Facilities Authority Revenue, Series E, weekly demand (a) 1,000 4.250 12/01/25 1,000
--------
1,900
--------
New Jersey - 0.4%
New Jersey Economic Development Authority Pollution
Control Revenue, Series A, weekly demand (a) 1,000 4.150 03/01/12 1,000
--------
</TABLE>
Annual Report 13
<PAGE>
SSgA
Tax Free Money Market Fund
Statement of Net Assets, continued
August 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity* $
--------- ------- --------- -------
<S> <C> <C> <C> <C>
New York - 7.3%
New York, New York General Obligation, Series A-9,
weekly demand 2,550 4.250 08/01/18 2,550
New York, New York General Obligation, Series B,
weekly demand 1,300 4.050 08/15/24 1,300
New York, New York Municipal Trust, Series SGB 36,
weekly demand 1,100 4.200 06/01/22 1,100
New York, New York Transitional Finance Authority Revenue,
Series A-1, weekly demand 4,160 4.300 11/15/22 4,160
New York, New York Transitional Finance Authority Revenue,
Series A-2, weekly demand 2,100 4.050 11/15/21 2,100
New York, New York Transitional Finance Authority Revenue,
Series A-2, weekly demand 3,100 4.050 11/15/22 3,100
New York, New York Transitional Finance Authority Revenue,
Series A-2, weekly demand 3,300 4.050 11/15/27 3,300
Suffolk County, New York Industrial Development Agency
Revenue, weekly demand 2,315 4.000 02/01/07 2,315
--------
19,925
--------
North Carolina - 1.0%
Charlotte, North Carolina Airport Revenue, Series A,
weekly demand (a) 775 4.250 07/01/16 775
University of North Carolina School of Medicine Ambulatory
Care Clinic Revenue, weekly demand 2,000 4.300 07/01/12 2,000
--------
2,775
--------
Ohio - 6.9%
Clermont County, Ohio Hospital Facilities Revenue, Series A,
weekly demand 400 4.300 12/01/21 400
Clermont County, Ohio Hospital Facilities Revenue, Series B,
weekly demand 880 4.350 09/01/21 880
Franklin County, Ohio Hospital Revenue, weekly demand 8,700 4.250 06/01/16 8,700
Ohio, State of, Building Authority Revenue, Series B 1,000 4.500 09/01/00 1,000
Ohio, State of, Public Facilities Commission Revenue,
Series II-A 5,500 4.500 12/01/00 5,506
Rocky River, Ohio City School District General Obligation,
Series A (pre-refunded 12/01/00)(b) 2,220 6.900 12/01/11 2,278
--------
18,764
--------
Oklahoma - 1.9%
Muskogee, Oklahoma Industrial Trust Pollution Control
Revenue,
Series A, weekly demand 5,000 4.500 01/01/25 5,000
Oklahoma, State of, Industrial Authority Revenue, Series B,
daily demand (a) 300 4.300 08/15/29 300
--------
5,300
--------
</TABLE>
14 Annual Report
<PAGE>
SSgA
Tax Free Money Market Fund
Statement of Net Assets, continued
August 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity* $
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Pennsylvania - 0.4%
Pennsylvania, State of, Higher Education Assistance Agency
Student Loan Revenue, Series A, semiannual demand 1,000 4.625 12/01/00 1,001
--------
Rhode Island - 0.4%
Rhode Island, State of, Public Buildings Authority
Revenue, Series A (pre-refunded 02/01/01)(a)(b) 1,200 6.000 02/01/11 1,209
--------
South Carolina - 1.3%
Piedmont, South Carolina Municipal Power Agency Electric
Revenue, Series C, weekly demand (a) 500 4.200 01/01/19 500
York County, South Carolina Pollution Control Revenue,
semiannual demand 3,000 4.050 09/15/14 3,000
--------
3,500
--------
Tennessee - 2.1%
Knox County, Tennessee Health Education & Housing
Facilities Board Hospital Facilities Revenue, Series B,
weekly demand 2,700 4.350 09/01/14 2,700
Memphis, Tennessee General Obligation, Series A, weekly demand 1,000 4.250 08/01/03 1,000
Memphis, Tennessee General Obligation, Series B, weekly demand 400 4.300 08/01/02 400
Shelby County, Tennessee General Obligation, Series A,
weekly demand 1,500 4.200 03/01/08 1,500
--------
5,600
--------
Texas - 10.4%
Alief, Texas Independent School District General Obligation
(pre-refunded 02/15/01)(b) 1,000 6.400 02/15/02 1,009
Brownsville, Texas Utility System Revenue (pre-refunded
09/01/00)(a)(b) 1,500 6.500 09/01/17 1,530
Harris County, Texas, Industrial Development Corp. Revenue,
daily demand 1,000 4.300 04/01/27 1,000
Lower Neches Valley, Texas Authority Revenue, semiannual
demand 1,000 4.250 02/15/17 1,000
San Antonio, Texas Electric & Gas Revenue 2,500 6.375 02/01/01 2,523
San Antonio, Texas Water Revenue, Series SGA 42, weekly
demand (a) 4,115 4.300 05/15/26 4,115
Tarrant County, Texas Water Control & Improvement District
Number 001 Revenue (pre-refunded 03/01/01)(b) 1,100 5.800 03/01/02 1,108
Tarrant County, Texas Water Control & Improvement District
Number 001 Revenue (pre-refunded 03/01/01)(b) 1,000 6.000 03/01/10 1,008
</TABLE>
Annual Report 15
<PAGE>
SSgA
Tax Free Money Market Fund
Statement of Net Assets, continued
August 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity* $
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Texas A&M University Revenue, weekly demand (a) 4,130 4.300 05/15/16 4,130
Texas, State of, Tax & Revenue Anticipation Notes 10,000 5.250 08/31/01 10,094
Texas, State of, Public Finance Authority General Obligation
(pre-refunded 10/01/00)(b) 1,000 6.300 10/01/02 1,002
--------
28,519
--------
Utah - 2.7%
Intermountain Power Agency Utah Power Supply Revenue,
Series E, semiannual demand (a) 2,000 4.075 07/01/14 2,000
Salt Lake City, Utah Revenue, Series A, weekly demand 5,450 4.200 01/01/20 5,450
--------
7,450
--------
Vermont - 0.6%
Vermont Educational & Health Buildings Financing Agency
Revenue, Series B, weekly demand (a) 1,000 4.250 12/01/25 1,000
Vermont Educational & Health Buildings Financing Agency
Revenue, Series D, weekly demand (a) 600 4.250 12/01/25 600
--------
1,600
--------
Virginia - 0.4%
Lynchburg, Virginia Industrial Development Authority
Hospital Facilities Revenue, Series F, weekly demand (a) 700 4.250 12/01/25 700
Roanoke, Virginia Industrial Development Authority
Hospital Revenue, Series A, daily demand 500 4.300 07/01/19 500
--------
1,200
--------
Washington - 4.3%
Benton County, Washington Public Utilities District Number
001 Electricity Revenue (a) 1,370 6.000 11/01/00 1,374
Kent, Washington General Obligation, Series SGA 27,
weekly demand 5,300 4.300 12/01/16 5,300
King County, Washington General Obligation, Series A 1,000 6.800 12/01/00 1,007
Port of Kalama, Washington Public Corp. Port, weekly demand 725 4.400 01/01/04 725
Port of Seattle, Washington Revenue, Series A
(pre-refunded 12/01/00)(a)(b) 3,250 6.000 12/01/14 3,264
--------
11,670
--------
</TABLE>
16 Annual Report
<PAGE>
SSgA
Tax Free Money Market Fund
Statement of Net Assets, continued
August 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity* $
--------- ------- --------- -------
<S> <C> <C> <C> <C>
West Virginia - 0.2%
West Virginia, State of, Hospital Finance Authority
Revenue, Series A, weekly demand (a) 600 4.250 12/01/25 600
--------
Total Investments - 99.6% (amortized cost $271,043)(c)
271,043
Other Assets and Liabilities, Net - 0.4% 1,162
--------
Net Assets - 100.0% 272,205
========
</TABLE>
(a) Bond is insured by AMBAC, FGIC, or MBIA/BIG.
(b) Pre-refunded: These bonds are collateralized by U.S. Government
Obligations, which are held in escrow by a trustee and are used to pay
principal and interest on 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 cost for federal income tax purposes is the same as shown above.
* All securities with a maturity greater than thirteen months have a demand
feature, or an optional or mandatory put, or are pre-refunded, resulting in
an effective maturity of thirteen months or less. Additionally, all daily
and weekly demand securities are backed by direct payment letters of
credit.
Annual Report 17
<PAGE>
SSgA
Tax Free Money Market Fund
Statement of Net Assets, continued
August 31, 2000
Quality Ratings as a % of Value (Unaudited)
VMIG1, SP-1+ or equivalent * ........................ 100%
Economic Sector Emphasis as a % of Value (Unaudited)
Healthcare Revenue .................................. 22%
General Obligation .................................. 20
Housing Revenue ..................................... 14
Pre-refunded ........................................ 11
Education Revenue ................................... 9
Industrial Revenue/Pollution Control Revenue ........ 9
Electricity & Power Revenue ......................... 6
Utility Revenue ..................................... 5
Stadium Revenue ..................................... 2
Highway Revenue ..................................... 1
Student Loan Revenue ................................ 1
----
100%
====
* VMIG1: The highest short-term municipal note credit rating given by
Moody's Investors Services to notes with a demand feature which are of
the best quality.
SP-1+: The highest short-term municipal note credit rating given by Standard &
Poor's Corporation to notes with a very strong or strong capacity to
pay principal and interest.
See accompanying notes which are an integral part of the financial statements.
18 Annual Report
<PAGE>
SSgA
Tax Free Money Market Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amount) August 31, 2000
<TABLE>
<S> <C> <C>
Assets
Investments at amortized cost which approximates market ..................... $ 271,043
Interest receivable ......................................................... 2,151
---------
Total assets .......................................................... 273,194
Liabilities
Payables:
Dividends .................................................... $ 830
Accrued fees to affiliates ................................... 148
Other accrued expenses ....................................... 11
---------
Total liabilities ..................................................... 989
---------
Net Assets .................................................................. $ 272,205
=========
Net Assets Consist of:
Accumulated net realized gain (loss) ........................................ $ (19)
Shares of beneficial interest ............................................... 272
Additional paid-in capital .................................................. 271,952
---------
Net Assets .................................................................. $ 272,205
=========
Net Asset Value, offering and redemption price per share:
($272,204,817 divided by 272,228,388 shares of $.001 par value
shares of beneficial interest outstanding) ............................ $ 1.00
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Annual Report 19
<PAGE>
SSgA
Tax Free Money Market Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 2000
Investment Income
Interest ........................................................ $ 11,421
Expenses
Advisory fees ........................................ $ 734
Administrative fees .................................. 103
Custodian fees ....................................... 96
Distribution fees .................................... 397
Transfer agent fees .................................. 48
Professional fees .................................... 16
Registration fees .................................... 44
Shareholder servicing fees ........................... 229
Trustees' fees ....................................... 10
Amortization of deferred organization expenses ....... 3
Miscellaneous ........................................ 19
---------
Expenses before reductions ........................... 1,699
Expense reductions ................................... (21)
---------
Expenses, net ................................................ 1,678
---------
Net investment income .............................................. 9,743
---------
Net Realized Gain (Loss)
Net realized gain (loss) on investments: ........................... (25)
---------
Net increase in net assets from operations ......................... $ 9,718
---------
See accompanying notes which are an integral part of the financial statements.
20 Annual Report
<PAGE>
SSgA
Tax Free Money Market Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Years Ended August 31,
2000 1999
--------- ---------
Increase (Decrease) in Net Assets
Operations
Net investment income ................................ $ 9,743 $ 7,575
Net realized gain (loss) ............................. (25) 34
--------- ---------
Net increase in net assets from operations ........ 9,718 7,609
--------- ---------
Distributions
From net investment income ........................... (9,743) (7,575)
--------- ---------
Share Transactions
Net increase in net assets from share transactions ... 9,837 2,275
--------- ---------
Total net increase (decrease) in net assets ............. 9,812 2,309
Net Assets
Beginning of period .................................. 262,393 260,084
--------- ---------
End of period ........................................ $ 272,205 $ 262,393
========= =========
See accompanying notes which are an integral part of the financial statements.
Annual Report 21
<PAGE>
SSgA
Tax Free Money Market Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
-------------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ......... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $1.0000
-------- -------- -------- -------- -------
Income From Operations
Net investment income ..................... .0331 .0267 .0304 .0295 .0302
-------- -------- -------- -------- -------
Distributions
From net investment income ................ (.0331) (.0267) (.0304) (.0295) (.0302)
-------- -------- -------- -------- -------
Net Asset Value, End of Period ............... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $1.0000
======== ======== ======== ======== =======
Total Return (%) ............................. 3.37 2.71 3.08 2.99 3.07
Ratios/Supplemental Data:
Net Assets, end of period (in thousands)... 272,205 262,393 260,084 163,502 45,061
Ratios to average net assets (%):
Operating expenses, net ................ .57 .56 .56 .58 .57
Operating expenses, gross .............. .58 .56 .56 .58 .57
Net investment income .................. 3.31 2.67 3.04 2.98 3.01
</TABLE>
22 Annual Report
<PAGE>
SSgA
Tax Free Money Market Fund
Notes to Financial Statements
August 31, 2000
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 24 investment portfolios which are in operation as
of August 31, 2000. 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 shares of beneficial interest at a $.001 par value.
2. Significant Accounting Policies
The Fund's financial statements are prepared in accordance with accounting
principles generally accepted in the United States 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 utilizes the amortized cost valuation method
in accordance with Rule 2a-7 of the 1940 Act, a method by which each
portfolio instrument meeting certain materiality parameters and credit
worthiness standards are initially valued at cost, and thereafter a
constant accretion/amortization to maturity of any discount or premium is
assumed.
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 tax and no federal income tax provision was required. At
August 31, 2000, the Fund had a net tax basis capital loss carryover of
$758, which may be applied against any realized net taxable gains in each
succeeding year or until its expiration date of August 31, 2008, whichever
comes first. As permitted by tax regulations, the Fund intends to defer a
net realized capital loss of $23,922 incurred from November 1, 1999 to
August 31, 2000 and treat it as arising in fiscal year 2001.
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
Annual Report 23
<PAGE>
SSgA
Tax Free Money Market Fund
Notes to Financial Statements, continued
August 31, 2000
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
of the investment company 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. These costs were deferred and are being
amortized over 60 months on a straight-line basis.
3. Securities Transactions
Investment transactions: For the year ended August 31, 2000, purchases,
sales and maturities of tax-exempt obligations were $1,418,614,799,
$1,237,459,974, and $170,685,000, 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, through State Street Global Advisors, the investment management
group of 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.
In addition, the Fund has entered into arrangements with its Adviser
whereby custody credits realized as a result of uninvested cash balances
were used to reduce a portion of the Fund's expenses. During the year, the
Fund's custodian fees were reduced by $21,121 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly-owned subsidiary of The Northwestern Mutual Life Insurance Company,
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 for services supplied by the
Administrator pursuant to the Administration Agreement, an annual fee,
payable monthly on a pro rata basis. For the period September 1, 1999 to
April 30, 2000, the following percentages of the average daily net assets
of all domestic funds: $0 up to and including $500 million - .06%; over
$500 million up to and including $1 billion - .05%; over $1 billion -
.03%. Effective May 1, 2000, the annual fee is based on the following
percentages of the average daily net assets of all money market
portfolios: $0 up to $15 billion - .0315%; over $15 billion - .029%. The
Administrator will also charge a flat fee of $30,000 per year per Fund
with less than $500 million in net assets and $1,500 per year for monthly
performance reports and use of Russell Performance Universe software
product. In addition, the Fund reimburses the Administrator for
out-of-pocket expenses and start-up costs for new funds.
Distributor and Shareholder Servicing: The Investment Company has 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 enter into
sub-distribution agreements with other
24 Annual Report
<PAGE>
SSgA
Tax Free Money Market Fund
Notes to Financial Statements, continued
August 31, 2000
non-related parties. The amounts paid to the Distributor are included in
the accompanying Statement of Operations.
The Investment Company has 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 Shareholder 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, 2000, the Fund
was charged shareholder servicing expenses of $73,345 and $158,931 by the
Adviser and Commercial Banking, respectively. The Fund did not incur any
expenses from SSBSI, RIS, or Solutions during this year.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets of the Fund on an
annual basis. The shareholder servicing payments shall not exceed .20% of
the average daily value of net assets of the Fund on an annual basis.
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, 2000.
Board of Trustees: The Investment Company paid each Trustee not affiliated
with the Investment Company an annual retainer, plus specified amounts for
board and committee meetings attended. 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, 2000 were
as follows:
Advisory fees $ 57,253
Administration fees 10,891
Custodian fees 18,687
Distribution fees 25,558
Shareholder servicing fees 16,127
Transfer agent fees 18,059
Trustees' fees 1,110
----------
$ 147,685
==========
Annual Report 25
<PAGE>
SSgA
Tax Free Money Market Fund
Notes to Financial Statements, continued
August 31, 2000
Beneficial Interest: As of August 31, 2000, three shareholders (two of
which were also affiliates of the Investment Company) were record owners
of approximately 40%, 25% and 16%, respectively, of the total outstanding
shares of the Fund.
5. Fund Share Transactions (On a Constant Dollar Basis):
<TABLE>
<CAPTION>
(amounts in thousands)
Fiscal Years Ended August 31,
-----------------------------
2000 1999
------------ ---------
<S> <C> <C>
Proceeds from shares sold..................... 1,144,186 887,427
Proceeds from reinvestment of distributions... 4,975 4,738
Payments for shares redeemed.................. (1,139,324) (889,890)
------------ ---------
Total net increase (decrease)................. 9,837 2,275
============ =========
</TABLE>
6. Interfund Lending Program
The Fund and all other funds of the Investment Company received from the
Securities and Exchange Commission an exemptive order on December 23, 1999
to establish and operate an Interfund Credit Facility. This allows the
Funds to directly lend to and borrow money from the SSgA Money Market Fund
for temporary purposes in accordance with certain conditions. The
borrowing Funds are charged the average of the current Repo Rate and the
Bank Loan Rate. The Fund did not utilize the interfund lending program
during this year.
26 Annual Report
<PAGE>
SSgA
Tax Free Money Market Fund
Tax Information
August 31, 2000 (Unaudited)
Of the dividends paid by the Tax Free Money Market Fund from net
investment income for the taxable year ended August 31, 2000, 100% were
exempt interest dividends which are tax exempt for purposes of regular
federal income tax, and for purposes of the federal alternative minimum
tax.
Please consult a tax advisor for any questions about federal or state
income tax laws.
Annual Report 27
<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, Treasurer and CEO
Mark E. Swanson, Treasurer and Principal
Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Treasurer
Carla L. Anderson, Assistant 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
160 Federal Street
Boston, Massachusetts 02110
28 Annual Report
<PAGE>
[COVER GRAPHIC]
SSgA(R) funds
ANNUAL REPORT
US Government Money Market Fund
August 31, 2000
<PAGE>
SSgA(R) Funds
US Government Money Market Fund
Annual Report
August 31, 2000
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(R)" 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,
It is our pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 2000. The SSgA Fund Family has grown to include
twenty-four portfolios with over $21 billion in assets as of August 31, 2000.
The Fund Family provides a wide range of strategies covering the world's major
markets. The enclosed information provides an overview of the investment process
for the SSgA US Government Money Market Fund. This overview contains the
portfolio management discussion, performance updates and financial information
for the Fund.
In an ongoing effort to develop competitive products and services that provide
investment solutions for our clients, we have added the SSgA Intermediate
Municipal Bond Fund to the SSgA Fund Family. This Fund's investment objective
seeks to provide federally tax-exempt current income by investing primarily in a
diversified portfolio of municipal debt securities with a dollar-weighted
average maturity between three and ten years.
We are also pleased with the success of our SSgA Emerging Markets and SSgA
Growth and Income Funds as they were included in Money(R) Magazine's June 2000
issue listing of the 'Top 100 Mutual Funds'. This is the second year in a row
that these funds have been selected.
Additionally, the SSgA Tax Free Money Market and the SSgA Active International
Funds have achieved five-year performance history during the 2000 fiscal year.
Currently, all of our SSgA Money Market Funds have at least a five-year
performance history. We strive to meet our clients' needs by providing funds
with long-term records and competitive performance.
We would like to thank you for choosing the SSgA Funds. Our reputation is based
on our tradition of designing and delivering exceptional financial services to
our clients. We look forward to continue sharing the benefit of our experience
with you.
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
/s/ Timothy B. Harbert
Timothy B. Harbert
State Street Global Advisors
President and Chief Operating Officer, SSgA
4 Annual Report
<PAGE>
SSgA US Government Money Market Fund
--------------------------------------------------------------------------------
Management of the Funds
--------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
[PHOTO]
Timothy B. Harbert
President and Chief Operating 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 is the Unit Head of the cash desk with
responsibility for the SSgA money market funds, several short-term funds and
enhanced cash portfolios. Prior to joining SSgA, she was a portfolio manager
with State Street's Investment Research Department, where she managed the
securities lending reinvestment funds since their inception in 1987, as well as
other money market portfolios. She received a BS from Suffolk University. There
are ten 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 while preserving capital and liquidity.
Invests in: US Government Treasury and Agency notes, and repurchase agreements
backed by those securities.
Strategy: Fund Managers base their decisions on the relative attractiveness of
different money market investments, which vary depending on the general level of
interest rates as well as supply and demand imbalances in the market.
--------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
Dates US Gov't Money Market Salomon Smith Barney 3-Month Treasury
Fund T-Bill Index**
Inception* $10,000 $10,000
1991 $10,306 $10,293
1992 $10,769 $10,731
1993 $11,100 $11,061
1994 $11,466 $11,454
1995 $12,083 $12,093
1996 $12,720 $12,740
1997 $13,381 $13,409
1998 $14,094 $14,109
1999 $14,762 $14,765
2000 $15,597 $15,578
================================================================================
Performance Review
The Fund had a total return of 5.65% for the fiscal year ended August 31, 2000.
This compared favorably to the Salomon Smith Barney 3-Month Treasury Bill Index
return of 5.51% for the same period. The Fund's performance is net of operating
expenses, while Index results do not include expenses of any kind. The Salomon
Smith Barney 3-Month Treasury Bill Index was chosen as a standard, well-known
representation of money market rates.
The market environment for the last year began with the Federal Open Market
Committee (FOMC) tightening monetary policy due to strong domestic growth and
rejuvenated demand from abroad. The FOMC raised rates by 25 basis points in
June, August and November 1999, bringing the Fed Funds target from 4.75% to
5.50%. The FOMC took no action at its December meeting, but followed a strategy
of injecting the economy with massive amounts of cash to ease Y2K liquidity
--------------------------------------------------------------------------------
SSgA US Government Money Market Fund
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
------------------- --------------- --------
1 Year $ 10,565 5.65%
5 Years $ 12,907 5.24%+
Inception $ 15,597 4.79%+
--------------------------------------------------------------------------------
Salomon Smith Barney 3-Month Treasury Bill Index
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
------------------- --------------- --------
1 Year $ 10,551 5.51%
5 Years $ 12,882 5.20%+
Inception $ 15,578 4.78%+
See related Notes on following page.
6 Annual Report
<PAGE>
SSgA US Government Money Market Fund
--------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
--------------------------------------------------------------------------------
concerns. Fourth quarter GDP logged an impressive 8.3% due to Y2K inventory
building supported by the generous liquidity provisions from the Federal
Reserve. This surfeit of liquidity, in effect, loosened monetary policy when in
fact tight labor markets and excess demand called for tightening.
First quarter 2000 GDP followed with a 4.8% growth rate. The Federal Reserve
Board needed to take back the excess liquidity and slow the economy. The FOMC
did so by raising interest rates by 100 basis points in the first half of 2000.
Although GDP advanced 5.4% throughout the second quarter of 2000, fears of
inflation were tempered by the fact that productivity grew at 5% for the same
period. The FOMC opted to leave rates unchanged at the June and August meetings
while maintaining a cautious stance going forward. The Manager continues to be
cautious about future FOMC policy, considering the trend in rising oil prices as
well as the upcoming presidential election.
Market and Portfolio Highlights
In the last fiscal year, the SSgA US Government Money Market Fund was managed
consistently with its objective of providing safety of principal and liquidity
by investing in US Government Treasury and Agency securities and providing
competitive returns. The Fund's net assets increased in size by $286 million or
23.1% over the past year to $1.5 billion at August 31, 2000.
During the fall tightening period the Fund was managed with liquidity as a
primary concern, with maturing positions remaining in cash and very liquid
short-term securities throughout the last calendar quarter of 1999. This large
cash position served to hedge against Y2K liquidity concerns and helped with the
substantial swings in assets related to calendar year-end 1999. The 100 basis
points of tightening in the first half of 2000, combined with the market's
concern of further tightening, resulted in a very steep yield curve, with the
6-month LIBOR at 7.10% and the 12-month LIBOR at 7.50%. Additionally, comments
from Treasury officials questioning the implicit government guarantee of the
Federal agencies widened spreads for these securities, particularly those issued
by FNMA and FHLMC. The Fund took the opportunity to buy on market weakness and
extended the Fund's average maturity. By end of August, the yield curve had
stabilized with the 3-month LIBOR at 6.67%, the 6-month LIBOR at 6.80% and the
12-month LIBOR at 6.92%. The Fund's average maturity ranged between 34 and 60
days, ending at 55 days at August 31, 2000, longer than its peer group average
of 51 days as measured by iMoneyNet, Inc. (formerly IBC Financial Data).
The Fund increased exposure in floating rate securities from 38% on August 31,
1999 to 46% at August 31, 2000. This offered protection in rising and falling
rate environments. The Manager concentrated primarily on indices such as one-
and three-month LIBOR, with a small allocation based on Fed Funds and Prime
rates. With the yield curve's potential to steepen on negative inflation news,
the Manager will look for those opportunities to extend duration and add yield.
------------------------------
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, 2000, 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 accounting principles
generally accepted in the United States of America. 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 auditing standards
generally accepted in the United States of America 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, 2000 by correspondence with the custodian, provide a reasonable basis for
our opinion.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
October 11, 2000
8 Annual Report
<PAGE>
SSgA
US Government Money Market Fund
Statement of Net Assets
August 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity $
-------- ------ -------- -------
<S> <C> <C> <C> <C>
United States Government Agencies - 85.9%
Federal Farm Credit Bank (a) 30,000 6.460 10/20/00 29,998
Federal Home Loan Bank (a) 50,000 6.470 09/28/00 49,999
Federal Home Loan Bank 28,250 6.350 02/02/01 28,237
Federal Home Loan Bank 20,000 6.668 04/06/01 19,993
Federal Home Loan Bank (a) 50,000 6.480 07/18/01 49,969
Federal Home Loan Bank (a) 50,000 6.430 07/20/01 49,974
Federal Home Loan Bank (a) 50,000 6.419 08/15/01 49,967
Federal Home Loan Bank (a) 75,000 6.460 08/17/01 74,951
Federal Home Loan Bank Discount Notes 30,000 6.490 09/20/00 29,897
Federal Home Loan Bank Discount Notes 30,000 6.450 09/27/00 29,860
Federal Home Loan Bank Discount Notes 50,000 6.480 12/13/00 49,073
Federal Home Loan Mortgage Association (a) 35,000 6.525 01/10/01 34,988
Federal Home Loan Mortgage Association 20,000 6.255 01/12/01 19,993
Federal Home Loan Mortgage Corp. (a) 50,000 6.525 12/20/00 49,974
Federal Home Loan Mortgage Corp. 25,000 6.330 07/19/01 23,589
Federal Home Loan Mortgage Corp. (a) 50,000 6.430 07/19/01 49,974
Federal Home Loan Mortgage Corp. (a) 50,000 6.425 07/26/01 49,969
Federal Home Loan Mortgage Corp. (a) 50,000 6.450 08/17/01 49,967
Federal Home Loan Mortgage Corp. Discount Notes 50,000 6.495 09/21/00 49,820
Federal Home Loan Mortgage Corp. Discount Notes 50,000 6.440 09/26/00 49,776
Federal Home Loan Mortgage Corp. Discount Notes 25,000 6.520 09/28/00 24,878
Federal Home Loan Mortgage Corp. Discount Notes 49,025 6.400 02/01/01 47,692
Federal National Mortgage Association (a) 25,000 6.461 11/13/00 24,996
Federal National Mortgage Association 25,000 5.600 02/02/01 24,905
Federal National Mortgage Association 25,000 6.570 02/22/01 24,997
Federal National Mortgage Association 15,000 6.550 03/20/01 14,996
Federal National Mortgage Association (a) 40,000 6.530 05/24/01 40,000
Federal National Mortgage Association (a) 40,000 6.485 06/07/01 39,975
Federal National Mortgage Association Discount Notes 25,000 6.465 10/19/00 24,785
Federal National Mortgage Association Discount Notes 25,000 6.695 11/16/00 24,647
Federal National Mortgage Association Discount Notes 40,000 6.460 01/11/01 39,053
Federal National Mortgage Association Discount Notes 50,000 6.400 02/08/01 48,577
Student Loan Marketing Association 15,000 5.900 12/01/00 14,994
Student Loan Marketing Association (a) 75,000 6.773 08/08/01 74,965
---------
Total United States Government Agencies (cost $1,309,428) 1,309,428
---------
Total Investments (amortized cost $1,309,428) 1,309,428
=========
</TABLE>
Annual Report 9
<PAGE>
SSgA
US Government Money Market Fund
Statement of Net Assets, continued
August 31, 2000
<TABLE>
<CAPTION>
Value
(000)
$
---------
<S> <C>
Repurchase Agreements - 14.4%
Agreement with ABN Amro Bank and Bank of New York (Tri-Party) of $60,056
acquired August 31, 2000 at 6.660% to be repurchased at $60,067 on
September 1, 2000, collateralized by:
$59,570 Federal Home Loan Bank securities 5.750%
due 09/01/00, valued at $61,262 60,056
Agreement with Banc One Corp. and Chase Bank (Tri-Party) of $50,000
acquired August 31, 2000 at 6.660% to be repurchased at $50,009 on
September 1, 2000, collateralized by:
$51,235 Federal National Mortgage Association Discount Notes
due 9/25/00, valued at $51,004 50,000
Agreement with Deutsche Bank of $110,000,
acquired August 31, 2000 at 6.660% to be repurchased at $110,020 on
September 1, 2000, collateralized by:
$111,905 Federal National Mortgage Corporation securities 6.400%
due 02/08/01, valued at $112,205 110,000
---------
Total Repurchase Agreements (identified cost $220,056) 220,056
---------
Total Investments and Repurchase Agreements - 100.3% (cost $1,529,484)(b) 1,529,484
Other Assets and Liabilities, Net - (0.3%) (4,219)
---------
Net Assets - 100.0% 1,525,265
=========
</TABLE>
(a) Adjustable or floating rate security.
(b) The identified cost for federal income tax purposes is the same as shown
above.
See accompanying notes which are an integral part of the financial statements.
10 Annual Report
<PAGE>
SSgA
US Government Money Market Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amount) August 31, 2000
<TABLE>
<S> <C> <C>
Assets
Investments at amortized cost which approximates market ............................................ $1,309,428
Repurchase agreements (identified cost $220,056) ................................................... 220,056
Interest receivable ................................................................................ 5,084
----------
Total assets ................................................................................. 1,534,568
Liabilities
Payables:
Dividends ............................................................................ $ 8,350
Accrued fees to affiliates ........................................................... 909
Other accrued expenses ............................................................... 44
--------
Total liabilities ............................................................................ 9,303
----------
Net Assets ......................................................................................... $1,525,265
==========
Net Assets Consist of:
Accumulated net realized gain (loss) ............................................................... $ 56
Shares of beneficial interest ...................................................................... 1,525
Additional paid-in capital ......................................................................... 1,523,684
----------
Net Assets ......................................................................................... $1,525,265
==========
Net Asset Value, offering and redemption price per share:
($1,525,264,979 divided by 1,525,208,558 shares of $.001 par value
shares of beneficial interest outstanding) ................................................... $ 1.00
==========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Annual Report 11
<PAGE>
SSgA
US Government Money Market Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 2000
<TABLE>
<S> <C> <C>
Investment Income
Interest ........................................................................................ $ 84,302
Expenses
Advisory fees ....................................................................... $ 3,529
Administrative fees ................................................................. 454
Custodian fees ...................................................................... 387
Distribution fees ................................................................... 277
Transfer agent fees ................................................................. 141
Professional fees ................................................................... 30
Registration fees ................................................................... 65
Shareholder servicing fees .......................................................... 1,022
Trustees' fees ...................................................................... 25
Miscellaneous ....................................................................... 46
----------
Expenses before reduction ........................................................... 5,976
Expense reductions .................................................................. (15)
----------
Expenses, net ................................................................................ 5,961
----------
Net investment income .............................................................................. 78,341
----------
Net Realized Gain (Loss)
Net realized gain (loss) on investments ............................................................ 27
----------
Net increase in net assets from operations ......................................................... $ 78,368
==========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
12 Annual Report
<PAGE>
SSgA
US Government Money Market Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Years Ended August 31,
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ............................................................... $ 78,341 $ 61,120
Net realized gain (loss) ............................................................ 27 2
---------- ----------
Net increase in net assets from operations ....................................... 78,368 61,122
---------- ----------
Distributions
From net investment income .......................................................... (78,341) (61,120)
---------- ----------
Share Transactions
Net increase (decrease) in net assets from share transactions ....................... 285,934 293,405
---------- ----------
Total net increase (decrease) in net assets ............................................ 285,961 293,407
Net Assets
Beginning of period ................................................................. 1,239,304 945,897
---------- ----------
End of period ....................................................................... $1,525,265 $1,239,304
========== ==========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Annual Report 13
<PAGE>
SSgA
US Government Money Market Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
------------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .......... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
---------- ---------- ---------- ---------- ----------
Income From Operations
Net investment income ...................... .0551 .0462 .0500 .0500 .0515
---------- ---------- ---------- ---------- ----------
Distributions
From net investment income ................. (.0551) (.0462) (.0500) (.0500) (.0515)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period ................ $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
========== ========== ========== ========== ==========
Total Return (%) .............................. 5.65 4.74 5.33 5.19 5.27
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ... 1,525,265 1,239,304 945,897 904,483 683,210
Ratios to average net assets (%):
Operating expenses ...................... .42 .42 .42 .44 .40
Net investment income ................... 5.55 4.62 5.20 5.08 5.12
</TABLE>
14 Annual Report
<PAGE>
SSgA
US Government Money Market Fund
Notes to Financial Statements
August 31, 2000
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 24 investment portfolios which are in operation as
of August 31, 2000. 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 shares of beneficial interest at a
$.001 par value.
2. Significant Accounting Policies
The Fund's financial statements are prepared in accordance with accounting
principles generally accepted in the United States 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 utilizes the amortized cost valuation method
in accordance with Rule 2a-7 of the 1940 Act, a method by which each
portfolio instrument meeting certain materiality parameters and credit
worthiness standards are initially valued at cost, and thereafter a
constant accretion/amortization to maturity of any discount or premium is
assumed.
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.
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
of the investment company which cannot be directly attributed are
allocated among all funds based principally on their relative net assets.
Annual Report 15
<PAGE>
SSgA
US Government Money Market Fund
Notes to Financial Statements, continued
August 31, 2000
Repurchase agreements: The Fund may engage in repurchase and tri-party
repurchase agreements with certain qualified 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. State Street
Bank and Trust Company (the "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, 2000, purchases,
sales and maturities of US Government and Agency obligations, excluding
repurchase agreements aggregated to $3,805,303,846, $629,554,079 and
$2,840,887,000, respectively.
4. Related Parties
Adviser: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company under which the Adviser, through State
Street Global Advisors, the investment management group of 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.
In addition, the Fund has entered into arrangements with its Adviser
whereby custody credits realized as a result of uninvested cash balances
were used to reduce a portion of the Fund's expenses. During the year, the
Fund's custodian fees were reduced by $14,984 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly-owned subsidiary of The Northwestern Mutual Life Insurance Company,
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 for services supplied by the
Administrator pursuant to the Administration Agreement, an annual fee,
payable monthly on a pro rata basis. For the period September 1, 1999 to
April 30, 2000, the following percentages of the average daily net assets
of all domestic funds: $0 up to and including $500 million - .06%; over
$500 million up to and including $1 billion - .05%; over $1 billion -
.03%. Effective May 1, 2000, the annual fee is based on the following
percentages of the average daily net assets of all money market
portfolios: $0 up to $15 billion - .0315%; over $15 billion - .029%. The
Administrator will also charge a flat fee of $30,000 per year per Fund
with less than $500 million in net assets and $1,500 per year for monthly
performance reports and use of Russell Performance Universe software
product. In addition, the Fund reimburses the Administrator for
out-of-pocket expenses and start-up costs for new funds.
16 Annual Report
<PAGE>
SSgA
US Government Money Market Fund
Notes to Financial Statements, continued
August 31, 2000
Distributor and Shareholder Servicing: The Investment Company has 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 enter 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 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 Shareholder 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%, .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, 2000, the Fund
was charged shareholder servicing expenses of $352,865, $14,186 and
$351,002 by the Adviser, RIS and Commercial Banking, respectively. The
Fund did not incur any expenses from SSBSI or Solutions during the year.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets of the Fund on an
annual basis. The shareholder servicing payments shall not exceed .20% of
the average daily value of net assets of the Fund on an annual basis.
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, 2000.
Board of Trustees: The Investment Company paid each Trustee not affiliated
with the Investment Company an annual retainer, plus specified amounts for
board and committee meeting attended. These expenses are allocated among
all of the funds based upon their relative net assets.
Annual Report 17
<PAGE>
SSgA
US Government Money Market Fund
Notes to Financial Statements, continued
August 31, 2000
Accrued fees payable to affiliates and trustees as of August 31, 2000 were
as follows:
Advisory fees $ 334,932
Administration fees 52,886
Custodian fees 54,621
Distribution fees 14,530
Shareholder servicing fees 408,861
Transfer agent fees 42,816
Trustees' fees 755
---------
$ 909,401
=========
Beneficial Interest: As of August 31, 2000, one shareholder (who was also
an affiliate of the Investment Company) was a record owner of
approximately 13% of the total outstanding shares of the Fund.
5. Fund Share Transactions (On a Constant Dollar Basis):
(amounts in thousands)
Fiscal Years Ended August 31,
-----------------------------
2000 1999
------------- ------------
Proceeds from shares sold .............. 15,303,660 11,294,180
Proceeds from reinvestment of
distributions ........................ 55,819 46,676
Payments for shares redeemed ........... (15,073,545) (11,047,451)
------------- ------------
Total net increase (decrease) .......... 285,934 293,405
============= ============
6. Interfund Lending Program
The Fund and all other funds of the Investment Company received from the
Securities and Exchange Commission an exemptive order on December 23, 1999
to establish and operate an Interfund Credit Facility. This allows the
Funds to directly lend to and borrow money from the SSgA Money Market Fund
for temporary purposes in accordance with certain conditions. The
borrowing Funds are charged the average of the current Repo Rate and the
Bank Loan Rate. The Fund did not utilize the interfund lending program
during this year.
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, Treasurer and CEO
Mark E. Swanson, Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Treasurer
Carla L. Anderson, Assistant 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
160 Federal Street
Boston, Massachusetts 02110
Annual Report 19
<PAGE>
[COVER GRAPHIC]
SSgA(R) funds
ANNUAL REPORT
Growth and Income Fund
August 31, 2000
<PAGE>
SSgA(R) Funds
Growth and Income Fund
Annual Report
August 31, 2000
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........................................................... 20
Fund Management and Service Providers..................................... 21
"SSgA(R)" 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,
It is our pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 2000. The SSgA Fund Family has grown to include
twenty-four portfolios with over $21 billion in assets as of August 31, 2000.
The Fund Family provides a wide range of strategies covering the world's major
markets. The enclosed information provides an overview of the investment process
for the SSgA Growth and Income Fund. This overview contains the portfolio
management discussion, performance updates and financial information for the
Fund.
In an ongoing effort to develop competitive products and services that provide
investment solutions for our clients, we have added the SSgA Intermediate
Municipal Bond Fund to the SSgA Fund Family. This Fund's investment objective
seeks to provide federally tax-exempt current income by investing primarily in a
diversified portfolio of municipal debt securities with a dollar-weighted
average maturity between three and ten years.
We are also pleased with the success of our SSgA Emerging Markets and SSgA
Growth and Income Funds as they were included in Money(R) Magazine's June 2000
issue listing of the 'Top 100 Mutual Funds'. This is the second year in a row
that these funds have been selected.
Additionally, the SSgA Tax Free Money Market and the SSgA Active International
Funds have achieved five-year performance history during the 2000 fiscal year.
Currently, all of our SSgA Money Market Funds have at least a five-year
performance history. We strive to meet our clients' needs by providing funds
with long-term records and competitive performance.
We would like to thank you for choosing the SSgA Funds. Our reputation is based
on our tradition of designing and delivering exceptional financial services to
our clients. We look forward to continue sharing the benefit of our experience
with you.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
/s/ Timothy B. Harbert
Timothy B. Harbert
State Street Global Advisors
President and Chief Operating Officer, SSgA
4 Annual Report
<PAGE>
SSgA Growth and Income Fund
--------------------------------------------------------------------------------
Management of the Funds
--------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
[PHOTO]
Timothy B. Harbert
President and Chief Operating 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 over 20 years of
investment experience. From 1987 to 1989, Mr. Tuttle was a portfolio manager at
private Client Services at State Street Bank in Zurich, Switzerland. Mr. Tuttle
is a magna cum laude from Suffolk Law School, and 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: US equity securities.
Strategy: Fund Managers concentrate in securities with larger market
capitalizations, in a range of $1.9 billion to $580 billion. Stock selection
focuses on individual companies and the strength of characteristics. In
addition, the Fund can invest in IPOs (Initial Public Offerings).
--------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
Dates Growth and Income Fund S&P 500(R) Index**
Inception* $10,000 $10,000
1994 $10,623 $10,547
1995 $12,287 $12,809
1996 $13,954 $15,208
1997 $19,668 $21,391
1998 $21,818 $23,122
1999 $30,882 $32,330
2000 $39,301 $37,610
================================================================================
Performance Review
For the fiscal year ended August 31, 2000, the SSGA Growth and Income Fund
gained 27.26%, versus 16.33% for the S&P 500(R) Index. Fund performance is net
of operating expenses, whereas Index results do not include expenses of any
kind.
The fiscal year-end performance of the Fund has benefitted from investments made
in Initial Public Offerings (IPOs). There is no guarantee that the Fund will
continue to participate in the IPO market, and due to their volatility, there
can be no assurance that the IPOs will continue to have a positive impact on
Fund performance.
The Fund benefited from an overweighting in the Energy and Technology sectors
throughout the period, and from an overweighting in Financial Services beginning
in the second calendar quarter of 2000. The Fund is underweight versus the S&P
500(R) Index in basic materials, industrials, and consumer
--------------------------------------------------------------------------------
SSgA Growth and Income Fund
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
-------------- ------------ -------
1 Year $12,726 27.26%
5 Years $31,987 26.18%+
Inception $39,301 21.59%+
--------------------------------------------------------------------------------
Standard and Poor's(R) 500 Composite
Stock Price Index
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
-------------- ------------ -------
1 Year $11,633 16.33%
5 Years $29,362 24.04%+
Inception $37,610 20.83%+
See related Notes on following page.
6 Annual Report
<PAGE>
SSgA Growth and Income Fund
--------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
--------------------------------------------------------------------------------
cyclicals, where the Manager anticipates lower growth rates in the near term.
Strong individual stock selection across economic sectors was the primary reason
for the Fund's outperformance relative to the benchmark. Among Technology
stocks, Corning, Inc., EMC Corp., Applied Materials, Inc., and Linear Technology
Corp. were the strongest performers, returning 393%, 227%, 143%, and 129%,
respectively. The Fund's Energy sector exposure benefited from Anadarko
Petroleum Co., which gained 93% during the fiscal year. VoiceStream, a leading
global telecommunications firm returned 173% for the period, while SPX
Corporation, a leading provider of products and services to the automotive
industry, gained 95% since its purchase in February.
Market and Portfolio Highlights
After retreating in October to first quarter 1999 levels, the S&P 500(R) Index
rallied, posting a 14.9% return for the fourth quarter 1999. Since December, the
stock market has continued to be volatile, remaining in a fairly narrow trading
range and gaining only 4.1%. Market leadership has also shifted away from
Technology and Telecommunications stocks.
The Index's best performing sectors in 2000 have been electric Utilities and
Financial Services (up 39% and 20% respectively), which rallied as the Federal
Reserve approached the end of a fifteen-month period of tight monetary policy.
Duke Energy Corp., the Fund's fourth largest holding, posted a return of 49%,
reflecting the Utilities sector's strength during the period. The Financial
Services sector benefited from Morgan Stanley Dean Witter and Mellon Financial,
gaining 51% and 33% respectively. Health Care (up 19%) was where continued
product development and the long-term demand from an aging population outweighed
concerns over more stringent government regulation. Within this sector both
Medtronic, Inc. and Pfizer boosted Fund results, posting gains of 41% and 33%,
respectively. Energy (up 11%) driven by higher oil and gas prices, which
resulted in positive returns from both Anadarko Petroleum Co. and Baker-Hughes,
Inc. of 93% and 74%, respectively.
The Fund is well diversified, with exposure to all major sectors of the US
economy. The individual holdings reflect the Manager's conviction that long-term
investors will be rewarded for owning companies with favorable long-term growth
prospects, strong management, identifiable competitive advantages, and
significant or fast-growing market share. The long-term investment horizon used
in evaluating both market sectors and individual securities has resulted in the
distribution of only modest realized capital gains.
--------------------------------------------------------
Top Ten Equity Holdings
(as a percent of Total Investments) August 31, 2000
--------------------------------------------------------
General Electric Co. 4.6%
Cisco Systems, Inc. 3.7
Intel Corp. 3.6
Duke Energy Corp. 3.6
Citigroup, Inc. 3.4
Mellon Financial Corp. 3.1
Pfizer, Inc. 3.0
Procter & Gamble Co. 3.0
AT&T Corp. 2.8
Microsoft Corp. 2.7
--------------------------------------------------------
---------------------
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(R) 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, 2000, 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 accounting principles generally
accepted in the United States of America. 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 auditing standards
generally accepted in the United States of America 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, 2000 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
Boston, Massachusetts
October 11, 2000
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
Growth and Income Fund
Statement of Net Assets
August 31, 2000
Market
Number Value
of (000)
Shares $
------- --------
Common Stocks - 98.6%
Basic Industries - 3.0%
E.I. du Pont de Nemours & Co. 150,000 6,731
Illinois Tool Works, Inc. 105,000 5,887
Smurfit-Stone Container Corp. (a) 220,000 2,860
--------
15,478
--------
Capital Goods - 7.1%
General Electric Co. 410,000 24,062
SPX Corp. (a) 80,000 13,120
--------
37,182
--------
Consumer Basics - 15.4%
ALZA Corp. (a) 80,000 6,050
American Home Products Corp. 115,000 6,232
Bestfoods 75,000 5,297
Coca-Cola Co. (The) 80,000 4,210
Medtronic, Inc. 215,000 11,019
PepsiCo, Inc. 220,000 9,378
Pfizer, Inc. 360,000 15,570
Procter & Gamble Co. 250,000 15,452
Stryker Corp. 160,000 7,170
--------
80,378
--------
Consumer Non-Durables - 3.1%
Home Depot, Inc. (The) 110,000 5,287
Wal-Mart Stores, Inc. 234,000 11,100
--------
16,387
--------
Energy - 5.8%
Anadarko Petroleum Corp. 100,000 6,577
Baker Hughes, Inc. 215,000 7,861
Burlington Resources, Inc. 115,000 4,521
Exxon Mobil Corp. 100,000 8,163
Noble Drilling Corp. (a) 61,000 2,958
--------
30,080
--------
Finance - 16.3%
Bank of America Corp. 235,000 12,587
Capital One Financial Corp. 74,500 4,493
Citigroup, Inc. 306,667 17,902
FleetBoston Financial Corp. 130,000 5,549
Marsh & McLennan Cos., Inc. 80,000 9,500
Mellon Financial Corp. 360,000 16,290
MetLife, Inc. New (a) 124,375 3,024
Morgan Stanley Dean Witter & Co. 100,000 10,756
Stilwell Financial, Inc. (a) 100,000 4,838
--------
84,939
--------
General Business - 4.8%
Automatic Data Processing, Inc. 220,000 13,118
Comcast Corp. Special Class A 182,500 6,798
SBC Communications, Inc. 125,000 5,218
--------
25,134
--------
Technology - 32.1%
America Online, Inc. (a) 80,000 4,690
Analog Devices, Inc. (a) 32,000 3,216
Applied Materials, Inc. (a) 88,000 7,596
Cisco Systems, Inc. (a) 280,000 19,233
Dell Computer Corp. (a) 125,000 5,453
EMC Corp. (a) 110,000 10,780
Gentex Corp. (a) 140,000 3,623
Hewlett-Packard Co. 77,000 9,298
Intel Corp. 250,000 18,719
International Business Machines
Corp. 105,000 13,860
Linear Technology Corp. 140,000 10,045
Lucent Technologies, Inc. 200,000 8,363
Microsoft Corp. (a) 205,000 14,312
Motorola, Inc. 255,000 9,196
Oracle Systems Corp. (a) 115,000 10,451
Sun Microsystems, Inc. (a) 70,000 8,885
VeriSign, Inc. (a) 38,000 7,556
Veritas Software Corp. (a) 22,000 2,650
--------
167,926
--------
Annual Report 9
<PAGE>
SSgA
Growth and Income Fund
Statement of Net Assets, continued
August 31, 2000
Market
Number Value
of (000)
Shares $
------- --------
Utilities - 11.0%
Alltel Corp. 137,000 6,927
Amdocs, Ltd. (a) 30,000 2,143
AT&T Corp. 460,060 14,492
Corning, Inc. 21,000 6,887
Duke Energy Corp. 248,000 18,554
VoiceStream Wireless Corp. (a) 45,000 5,064
WorldCom, Inc. (a) 100,000 3,650
--------
57,717
--------
Total Common Stocks
(cost $422,136) 515,221
--------
Principal Market
Amount Value
(000) (000)
$ $
--------- --------
Short-Term Investments - 1.4%
AIM Short Term Investment Prime
Portfolio Class A (b) 3,587 3,587
Federated Government Obligations
Fund (b) 3,586 3,586
--------
Total Short-Term Investments
(cost $7,173) 7,173
--------
Total Investments - 100.0%
(identified cost $429,309) 522,394
Other Assets and Liabilities,
Net - 0.0% 115
--------
Net Assets - 100.0% 522,509
========
(a) Nonincome-producing security.
(b) At amortized cost, which approximates market.
See accompanying notes which are an integral part of the financial statements.
10 Annual Report
<PAGE>
SSgA
Growth and Income Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amount) August 31, 2000
<TABLE>
<S> <C> <C>
Assets
Investments at market (identified cost $429,309) .................................. $ 522,394
Receivables:
Dividends ...................................................................... 560
Fund shares sold ............................................................... 513
Prepaid Expenses .................................................................. 25
Short-term investments held as collateral for securities loaned, at market ........ 7,471
---------
Total assets ................................................................ 530,963
Liabilities
Payables:
Investments purchased .............................................. $ 64
Fund shares redeemed ............................................... 348
Accrued fees to affiliates ......................................... 571
Payable upon return of securities loaned, at market ................... 7,471
---------
Total liabilities ........................................................... 8,454
---------
Net Assets ........................................................................ $ 522,509
=========
Net Assets Consist of:
Undistributed net investment income ............................................... $ 221
Accumulated net realized gain (loss) .............................................. 22,960
Unrealized appreciation (depreciation) on investments ............................. 93,085
Shares of beneficial interest ..................................................... 19
Additional paid-in capital ........................................................ 406,224
---------
Net Assets ........................................................................ $ 522,509
=========
Net Asset Value, offering and redemption price per share:
($522,509,413 divided by 19,203,708 shares of $.001 par value
shares of beneficial interest outstanding) .................................. $ 27.21
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Annual Report 11
<PAGE>
SSgA
Growth and Income Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 2000
<TABLE>
<S> <C> <C>
Investment Income
Dividends ...................................................................... $ 5,218
Securities Lending Income ...................................................... 276
---------
Total investment income ..................................................... 5,494
Expenses
Advisory fees ...................................................... $ 3,466
Administrative fees ................................................ 140
Custodian fees ..................................................... 79
Distribution fees .................................................. 341
Transfer agent fees ................................................ 80
Professional fees .................................................. 19
Registration fees .................................................. 40
Shareholder servicing fees ......................................... 482
Trustees' fees ..................................................... 11
Miscellaneous ...................................................... 13
---------
Expenses before reductions ......................................... 4,671
Expense reductions ................................................. (173)
---------
Expenses, net ............................................................... 4,498
---------
Net investment income ............................................................. 996
---------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on investments ........................................... 25,416
Net change in unrealized appreciation (depreciation) on investments ............... 71,444
---------
Net realized and unrealized gain (loss) ........................................... 96,860
---------
Net increase (decrease) in net assets from operations ............................. $97,856
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
12 Annual Report
<PAGE>
SSgA
Growth and Income Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Years Ended August 31,
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income .............................................. $ 996 $ 927
Net realized gain (loss) ........................................... 25,416 41,787
Net change in unrealized appreciation (depreciation) ............... 71,444 9,643
--------- ---------
Net increase (decrease) in net assets from operations ........... 97,856 52,357
--------- ---------
Distributions
From net investment income ......................................... (1,055) (813)
From net realized gain ............................................. (15,079) (16,521)
--------- ---------
Net decrease in net assets from distributions ................... (16,134) (17,334)
--------- ---------
Share Transactions
Net increase (decrease) in net assets from share transactions ...... 149,071 145,067
--------- ---------
Total net increase (decrease) in net assets ........................... 230,793 180,090
Net Assets
Beginning of period ................................................ 291,716 111,626
--------- ---------
End of period (including undistributed net investment income of
$221 and $280, respectively) .................................... $ 522,509 $ 291,716
========= =========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Annual Report 13
<PAGE>
SSgA
Growth and Income Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
------------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ..... $ 22.53 $ 18.10 $ 18.08 $ 13.36 $ 11.95
-------- -------- -------- ------- -------
Income From Operations
Net investment income (a) ............. .06 .09 .11 .12 .15
Net realized and unrealized gain (loss) 5.77 6.79 1.83 5.18 1.46
-------- -------- -------- ------- -------
Total income from operations ....... 5.83 6.88 1.94 5.30 1.61
-------- -------- -------- ------- -------
Distributions
From net investment income ............ (.07) (.09) (.11) (.14) (.16)
From net realized gain ................ (1.08) (2.36) (1.81) (.44) (.04)
-------- -------- -------- ------- -------
Total distributions ................ (1.15) (2.45) (1.92) (.58) (.20)
-------- -------- -------- ------- -------
Net Asset Value, End of Period ........... $ 27.21 $ 22.53 $ 18.10 $ 18.08 $ 13.36
======== ======== ======== ======= =======
Total Return (%) ......................... 27.26 41.55 10.93 40.95 13.57
Ratios/Supplemental Data:
Net Assets, end of period (in
thousands) ......................... 522,509 291,716 111,626 71,736 55,823
Ratios to average net assets (%):
Operating expenses, net (b) ........ 1.10 1.03 .95 .95 .95
Operating expenses, gross (b) ...... 1.15 1.11 1.14 1.21 1.40
Net investment income .............. .24 .41 .57 .82 1.15
Portfolio turnover rate (%) ........... 49.72 72.27 66.44 29.88 38.34
</TABLE>
(a) For the periods subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.
(b) See Note 4 for current period amounts.
14 Annual Report
<PAGE>
SSgA
Growth and Income Fund
Notes to Financial Statements
August 31, 2000
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 24 investment portfolios which are in operation as
of August 31, 2000. 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 accounting
principles generally accepted in the United States 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.
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.
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 15
<PAGE>
SSgA
Growth and Income Fund
Notes to Financial Statements, continued
August 31, 2000
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, 2000 are as follows:
Net
Unrealized
Federal Tax Unrealized Unrealized Appreciation
Cost Appreciation (Depreciation) (Depreciation)
------------ ------------ -------------- --------------
$429,716,717 $112,712,713 $ (20,035,349) $ 92,677,364
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 year may differ significantly from
distributions during such year. 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.
Expenses: Most expenses can be directly attributed to the Fund. Expenses
of the investment company which cannot be directly attributed are
allocated among all funds based principally on their relative net assets.
3. Securities Transactions
Investment transactions: For the year ended August 31, 2000, purchases and
sales of investment securities, excluding short-term investments,
aggregated to $334,335,447, and $197,946,007, respectively.
Securities lending: The Investment Company has a securities lending
program whereby each Fund can loan securities with a value up to 33 1/3%
of its total assets to certain brokers. The Fund receives cash (U.S.
currency), U.S. Government or U.S. Government agency obligations as
collateral against the loaned securities. To the extent that a loan is
secured by cash collateral, such collateral shall be invested by State
Street Bank and Trust Company in short-term instruments, money market
mutual funds, and such other short-term investments, provided the
investments meet certain quality and diversification requirements. Under
the securities lending arrangement, the collateral received is recorded on
the Fund's statement of assets and liabilities along with the related
obligation to return the collateral. In those situations where the Company
has relinquished control of securities transferred, it derecognizes the
securities and records a receivable from the counterparty.
16 Annual Report
<PAGE>
SSgA
Growth and Income Fund
Notes to Financial Statements, continued
August 31, 2000
Income generated from the investment of cash collateral, less negotiated
rebate fees paid to participating brokers and transaction costs, is
divided between the Fund and State Street Bank and Trust Company and is
recorded as interest income for the Fund. To the extent that a loan is
secured by non-cash collateral, brokers pay the Fund negotiated lenders'
fees, which are divided between the Fund and State Street Bank and Trust
Company and are recorded as interest income for the Fund. All collateral
received will be in an amount at least equal to 102% (for loans of U.S.
securities) or 105% (for non-U.S. securities) of the market value of the
loaned securities at the inception of each loan. Should the borrower of
the securities fail financially, there is a risk of delay in recovery of
the securities or loss of rights in the collateral. Consequently, loans
are made only to borrowers which are deemed to be of good financial
standing. As of August 31, 2000, the value of outstanding securities on
loan and the value of collateral amounted to $7,306,574 and $7,470,530,
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, through State Street Global Advisors, the investment management
group of 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. The
Adviser has voluntarily agreed to reimburse the Fund for all expenses in
excess of 1.10% of average daily net asset on an annual basis. The total
amount of the reimbursement for the year ended August 31, 2000 was
$168,469. As of August 31, 2000, the receivable due from the Adviser for
reimbursed expenses in excess of the expense cap has been netted against
the Advisory 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.
In addition, the Fund has entered into arrangements with its Adviser
whereby custody credits realized as a result of uninvested cash balances
were used to reduce a portion of the Fund's expenses. During the year, the
Fund's custodian fees were reduced by $4,381 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly-owned subsidiary of The Northwestern Mutual Life Insurance Company,
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 for services supplied by the
Administrator pursuant to the Administration Agreement, an annual fee,
payable monthly on a pro rata basis. For the period September 1, 1999 to
April 30, 2000 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 up to and including $1 billion - .05%; over $1 billion -
.03%. Effective May 1, 2000, the annual fee is based on the following
percentages of the average daily net assets of all U.S. Equity portfolios:
$0 to $2 billion - .0315%; over $2 billion - .029%. The Administrator will
charge a flat fee of $30,000 per year per Fund with less than $500 million
in net assets and $1,500 per year for monthly performance reports and use
of Russell Performance Universe software product. In addition, the Fund
reimburses the Administrator for out-of-pocket expenses and start-up costs
for new funds.
Annual Report 17
<PAGE>
SSgA
Growth and Income Fund
Notes to Financial Statements, continued
August 31, 2000
Distributor and Shareholder Servicing: The Investment Company has 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 enter 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 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 Shareholder 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, 2000, the Fund
was charged shareholder servicing expenses of $101,948, $29,292, $26,602,
$3,329 and $276,294 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 of the Fund on an
annual basis. The shareholder servicing payments shall not exceed .20% of
the average daily value of net assets of the Fund on an annual basis.
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, 2000.
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 $82,885 for the year ended
August 31, 2000.
Board of Trustees: The Investment Company paid each Trustee not affiliated
with the Investment Company an annual retainer, plus specified amounts for
board and committee meetings attended. 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, 2000
Accrued fees payable to affiliates and trustees as of August 31, 2000 were
as follows:
Advisory fees $ 467,229
Administration fees 17,702
Custodian fees 3,886
Distribution fees 15,077
Shareholder servicing fees 64,715
Transfer agent fees 1,746
Trustees' fees 940
----------
$ 571,295
==========
Beneficial Interest: As of August 31, 2000, two shareholders (one of which
was also an affiliate of the Investment Company) were record owners of
approximately 33% and 12%, respectively, of the total outstanding shares
of the Fund.
5. Fund Share Transactions (amounts in thousands)
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
----------------------------------------------------
2000 1999
------------------------ ------------------------
Shares Dollars Shares Dollars
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Proceeds from shares sold 9,805 $ 238,027 11,203 $ 241,058
Proceeds from reinvestment of
distributions 692 14,880 900 16,164
Payments for shares redeemed (4,244) (103,836) (5,320) (112,155)
---------- ---------- ---------- ----------
Total net increase (decrease) 6,253 $ 149,071 6,783 $ 145,067
========== ========== ========== ==========
</TABLE>
6. Interfund Lending Program
The Fund and all other funds of the Investment Company received from the
Securities and Exchange Commission an exemptive order on December 23, 1999
to establish and operate an Interfund Credit Facility. This allows the
Funds to directly lend to and borrow money from the SSgA Money Market Fund
for temporary purposes in accordance with certain conditions. The
borrowing Funds are charged the average of the current Repo Rate and the
Bank Loan Rate. The Fund did not utilize the interfund lending program
during this year.
7. Dividends
On September 1, 2000, the Board of Trustees declared a dividend of $.0112
from net investment income, payable on September 8, 2000 to shareholders
of record on September 5, 2000.
Annual Report 19
<PAGE>
SSgA
Growth and Income Fund
Tax Information
August 31, 2000 (Unaudited)
The Fund paid a distribution of $14,323,649 from net long-term capital gains
during its taxable year ended August 31, 2000.
Please consult a tax advisor for questions about federal or state income tax
laws.
20 Annual Report
<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, Treasurer and CEO
Mark E. Swanson, Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Treasurer
Carla L. Anderson, Assistant 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
160 Federal Street
Boston, Massachusetts 02110
Annual Report 21
<PAGE>
[COVER GRAPHIC]
SSgA(R) funds
ANNUAL REPORT
Intermediate Fund
August 31, 2000
<PAGE>
SSgA(R) Funds
Intermediate Fund
Annual Report
August 31, 2000
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(R)" 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,
It is our pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 2000. The SSgA Fund Family has grown to include
twenty-four portfolios with over $21 billion in assets as of August 31, 2000.
The Fund Family provides a wide range of strategies covering the world's major
markets. The enclosed information provides an overview of the investment process
for the SSgA Intermediate Fund. This overview contains the portfolio management
discussion, performance updates and financial information for the Fund.
In an ongoing effort to develop competitive products and services that provide
investment solutions for our clients, we have added the SSgA Intermediate
Municipal Bond Fund to the SSgA Fund Family. This Fund's investment objective
seeks to provide federally tax-exempt current income by investing primarily in a
diversified portfolio of municipal debt securities with a dollar-weighted
average maturity between three and ten years.
We are also pleased with the success of our SSgA Emerging Markets and SSgA
Growth and Income Funds as they were included in Money(R) Magazine's June 2000
issue listing of the 'Top 100 Mutual Funds'. This is the second year in a row
that these funds have been selected.
Additionally, the SSgA Tax Free Money Market and the SSgA Active International
Funds have achieved five-year performance history during the 2000 fiscal year.
Currently, all of our SSgA Money Market Funds have at least a five-year
performance history. We strive to meet our clients' needs by providing funds
with long-term records and competitive performance.
We would like to thank you for choosing the SSgA Funds. Our reputation is based
on our tradition of designing and delivering exceptional financial services to
our clients. We look forward to continue sharing the benefit of our experience
with you.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
/s/ Timothy B. Harbert
Timothy B. Harbert
State Street Global Advisors
President and Chief Operating Officer, SSgA
4 Annual Report
<PAGE>
SSgA Intermediate Fund
--------------------------------------------------------------------------------
Management of the Funds
--------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
[PHOTO]
Timothy B. Harbert
President and Chief Operating 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 Cambridgeport Savings. He has a BA degree 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 and agencies, corporate bonds, asset-backed securities,
mortgage-backed securities and CMBS.
Strategy: Fund Managers seek to exceed the return of the Lehman Brothers
Intermediate Government/Credit 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
Lehman Brothers
Intermediate
Government/
Dates Intermediate Fund Credit Index**
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
1999 $13,162 $13,763
2000 $13,967 $14,626
================================================================================
Performance Review
For the year ended August 31, 2000, the SSgA Intermediate Bond Market Fund
returned 6.12% versus its benchmark, the Lehman Brothers Intermediate
Government/Credit Index, which posted a return of 6.27%. The Fund's performance
includes sixty basis points in fees, whereas the Index does not include expenses
of any kind. The Fund outperformed the benchmark by 45 basis points with the
expense differential included.
The Fund's overweight allocation to mortgage-backed securities, corporate bonds
and asset-backed securities was the primary driver to the Fund's outperformance
versus the Index. The fact that the Fund doesn't invest in corporate or asset
backed securities with maturities longer than ten years helped the strategy
during the period. This was due, in part, to the effects of the Treasury
buybacks and diminished auction supply, which were much more pronounced in the
greater-than-ten-year maturities. With long Treasury bonds rallying the to the
greatest degree, the longer corporate bond sector
--------------------------------------------------------------------------------
SSgA Intermediate Fund
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
--------------------- ------------ -------
1 Year $ 10,612 6.12%
5 Years $ 13,141 5.61%+
Inception $ 13,967 4.89%+
--------------------------------------------------------------------------------
Lehman Brothers Intermediate
Government/Credit Index
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
--------------------- ------------ -------
1 Year $ 10,627 6.27%
5 Years $ 13,405 6.04%+
Inception $ 14,626 5.58%+
See related Notes on following page.
6 Annual Report
<PAGE>
SSgA Intermediate Fund
--------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
--------------------------------------------------------------------------------
spreads widened significantly and most of the underperformance occurred in the
longer sectors.
Portfolio and Market Highlights
The year was marked by a Federal Reserve policy of increasing short-term rates
intended to slow down an overly robust economy. The resulting interest rate
hikes implemented by the Fed during the period, as well as the US Treasury's
announcement of aggressive bond buybacks and curtailed issuance in the future
led to an inverted Treasury yield curve. The two-year Treasury note ended the
fiscal year at 6.17%, while the thirty-year bond was at 5.67%. At the beginning
of the year, thepse two securities were yielding 5.73% and 6.07% respectively.
As a result of this inversion, longer corporate bond spreads widened relative to
their Treasury benchmarks.
Additionally, comments made by a Treasury department official in first quarter
2000 questioning the implicit government guarantee of the Federal Agencies, such
as FNMA and FHLMC, further aggravated spreads. Finally, the continued lower risk
profile on the part of the Wall Street dealer community, evidenced by less
inventory and reduced market making, made it much more difficult to buy and sell
corporate securities, encouraging wider spreads to persist in that sector.
The Fund continues to be overweighted in spread product, although the current
positions constitute its lowest level of the year. Additionally, the composition
of that overweight is changing, as the Fund sold longer corporate bonds and
invested in mortgage backed, Federal agency and asset backed securities. The
Manager felt that it was prudent to lower Fund exposure to Corporates, a very
technical and illiquid sector. The Manager moved the Fund into more liquid
sectors such as mortgage-backed securities, allowing it to continue taking
advantage of the unusually wide spreads. As a result, the Fund is only slightly
overweight Corporates, and primarily in the shorter end. The Fund continues to
be overweight in the Mortgage and the Asset-Backed sectors, which comprise the
bulk of the portfolio's overweight exposure to the spread sectors.
The Fund seeks to enhance returns through overweight allocations the Corporate
and Mortgage-Backed sectors relative to its benchmark. These weightings are
reduced or increased throughout the year in response to the Manager's outlook on
the market. The Fund can carry an overweight to non-index sectors such as
Asset-Backed securities. The Fund does not take explicit active interest rate
risk, but by utilizing duration as its measurement, seeks to match that of the
Index.
--------------------------------------------------------
Top Ten Issuers (as a percent of Total
Investments) August 31, 2000
--------------------------------------------------------
United States Government Treasuries 32.5%
Federal National Mortgage Association 13.8
Federal Home Loan Bank 6.9
Federal Home Loan Mortgage Corporation 6.5
General Motors Acceptance Corporation 2.8
Ford Motor Credit Co. 2.3
AT&T Canada Inc. 1.4
Korea Development Bank 1.4
CIT Group, Inc. 1.3
Enron Corp. 1.3
--------------------------------------------------------
---------------------------
Notes: The following notes relate to the Growth of $10,000 graph and table on
the preceding page.
* The Intermediate Fund commenced operations on September 1, 1993. Index
comparisons also began on September 1, 1993.
** The Lehman Brothers Intermediate Government/Credit Index is composed of
all bonds covered by the Lehman Brothers Government/ Credit 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, 2000, 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 accounting principles generally
accepted in the United States of America. 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 auditing standards
generally accepted in the United States of America 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, 2000 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
Boston, Massachusetts
October 11, 2000
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
Intermediate Fund
Statement of Net Assets
August 31, 2000
Principal Market
Amount Value
(000) (000)
$ $
--------- ------
Long-Term Investments - 96.0%
Asset-Backed Securities - 2.9%
CNH Equipment Trust
Series 2000-A Class A4
7.340% due 02/15/07 250 252
Discover Card Master Trust I
Series 1998-7 Class A
5.600% due 05/16/06 500 480
Ford Credit Auto Owner Trust
Series 2000-B Class A5
7.070% due 04/15/04 500 502
Honda Automobile Lease Trust
Series 1999-A Class A5
6.650% due 07/15/05 350 349
MBNA Master Credit Card Trust
Series 2000-I Class A
6.900% due 01/15/08 250 249
USAA Auto Loan Grantor Trust
Series 1998-1 Class A
5.800% due 01/15/05 71 70
-------
1,902
-------
Corporate Bonds and Notes - 23.1%
Associates Corp. North America
5.800% due 04/20/04 250 238
BankAmerica Corp.
5.875% due 02/15/09 500 452
BankBoston Corp.
6.125% due 03/15/02 150 148
Chase Manhattan Corp.
7.875% due 06/15/10 350 359
CIT Group, Inc.
5.800% due 03/26/02 500 489
5.910% due 11/10/03 500 479
Clear Channel Communications
7.875% due 06/15/05 150 153
DaimlerChrysler North America Holding Corp.
Series B
6.630% due 09/21/01 300 298
El Paso Energy Corp.
6.750% due 05/15/09 200 189
Enron Corp.
6.500% due 08/01/02 750 740
9.125% due 04/01/03 200 208
EOP Operating, L.P.
6.500% due 01/15/04 250 241
6.800% due 01/15/09 250 231
Equitable Cos., Inc.
9.000% due 12/15/04 250 265
Equitable Life Assurance Society
6.950% due 12/01/05 300 288
Fleet National Bank
Series BKNT
5.750% due 01/15/09 500 445
Ford Motor Credit Co.
6.110% due 12/28/01 700 691
6.500% due 02/28/02 500 495
7.500% due 01/15/03 500 503
GATX Capital Corp.
6.500% due 11/01/00 500 499
General Motors Acceptance Corp.
6.375% due 09/28/01 600 593
9.625% due 12/15/01 500 513
5.500% due 01/14/02 500 488
5.950% due 03/14/03 500 486
Goldman Sachs Group, Inc.
7.625% due 08/17/05 375 379
International Business Machines Corp.
5.250% due 12/01/03 500 476
International Paper Co.
8.000% due 07/08/03 165 167
Kemper Corp.
6.875% due 09/15/03 500 495
Lehman Brothers Holdings, Inc.
6.625% due 04/01/04 100 97
Lockheed Martin Corp.
7.950% due 12/01/05 150 152
Mellon Financial Co.
5.750% due 11/15/03 500 482
Annual Report 9
<PAGE>
SSgA
Intermediate Fund
Statement of Net Assets, continued
August 31, 2000
Principal Market
Amount Value
(000) (000)
$ $
--------- ------
MidAmerican Funding LLC
6.339% due 03/01/09 150 137
Morgan Stanley Dean Witter & Co.
7.125% due 01/15/03 400 401
5.625% due 01/20/04 500 478
Norfolk Southern Corp.
8.375% due 05/15/05 190 197
Phillips Petroleum Co.
8.500% due 05/25/05 190 199
Sprint Capital Corp.
6.500% due 11/15/01 500 495
7.625% due 06/10/02 300 302
Time Warner, Inc.
8.180% due 08/15/07 552 572
Tosco Corp.
7.250% due 01/01/07 250 246
Union Pacific Corp.
7.375% due 09/15/09 300 294
United Mexican States
Series A
8.500% due 02/01/06 100 100
Vastar Resources, Inc.
6.500% due 04/01/09 250 239
-------
15,399
-------
Eurodollar Bonds - 5.6%
Alberta, Province of
4.875% due 10/29/03 300 283
Cable & Wireless Optus, Ltd.
8.000% due 06/22/10 300 306
Chile, Republic of
6.875% due 04/28/09 200 188
Korea Development Bank
7.125% due 04/22/04 470 459
Korea, Republic of
8.750% due 04/15/03 350 359
Ontario, Province of
7.375% due 01/27/03 500 505
Quebec, Province of Canada
5.750% due 02/15/09 250 228
Telekomunikacja Polska SA
7.125% due 12/10/03 550 534
7.750% due 12/10/08 30 29
Toyota Motor Credit Corp.
5.625% due 11/13/03 400 385
United Mexican States
8.625% due 03/12/08 250 250
Series XW
10.375% due 02/17/09 200 220
-------
3,746
-------
Mortgage-Backed Securities - 14.4%
COMM Mortgage Trust
Series 1999-1 Class A1
6.145% due 02/15/08 580 560
Federal Home Loan Mortgage Corp. (a)
6.500% 30 year TBA 475 454
7.500% 30 year TBA 2,815 2,798
Federal Home Loan Mortgage Corp.
Participation Certificate
4.500% due 2001 320 313
Federal National Mortgage Association
8.000% 30 year TBA (a) 975 984
6.000% due 01/01/09 328 319
7.125% due 06/15/10 1,700 1,731
6.000% due 09/01/14 260 249
6.000% due 05/01/29 480 446
6.000% due 06/01/29 930 864
6.000% due 09/01/29 57 53
Heller Financial Commercial Mortgage Asset Co.
Series 1999-PH1 Class A1
6.500% due 05/15/31 828 807
Nomura Asset Securities Corp.
6.590% due 03/17/28 20 19
-------
9,597
-------
10 Annual Report
<PAGE>
SSgA
Intermediate Fund
Statement of Net Assets, continued
August 31, 2000
Principal Market
Amount Value
(000) (000)
$ $
--------- ------
United States Government Agencies - 7.7%
Federal Home Loan Bank
6.875% due 07/18/02 2,500 2,507
Federal Home Loan Mortgage Corp.
7.000% due 03/15/10 490 494
6.625% due 09/15/09 740 726
Federal National Mortgage Association
7.125% due 02/15/05 500 507
6.400% due 05/14/09 400 378
7.250% due 01/15/10 490 502
-------
5,114
-------
United States Government Treasuries - 36.1%
United States Treasury Bonds
10.000% due 05/15/10 320 368
12.000% due 08/15/13 1,600 2,182
United States Treasury Notes
6.375% due 04/30/02 3,185 3,191
6.625% due 05/31/02 825 830
6.375% due 06/30/02 450 451
6.250% due 07/31/02 2,000 2,002
6.125% due 08/31/02 1,500 1,499
5.250% due 08/15/03 500 489
5.875% due 11/15/04 1,120 1,114
7.875% due 11/15/04 250 266
6.750% due 05/15/05 4,495 4,634
6.500% due 08/15/05 310 316
6.875% due 05/15/06 250 260
6.500% due 10/15/06 250 256
5.625% due 05/15/08 2,500 2,451
3.875% due 01/15/09 1,050 1,039
6.500% due 02/15/10 1,565 1,634
5.750% due 08/15/10 1,075 1,076
-------
24,058
-------
Yankee Bonds - 6.2%
Abitibi-Consolidated, Inc.
8.300% due 08/01/05 150 153
AT & T Canada, Inc.
7.650% due 09/15/06 500 503
Canadian National Railroad
6.625% due 05/15/03 500 491
Ireland, Republic of
7.125% due 07/15/02 600 602
Korea Development Bank
7.625% due 10/01/02 600 600
Kowloon-Canton Railway
8.000% due 03/15/10 565 577
Metronet Communications Corp.
10.750% due 11/01/07 (b) 330 299
12.000% due 08/15/07 500 563
Orange PLC
9.000% due 06/01/09 150 157
Svenska Handelsbanken
8.350% due 07/15/04 200 205
-------
4,150
-------
Total Long-Term Investments
(cost $64,032) 63,966
-------
Annual Report 11
<PAGE>
SSgA
Intermediate Fund
Statement of Net Assets, continued
August 31, 2000
Principal Market
Amount Value
(000) (000)
$ $
--------- ------
Short-Term Investments - 15.0%
Federal Home Loan Bank Consolidated Discount Note
6.510% due 09/01/00 (c)(d) 2,600 2,600
Federal National Mortgage Association
Discount Note
6.403% due 09/14/00 (c)(d) 4,200 4,191
Federated Investors Prime Cash Obligations
Fund (c) 3,176 3,176
-------
Total Short-Term Investments
(cost $9,967) 9,967
-------
Total Investments - 111.0%
(identified cost $73,999) 73,933
Other Assets and Liabilities,
Net - (11.0%) (7,312)
-------
Net Assets - 100.0% 66,621
=======
(a) Forward commitment.
(b) Adjustable or floating rate security.
(c) At amortized cost, which approximates market.
(d) Rate noted is yield to maturity from date of acquisition.
Abbreviations:
TBA - To Be Announced Security
See accompanying notes which are an integral part of the financial statements.
12 Annual Report
<PAGE>
SSgA
Intermediate Fund
Statement of Asset and Liabilities
Amounts in thousands (except per share amount) August 31, 2000
<TABLE>
<S> <C> <C>
Assets
Investments at market (identified cost $73,999) ............................................... $73,933
Receivables:
Interest ................................................................................... 869
Investments sold ........................................................................... 175
Fund shares sold ........................................................................... 24
-------
Total assets ............................................................................ 75,001
Liabilities
Payables:
Investments purchased (regular settlement) ..................................... $4,085
Investments purchased (delayed settlement) ..................................... 4,232
Fund shares redeemed ........................................................... 7
Accrued fees to affiliates ..................................................... 34
Other accrued expenses ......................................................... 22
------
Total liabilities ....................................................................... 8,380
-------
Net Assets .................................................................................... $66,621
=======
Net Assets Consist of:
Undistributed net investment income ........................................................... $ 995
Accumulated net realized gain (loss) .......................................................... (2,290)
Unrealized appreciation (depreciation) on investments ......................................... (66)
Shares of beneficial interest ................................................................. 7
Additional paid-in capital .................................................................... 67,975
-------
Net Assets .................................................................................... $66,621
=======
Net Asset Value, offering and redemption price per share:
($66,620,778 divided by 6,995,308 shares of $.001 par value
shares of beneficial interest outstanding) .............................................. $ 9.52
=======
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Annual Report 13
<PAGE>
SSgA
Intermediate Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 2000
<TABLE>
<S> <C> <C>
Investment Income
Interest ................................................................................... $ 4,002
Dividends .................................................................................. 191
-------
Total investment income ................................................................. 4,193
Expenses
Advisory fees .................................................................. $ 520
Administrative fees ............................................................ 32
Custodian fees ................................................................. 49
Distribution fees .............................................................. 28
Transfer agent fees ............................................................ 27
Professional fees .............................................................. 15
Registration fees .............................................................. 30
Shareholder servicing fees ..................................................... 54
Trustees' fees ................................................................. 6
Miscellaneous .................................................................. 7
-----
Expenses before reductions ..................................................... 768
Expense reductions ............................................................. (378)
-----
Expenses, net ........................................................................... 390
-------
Net investment income ......................................................................... 3,803
-------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on investments ....................................................... (1,721)
Net change in unrealized appreciation (depreciation) on investments ........................... 1,757
-------
Net realized and unrealized gain (loss) ....................................................... 36
-------
Net increase (decrease) in net assets from operations ......................................... $ 3,839
=======
</TABLE>
See accompanying notes which are an integral part of the financial statements.
14 Annual Report
<PAGE>
SSgA
Intermediate Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Years Ended August 31,
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income .......................................... $ 3,803 $ 3,876
Net realized gain (loss) ....................................... (1,721) (9)
Net change in unrealized appreciation (depreciation) ........... 1,757 (2,882)
-------- --------
Net increase (decrease) in net assets from operations ....... 3,839 985
-------- --------
Distributions
From net investment income ..................................... (3,806) (3,873)
From net realized gain ......................................... (50) (1,163)
-------- --------
Net decrease in net assets from distributions ............... (3,856) (5,036)
-------- --------
Share Transactions
Net increase (decrease) in net assets from share transactions .. (4,912) (1,090)
-------- --------
Total net increase (decrease) in net assets ....................... (4,929) (5,141)
Net Assets
Beginning of period ............................................ 71,550 76,691
-------- --------
End of period (including undistributed net investment income of
$995 and $992, respectively) ................................ $ 66,621 $ 71,550
======== ========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Annual Report 15
<PAGE>
SSgA
Intermediate Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
--------------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ......... $ 9.51 $ 10.04 $ 9.76 $ 9.57 $ 9.72
-------- -------- -------- -------- --------
Income From Operations
Net investment income (a) ................. .55 .49 .53 .54 .53
Net realized and unrealized gain (loss) ... .01 (.35) .28 .20 (.14)
-------- -------- -------- -------- --------
Total income from operations ........... .56 .14 .81 .74 .39
-------- -------- -------- -------- --------
Distributions
From net investment income ................ (.54) (.51) (.53) (.55) (.54)
From net realized gain .................... (.01) (.16) -- -- --
-------- -------- -------- -------- --------
Total distributions .................... (.55) (.67) (.53) (.55) (.54)
-------- -------- -------- -------- --------
Net Asset Value, End of Period ............... $ 9.52 $ 9.51 $ 10.04 $ 9.76 $ 9.57
======== ======== ======== ======== ========
Total Return (%) ............................. 6.12 1.36 8.64 8.00 4.12
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) .. 66,621 71,550 76,691 53,834 41,518
Ratios to average net assets (%):
Operating expenses, net (b) ............ .60 .60 .60 .60 .60
Operating expenses, gross (b) .......... 1.18 1.11 1.13 1.30 1.38
Net investment income .................. 5.85 5.02 5.51 5.78 5.57
Portfolio turnover rate (%) ............... 225.31 304.47 244.58 242.76 221.73
</TABLE>
(a) For the periods subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.
(b) See Note 4 for current period amounts.
16 Annual Report
<PAGE>
SSgA
Intermediate Fund
Notes to Financial Statements
August 31, 2000
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 24 investment portfolios which are in operation as
of August 31, 2000. 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 accounting
principles generally accepted in the United States 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.
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.
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
Annual Report 17
<PAGE>
SSgA
Intermediate Fund
Notes to Financial Statements, continued
August 31, 2000
federal income taxes and no federal income tax provision was required. At
August 31, 2000, the Fund had net tax basis capital loss carryover of
$726,691, which may be applied against any realized net taxable gains in
each succeeding year or until its expiration date of August 31, 2008. As
permitted by tax regulations, the Fund intends to defer a net realized
capital loss of $1,465,188 incurred from November 1, 1999 to August 31,
2000, and treat it as arising in the fiscal year 2001.
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, 2000 are as follows:
Net Unrealized
Unrealized Unrealized Appreciation
Federal Tax Cost Appreciation (Depreciation) (Depreciation)
---------------- ------------ -------------- --------------
$74,097,500 $750,661 $(855,046) $(104,385)
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 year may differ significantly from
distributions during such year. 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.
Expenses: Most expenses can be directly attributed to the Fund. Expenses
of the investment company which cannot be directly attributed are
allocated among all funds based principally on their relative net assets.
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. 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.
18 Annual Report
<PAGE>
SSgA
Intermediate Fund
Notes to Financial Statements, continued
August 31, 2000
3. Securities Transactions
Investment transactions: For the year ended August 31, 2000, purchases and
sales of investment securities, excluding US Government and Agency
obligations and short-term investments, aggregated to $28,125,292 and
$42,448,141, respectively.
For the year ended August 31, 2000, purchases and sales of US Government
and Agency obligations, excluding short-term investments, aggregated to
$112,974,855 and $102,743,755, respectively.
Securities lending: The Investment Company has a securities lending
program whereby each Fund can loan securities with a value up to 33 1/3%
of its total assets to certain brokers. The Fund receives cash (U.S.
currency), U.S. Government or U.S. Government agency obligations as
collateral against the loaned securities. To the extent that a loan is
secured by cash collateral, such collateral shall be invested by State
Street Bank and Trust Company in short-term instruments, money market
mutual funds, and such other short-term investments, provided the
investments meet certain quality and diversification requirements. Under
the securities lending arrangement, the collateral received is recorded on
the Fund's statement of assets and liabilities along with the related
obligation to return the collateral. In those situations where the Company
has relinquished control of securities transferred, it derecognizes the
securities and records a receivable from the counterparty.
Income generated from the investment of cash collateral, less negotiated
rebate fees paid to participating brokers and transaction costs, is
divided between the Fund and State Street Bank and Trust Company and is
recorded as interest income for the Fund. To the extent that a loan is
secured by non-cash collateral, brokers pay the Fund negotiated lenders'
fees, which are divided between the Fund and State Street Bank and Trust
Company and are recorded as interest income for the Fund. All collateral
received will be in an amount at least equal to 102% (for loans of U.S.
securities) or 105% (for non-U.S. securities) of the market value of the
loaned securities at the inception of each loan. Should the borrower of
the securities fail financially, there is a risk of delay in recovery of
the securities or loss of rights in the collateral. Consequently, loans
are made only to borrowers which are deemed to be of good financial
standing. As of August 31, 2000, there were no outstanding securities on
loan and no income earned during the year.
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, through State Street Global Advisors, the investment management
group of 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 period January 1, 2000 to August 31, 2000, the Adviser has voluntarily
agreed to waive .50% of its .80% advisory fee. The Adviser has also
voluntarily agreed to reimburse the Fund for all expenses in excess of
.60% of average daily net assets on an annual basis. The total amounts of
the waiver and reimbursement for the year ended August 31, 2000 were
$208,577 and $168,103, respectively. As of August 31, 2000, the receivable
due from the Adviser for reimbursed expenses in excess of the expense cap
has been netted against the Advisory 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.
Annual Report 19
<PAGE>
SSgA
Intermediate Fund
Notes to Financial Statements, continued
August 31, 2000
In addition, the Fund has entered into arrangements with its Adviser
whereby custody credits realized as a result of uninvested cash balances
were used to reduce a portion of the Fund's expenses. During the year, the
Fund's custodian fees were reduced by $850 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly-owned subsidiary of The Northwestern Mutual Life Insurance Company,
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 for services supplied by the
Administrator pursuant to the Administration Agreement, an annual fee,
payable monthly on a pro rata basis. For the period September 1, 1999 to
April 30, 2000, it is 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 up to and including $1 billion - .05%;
over $1 billion - .03%. Effective May 1, 2000, the annual fee is based on
the following percentages of the average daily net assets of all U.S.
Fixed Income portfolios: $0 up to $1 billion - .0315%; over $1 billion -
.029%. The Administrator will also charge a flat fee of $30,000 per year
per Fund with less than $500 million in net assets and $1,500 per year for
monthly performance reports and use of Russell Performance Universe
software product. In addition, the Fund reimburses the Administrator for
out-of-pocket expenses and start-up costs for new funds.
Distributor and Shareholder Servicing: The Investment Company has 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 enter 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 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 Shareholder 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, 2000, the Fund
was charged shareholder servicing expenses of $15,938, $2,407, $3,826,
$2,172 and $30,516, 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 of the Fund on an
annual basis. The shareholder servicing payments shall not exceed .20% of
the
20 Annual Report
<PAGE>
SSgA
Intermediate Fund
Notes to Financial Statements, continued
August 31, 2000
average daily value of net assets of the Fund on an annual basis. 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, 2000.
Board of Trustees: The Investment Company paid each Trustee not affiliated
with the Investment Company an annual retainer, plus specified amounts for
board and committee meetings attended. 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, 2000 were
as follows:
Advisory fees $11,794
Administration fees 5,387
Custodian fees 5,552
Distribution fees 1,139
Shareholder servicing fees 4,852
Transfer agent fees 4,502
Trustees' fees 998
-------
$34,224
=======
Beneficial Interest: As of August 31, 2000, 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>
Fiscal Years Ended August 31,
--------------------------------------------
2000 1999
-------------------- --------------------
Shares Dollars Shares Dollars
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Proceeds from shares sold .................... 3,076 $ 28,880 4,663 $ 45,790
Proceeds from reinvestment of distributions .. 338 3,145 444 4,359
Payments for shares redeemed ................. (3,945) (36,937) (5,220) (51,239)
-------- -------- -------- --------
Total net increase (decrease) ................ (531) $ (4,912) (113) $ (1,090)
======== ======== ======== ========
</TABLE>
Annual Report 21
<PAGE>
SSgA
Intermediate Fund
Notes to Financial Statements, continued
August 31, 2000
6. Interfund Lending Program
The Fund and all other funds of the Investment Company received from the
Securities and Exchange Commission an exemptive order on December 23, 1999
to establish and operate an Interfund Credit Facility. This allows the
Funds to directly lend to and borrow money from the SSgA Money Market Fund
for temporary purposes in accordance with certain conditions. The
borrowing Funds are charged the average of the current Repo Rate and the
Bank Loan Rate. The Fund did not utilize the interfund lending program
during this year.
7. Dividends
On September 1, 2000, the Board of Trustees declared a dividend of $.1401
from net investment income, payable on September 8, 2000 to shareholders
of record on September 5, 2000.
22 Annual Report
<PAGE>
SSgA
Intermediate Fund
Tax Information
August 31, 2000 (Unaudited)
The Fund paid a distribution of $49,873 from net long-term capital gains
during its taxable year ended August 31, 2000.
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, Treasurer and CEO
Mark E. Swanson, Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Treasurer
Carla L. Anderson, Assistant 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
160 Federal Street
Boston, Massachusetts 02110
24 Annual Report
<PAGE>
[COVER GRAPHIC]
SSgA(R) funds
ANNUAL REPORT
Intermediate Municipal Bond Fund
August 31, 2000
<PAGE>
SSgA(R) Funds
Intermediate Municipal Bond Fund
Annual Report
August 31, 2000
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......................................................... 22
Fund Management and Service Providers................................... 23
"SSgA(R)" 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 Municipal Bond Fund
--------------------------------------------------------------------------------
Letter From the Chairman of State Street Global Advisors
--------------------------------------------------------------------------------
Dear Shareholders,
It is our pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 2000. The SSgA Fund Family has grown to include
twenty-four portfolios with over $21 billion in assets as of August 31, 2000.
The Fund Family provides a wide range of strategies covering the world's major
markets. The enclosed information provides an overview of the investment process
for the SSgA Intermediate Municipal Bond Fund. This overview contains the
portfolio management discussion, performance updates and financial information
for the Fund.
In an ongoing effort to develop competitive products and services that provide
investment solutions for our clients, we have added the SSgA Intermediate
Municipal Bond Fund to the SSgA Fund Family. This Fund's investment objective
seeks to provide federally tax-exempt current income by investing primarily in a
diversified portfolio of municipal debt securities with a dollar-weighted
average maturity between three and ten years.
We are also pleased with the success of our SSgA Emerging Markets and SSgA
Growth and Income Funds as they were included in Money(R) Magazine's June 2000
issue listing of the 'Top 100 Mutual Funds'. This is the second year in a row
that these funds have been selected.
Additionally, the SSgA Tax Free Money Market and the SSgA Active International
Funds have achieved five-year performance history during the 2000 fiscal year.
Currently, all of our SSgA Money Market Funds have at least a five-year
performance history. We strive to meet our clients' needs by providing funds
with long-term records and competitive performance.
We would like to thank you for choosing the SSgA Funds. Our reputation is based
on our tradition of designing and delivering exceptional financial services to
our clients. We look forward to continue sharing the benefit of our experience
with you.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
/s/ Timothy B. Harbert
Timothy B. Harbert
State Street Global Advisors
President and Chief Operating Officer, SSgA
4 Annual Report
<PAGE>
SSgA Intermediate Municipal Bond Fund
--------------------------------------------------------------------------------
Management of the Funds
--------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
[PHOTO]
Timothy B. Harbert
President and Chief Operating 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.
Deborah B. Vargo, Principal, is the portfolio manager primarily responsible for
investment decisions regarding the SSgA Intermediate Municipal Bond Fund since
its inception in June 2000. She joined the firm in 1984, and is responsible for
the trading and management of portfolios pertaining to the tax-exempt municipal
bond market. She has been dedicated to this asset class for over sixteen years.
Ms. Vargo is currently responsible for corporate cash management, tax-exempt
common trust funds, certain high net worth accounts, and a large public utility
account. Prior to joining SSgA, she worked at Tucker, Anthony & R.L. Day. She
has been working in the investment management field since 1982, and holds a BS
in Finance from Boston University. There are five other portfolio managers
working with Ms. Vargo.
Annual Report 5
<PAGE>
SSgA Intermediate Municipal Bond Fund
--------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
--------------------------------------------------------------------------------
Objective: To provide federally tax-exempt current income by investing primarily
in a diversified portfolio of municipal debt securities.
Invests in: Investment grade municipal debt instruments including: municipal
securities, industrial development and private activity bonds and municipal
leases.
Strategy: Fund Managers base their decisions on the relative attractiveness of
different municipal debt instruments which vary depending on the general level
of interest rates as well as supply and demand imbalances in the market.
--------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
Dates Intermediate Municipal Bond Fund Lehman Brothers 1-10 Year Bond
Inception* $10,000 $10,000
2000 $10,310 $10,412
================================================================================
Performance Review
From its inception on June 1, 2000, through August 31, 2000, the SSgA
Intermediate Municipal Bond Fund had a total return of 3.10%. For the period of
June 1, 2000 through August 31, 2000, the Lehman 1-10 Year Blend Index, gained
4.12%. The Fund's performance is net of operating expenses, whereas Index
results do not include expenses of any kind.
The Fund commenced operations with cash during a period of declining interest
rates and extreme demand in the municipal market. Subsequent purchases of
securities in the Fund over the next several weeks resulted in
benchmark-relative underperformance due to cash levels in the Portfolio through
this period.
Since the end of May 2000, tax-exempt securities have reaped the benefit of
lower issuance, strong retail demand, and a Federal Reserve that continues to be
vigilant. Since June 30,
--------------------------------------------------------------------------------
SSgA Intermediate Municipal Bond Fund
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
--------------------- ----------- --------
Inception $ 10,310 3.10%
--------------------------------------------------------------------------------
Lehman Brothers 1-10 Year Blend
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
--------------------- ----------- --------
Inception $ 10,412 4.12%
See related Notes on following page.
6 Annual Report
<PAGE>
SSgA Intermediate Municipal Bond Fund
--------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
--------------------------------------------------------------------------------
2000, the municipal yield curve flattened 14 basis points in the 1-to-30 year
maturity range, to 125 basis points, the narrowest spread since January 1998.
Since January 1, 2000, the curve has flattened a full 73 basis points.
Intermediate-term bonds witnessed a continuation of strong support during this
period, as market participants reacted to the flatter yield curve environment
and moved into the shorter maturity issues.
For the three months ended August 31, 2000, all of the longer-duration
securities in general performed better than those in the shorter range. Within
individual sectors the highest returns were generated in Health Care and
Lease-Backed. The Fund has neutral-to-underweighted exposure in both these
sectors when compared to the benchmark. In general, as in most bond market
rallies, lower-quality names performed better than high-grades, although select
high-grade specialty sectors such as California, Massachusetts, and Puerto Rico
continue to reap the benefits of low supply and unabated demand from high-tax
brackets participants. The current economy has been beneficial for most
municipalities, allowing state and local governments to employ pay-as-you-go
strategies. Issues backed by dedicated revenue streams need less funding and
realized much lower net interest costs to fund their projects. Credit upgrades
far exceed downgrades, as balance sheets improved within all sectors during the
period. The exception to this scenario is the Health Care sector, which
continues to be under pressure as a result of federal cutbacks employed in the
Balanced Budget Act of l997.
Market and Portfolio Highlights
The Fund began with $13.6 million in assets on June 1, 2000. Investments were
made across sectors, with slight benchmark-relative underweightings in the
Health Care and the Leased-Back sectors. Maturity of the investments was
concentrated in the four-to-six year range, with some exposure beyond 10 years.
Overall, the portfolio's average maturity has fluctuated between 5.55 years and
5.96 years since it's inception, with an average modified duration ranging from
4.50 to 4.84, versus 4.35 for the Index. Average quality for the Fund was AA, as
compared to the AA1/AA2 for its Index. The Fund held no securities rated below A
as the quality spreads between Baa's and single-A's were too narrow to justify
owning. In addition, single-A and higher rated securities maintain marketability
and liquidity which is extremely important if conditions become more volatile.
The Manager has and will continue to focus on quality and marketability in order
to defend against market corrections. Strong performance for municipal bonds
over the period pushed the Fund's net asset value up from its $10.00 starting
price to $10.31 at August 31, 2000. The Fund will seek to continue exhibiting
attractive yield and quality parameters.
---------------------------------------------------------------
Top Ten Issuers
(as a percent of Total Investments) August 31, 2000
---------------------------------------------------------------
District of Columbia General Obligation 10.1%
Elba, New York Central School District
General Obligation 5.3
Grand River Dam, Oklahoma Authority
Revenue 5.1
Atlanta, Georgia Airport Revenue 5.0
Milwaukee, Wisconsin Metropolitan Sewer
District General Obligation 5.0
Clark County, Nevada General Obligation 5.0
Madison, Wisconsin General Obligation 5.0
Maine, State of, General Obligation 4.9
Massachusetts State Development Finance
Agency Revenue 4.9
Port of Seattle, Washington General Obligation 4.9
---------------------------------------------------------------
--------------------
Notes: The following notes relate to the Growth of $10,000 graph and table on
the preceding page.
* The Intermediate Municipal Bond Fund commenced operations on June 1, 2000.
Index comparisons also began June 1, 2000.
** The Lehman Brothers 1-10 Year Blend Index includes bonds in the Lehman
Municipal Indexes with effective maturities of 1-12 years.
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 Municipal Bond Fund (the
"Fund") at August 31, 2000, the results of its operations, the changes in its
net assets and the financial highlights for the period June 1, 2000
(commencement of operations) to August 31, 2000, in conformity with accounting
principles generally accepted in the United States of America. 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 auditing
standards generally accepted in the United States of America 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, 2000 by correspondence with the custodian, provides
a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
October 11, 2000
8 Annual Report
<PAGE>
SSgA
Intermediate Municipal Bond Fund
Statement of Net Assets
August 31, 2000
<TABLE>
<CAPTION>
Principal Market
Amount Date Value
(000) Rate of (000)
$ % Maturity $
-------- ----- -------- -------
<S> <C> <C> <C> <C>
Municipal Bonds - 94.9%
Arizona - 2.5%
Salt River Project Arizona Agricultural Import & Power District Electric
System Revenue, Series A 250 6.000 01/01/05 264
------
District of Columbia - 10.0%
District of Columbia General Obligation, Series B 500 5.500 06/01/10 524
District of Columbia General Obligation, Series B (d) 500 6.000 06/01/10 535
------
1,059
------
Georgia - 7.2%
Atlanta, Georgia Airport Revenue, Series A (d) 500 5.750 01/01/14 527
Georgia Municipal Electric Authority Power Revenue, Series C 125 5.550 01/01/07 130
Georgia Municipal Electric Authority Power Revenue, Series C 100 5.600 01/01/08 105
------
762
------
Hawaii - 4.2%
Honolulu, Hawaii City & County General Obligation, Series A
(pre-refunded11/01/07) (c)(d) 410 6.000 11/01/09 451
------
Illinois - 2.5%
Metropolitan Pier & Exposition Authority Illinois Dedicated State Tax
Revenue (pre-refunded 06/15/03)(c) 250 6.500 06/15/22 268
------
Maine - 4.9%
Maine, State of, General Obligation 500 5.500 06/15/03 515
------
Maryland - 2.9%
Montgomery County, Maryland Housing Opportunities Community Multifamily
Revenue, Series B (a) 305 5.200 07/01/04 307
------
</TABLE>
Annual Report 9
<PAGE>
SSgA
Intermediate Municipal Bond Fund
Statement of Net Assets, continued
August 31, 2000
<TABLE>
<CAPTION>
Principal Market
Amount Date Value
(000) Rate of (000)
$ % Maturity $
-------- ----- -------- -------
<S> <C> <C> <C> <C>
Massachusetts - 9.5%
Boston, Massachusetts Economic Development & Industrial Corporation 500 5.150 07/01/25 500
Massachusetts State Development Finance Agency Revenue, Series C 500 5.750 08/01/05 514
------
1,014
------
Nevada - 4.9%
Clark County, Nevada General Obligation 500 5.500 07/01/11 523
------
New York - 10.7%
Elba, New York Central School District General Obligation (d) 525 5.600 06/15/11 556
New York State Dormitory Authority Revenue (d) 240 5.250 05/15/13 246
Newark, New York Central School District General Obligation (d) 325 5.625 06/15/12 339
------
1,141
------
Ohio - 3.0%
Ohio, State of, General Obligation, Series A 300 5.750 06/15/10 322
------
Oklahoma - 5.1%
Grand River Dam, Oklahoma Authority Revenue (d) 500 6.000 06/01/07 541
------
Pennsylvania - 2.3%
East Allegheny, Pennsylvania School District General Obligation, Series A 250 4.875 08/01/03 250
------
Tennessee - 3.6%
Shelby County, Tennessee General Obligation, Series A 360 5.875 06/01/19 384
------
Texas - 2.2%
San Antonio, Texas Electric & Gas Revenue 225 5.800 02/01/06 238
------
Virginia - 4.8%
Virginia State Housing Development Authority Commonwealth Mortgage,
Series C 500 5.450 07/01/02 507
------
</TABLE>
10 Annual Report
<PAGE>
SSgA
Intermediate Municipal Bond Fund
Statement of Net Assets, continued
August 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity $
-------- ----- -------- -------
<S> <C> <C> <C> <C>
Washington - 4.8%
Port of Seattle, Washington General Obligation, Series B 500 5.100 12/01/06 511
------
Wisconsin - 9.8%
Madison, Wisconsin General Obligation, Series A 500 5.500 05/01/05 521
Milwaukee, Wisconsin Metropolitan Sewer District General Obligation,
Series A 500 6.125 10/01/03 524
------
1,045
------
Total Municipal Bonds
(cost $9,924) 10,102
------
Short-Term Investments - 3.9%
AIM Tax Free Cash Reserve Money Market (b) 284 284
Federated Municipal Obligations Fund - Class A (b) 132 132
------
Total Short-Term Investments
(cost $416) 416
------
Total Investments - 98.8%
(identified cost $10,340) 10,518
Other Assets and Liabilities, Net - 1.2% 123
------
Net Assets - 100.0% 10,641
======
</TABLE>
(a) Adjustable or floating rate security.
(b) At amortized cost, which approximates market value.
(c) Pre-refunded: These bonds are collateralized by U.S. Treasury Securities,
which are held in escrow by a trustee and used to pay principal and
interest in the tax exempt issue and to retire the bonds in full at the
earliest refunding date. The rate is for descriptive purposes; effective
yield may vary.
(d) Bond is insured by AMBAC, FGIC or MBIA/BIG.
Abbreviations:
AMBAC - AMBAC Indemnity Corporation
FGIC - Financial Guaranty Insurance Corporation
MBIA - Municipal Bond Investors Assurance
See accompanying notes which are an integral part of the financial statements.
Annual Report 11
<PAGE>
SSgA
Intermediate Municipal Bond Fund
Statement of Net Assets, continued
August 31, 2000
Quality Ratings as a % of Value (Unaudited)
AAA ................................................ 52%
AA ................................................. 36
A .................................................. 12
-----
100%
=====
Economic Sector Emphasis as a % of Value (Unaudited)
General Obligation ................................. 36%
Electricity & Power Revenue ........................ 12
Education Revenue .................................. 11
Housing Revenue .................................... 8
Port Revenue ....................................... 7
Industrial Revenue/Pollution Control Revenue ....... 5
Utility Revenue .................................... 5
Airport Revenue .................................... 5
Public Agency Revenue .............................. 5
Other .............................................. 4
University Revenue ................................. 2
-----
100%
=====
See accompanying notes which are an integral part of the financial statements.
12 Annual Report
<PAGE>
SSgA
Intermediate Municipal Bond Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amount)
August 31, 2000
<TABLE>
<S> <C> <C>
Assets
Investments at market (identified cost $10,340) .................................................... $10,518
Receivables:
Interest ........................................................................................ 127
From Adviser .................................................................................... 19
Deferred offering cost .......................................................................... 24
-------
Total assets ................................................................................. 10,688
Liabilities
Payables:
Accrued fees to affiliates ........................................................... $ 7
Other accrued expenses ............................................................... 40
--------
Total liabilities ............................................................................ 47
-------
Net Assets ......................................................................................... $10,641
=======
Net Assets Consist of:
Undistributed net investment income ................................................................ $ 109
Accumulated net realized gain (loss) ............................................................... 48
Unrealized appreciation (depreciation) on investments .............................................. 178
Shares of beneficial interest ...................................................................... 1
Additional paid-in capital ......................................................................... 10,305
-------
Net Assets ......................................................................................... $10,641
=======
Net Asset Value, offering and redemption price per share:
($10,641,227 divided by 1,031,748 shares of $.001 par value
shares of beneficial interest outstanding) ................................................... $ 10.31
=======
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Annual Report 13
<PAGE>
SSgA
Intermediate Municipal Bond Fund
Statement of Operations
Amounts in thousands For the Period June 1, 2000
(Commencement of Operations) to August 31, 2000
<TABLE>
<S> <C> <C>
Investment Income
Interest ...................................................................................... $ 121
Dividends ..................................................................................... 5
------
Total investment income ....................................................................... 126
Expenses
Advisory fees ......................................................................... $ 8
Administrative fees ................................................................... 9
Custodian fees ........................................................................ 3
Transfer agent fees ................................................................... 5
Professional fees ..................................................................... 11
Registration fees ..................................................................... 1
Shareholder servicing fees ............................................................ 1
Amortization of deferred offering costs ............................................... 8
------
Expenses before reductions ............................................................ 46
Expense reductions .................................................................... (29)
------
Expenses, net .............................................................................. 17
------
Net investment income ............................................................................ 109
------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on investments .......................................................... 48
Net change in unrealized appreciation (depreciation) on investments .............................. 178
------
Net realized and unrealized gain (loss) .......................................................... 226
------
Net increase (decrease) in net assets from operations ............................................ $ 335
======
</TABLE>
See accompanying notes which are an integral part of the financial statements.
14 Annual Report
<PAGE>
SSgA
Intermediate Municipal Bond Fund
Statement of Changes in Net Assets
Amounts in thousands For the Period June 1, 2000
(Commencement of Operations) to August 31, 2000
<TABLE>
<S> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income .................................................................................... $ 109
Net realized gain (loss) ................................................................................. 48
Net change in unrealized appreciation (depreciation) ..................................................... 178
-------
Net increase (decrease) in net assets from operations ................................................. 335
-------
Share Transactions
Net increase (decrease) in net assets from share transactions ............................................ 10,306
-------
Total net increase (decrease) in net assets ................................................................. 10,641
Net Assets
Beginning of period ...................................................................................... --
-------
End of period (including undistributed net investment income of $109) .................................... $10,641
=======
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Annual Report 15
<PAGE>
SSgA
Intermediate Municipal Bond 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.
2000*
-------
Net Asset Value, Beginning of Period ................................ $ 10.00
-------
Income From Operations
Net investment income (a) ........................................ .11
Net realized and unrealized gain (loss) .......................... .20
-------
Total income from operations .................................. .31
-------
Net Asset Value, End of Period ...................................... $ 10.31
=======
Total Return (%)(b) ................................................. 3.10
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ......................... 10,641
Ratios to average net assets (%)(c):
Operating expenses, net (d) ................................... .65
Operating expenses, gross (d) ................................. 1.68
Net investment income ......................................... 4.21
Portfolio turnover rate (%) ...................................... 212.18%
* For the period June 1, 2000 (Commencement of Operations) to August 31,
2000.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) The ratios for the period ended August 31, 2000 are annualized.
(d) See Note 4 for current period amounts.
16 Annual Report
<PAGE>
SSgA
Intermediate Municipal Bond Fund
Notes to Financial Statements
August 31, 2000
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 24 investment portfolios which are in operation as
of August 31, 2000. These financial statements report on one portfolio,
the SSgA Intermediate Municipal 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 accounting
principles generally accepted in the United States 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.
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 from tax-free money market funds 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 17
<PAGE>
SSgA
Intermediate Municipal Bond Fund
Notes to Financial Statements, continued
August 31, 2000
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, 2000 are as follows:
Net
Unrealized
Unrealized Unrealized Appreciation
Federal Tax Cost Appreciation (Depreciation) (Depreciation)
---------------- ------------ -------------- --------------
$ 10,339,687 $ 179,295 $ (861) $ 178,434
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 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
of the investment company which cannot be directly attributed are
allocated among all funds based principally on their relative net assets.
Deferred offering expenses: The Fund incurred expenses in connection with
its initial offering. These costs were deferred and are being amortized
over 12 months on a straight-line basis.
3. Securities Transactions
Investment transactions: For the period ended August 31, 2000, purchases
and sales of investment securities, excluding short-term investments,
aggregated to $31,630,329 and $21,741,860, respectively.
Securities lending: The Investment Company has a securities lending
program whereby each Fund can loan securities with a value up to 33 1/3%
of its total assets to certain brokers. The Fund receives cash (U.S.
currency), U.S. Government or U.S. Government agency obligations as
collateral against the loaned securities. To the extent that a loan is
secured by cash collateral, such collateral shall be invested by State
Street Bank and Trust Company in short-term instruments, money market
mutual funds, and such other short-term investments, provided the
investments meet certain quality and diversification requirements. Under
the securities lending arrangement, the collateral received is recorded on
the Fund's statement of assets and liabilities along with the related
obligation to return the collateral. In those situations where the Company
has relinquished control of securities transferred, it derecognizes the
securities and records a receivable from the counterparty.
18 Annual Report
<PAGE>
SSgA
Intermediate Municipal Bond Fund
Notes to Financial Statements, continued
August 31, 2000
Income generated from the investment of cash collateral, less negotiated
rebate fees paid to participating brokers and transaction costs, is
divided between the Fund and State Street Bank and Trust Company and is
recorded as interest income for the Fund. To the extent that a loan is
secured by non-cash collateral, brokers pay the Fund negotiated lenders'
fees, which are divided between the Fund and State Street Bank and Trust
Company and are recorded as interest income for the Fund. All collateral
received will be in an amount at least equal to 102% (for loans of U.S.
securities) or 105% (for non-U.S. securities) of the market value of the
loaned securities at the inception of each loan. Should the borrower of
the securities fail financially, there is a risk of delay in recovery of
the securities or loss of rights in the collateral. Consequently, loans
are made only to borrowers which are deemed to be of good financial
standing. As of August 31, 2000, there were no outstanding securities on
loan and no income earned during the year.
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, through State Global Advisors, the investment management group of
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 total amount of the reimbursement
for the period of June 1, 2000 (commencement of operations) to August 31,
2000 was $26,467. As of August 31, 2000, the receivable due from the
Adviser for reimbursed expenses in excess of the expense cap has been
netted against the Advisory 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.
In addition, the Fund has entered into arrangements with its Adviser
whereby custody credits realized as a result of uninvested cash balances
were used to reduce a portion of the Fund's expenses. During the period,
the Fund's custodian fees were reduced by $2,852 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly-owned subsidiary of The Northwestern Mutual Life Insurance Company,
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 for services supplied by the
Administrator pursuant to the Administration Agreement, an annual fee,
payable monthly on a pro rata basis. For the period ending August 31,
2000, the annual fee is based on the following percentages of the average
daily net assets of all U.S. Fixed Income portfolios: $0 up to $1 billion
- .0315%; over $1 billion - .029%. The Administrator will also charge a
flat fee of $30,000 per year per Fund with less than $500 million in net
assets and $1,500 per year for monthly performance reports and use of
Russell Performance Universe software product. In addition, the Fund
reimburses the Administrator for out-of-pocket expenses and start-up costs
for new funds.
Distributor and Shareholder Servicing: The Investment Company has a
Distribution Agreement with Russell Fund Distributors (the "Distributor")
which is a wholly-owned subsidiary of the Administrator to promote and
Annual Report 19
<PAGE>
SSgA
Intermediate Municipal Bond Fund
Notes to Financial Statements, continued
August 31, 2000
offer shares of the Investment Company. The Distributor may enter 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 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 Shareholder 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 ended August 31, 2000, the Fund
was charged shareholder servicing expenses of $650 by the Adviser. The
Fund did not incur any expenses from SSBSI, 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 of the Fund on an
annual basis. The shareholder servicing payments shall not exceed .20% of
the average daily value of net assets of the Fund on an annual basis.
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, 2000.
Board of Trustees: The Investment Company paid each Trustee not affiliated
with the Investment Company an annual retainer, plus specified amounts for
board and committee meetings attended. These expenses are allocated among
all of the funds based upon their relative net assets.
20 Annual Report
<PAGE>
SSgA
Intermediate Municipal Bond Fund
Notes to Financial Statements, continued
August 31, 2000
Accrued fees payable to affiliates and trustees as of August 31, 2000 were
as follows:
Administration fees $ 3,265
Custodian fees 372
Distribution fees 206
Shareholder servicing fees 220
Transfer agent fees 3,166
Trustees' fees 27
--------
$ 7,256
========
Beneficial Interest: As of August 31, 2000, one shareholder (who is also
an affiliate of the Investment Company) was a record owner of
approximately 85% of the total outstanding shares of the Fund.
5. Fund Share Transactions (amounts in thousands)
Period Ended August 31,
-----------------------------
2000*
-----------------------------
Shares Dollars
---------- --------------
Proceeds from shares sold ............... 1,446 $ 14,466
Payments for shares redeemed ............ (414) (4,160)
--------- -------------
Total net increase (decrease) ........... 1,032 $ 10,306
========= =============
* For the period June 1, 2000 (commencement of operations) to August
31, 2000.
6. Interfund Lending Program
The Fund and all other funds of the Investment Company received from the
Securities and Exchange Commission an exemptive order on December 23, 1999
to establish and operate an Interfund Credit Facility. This allows the
Funds to directly lend to and borrow money from the SSgA Money Market Fund
for temporary purposes in accordance with certain conditions. The
borrowing Funds are charged the average of the current Repo Rate and the
Bank Loan Rate. The Fund did not utilize the interfund lending program
during this period.
7. Dividends
On September 1, 2000, the Board of Trustees declared a dividend of $.1053
from net investment income, payable on September 8, 2000 to shareholders
of record on September 5, 2000.
Annual Report 21
<PAGE>
SSgA
Intermediate Municipal Bond Fund
Tax Information
August 31, 2000 (Unaudited)
Of the dividends paid by the Intermediate Municipal Bond Fund from net
investment income for the taxable year ended August 31, 2000, 100% were
exempt interest dividends which are tax exempt for purposes of regular
federal income tax, and for purposes of the federal alternative minimum
tax.
Please consult a tax advisor for any questions about federal or state
income tax laws.
22 Annual Report
<PAGE>
SSgA Intermediate Municipal 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, Treasurer and CEO
Mark E. Swanson, Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Treasurer
Carla L. Anderson, Assistant 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
160 Federal Street
Boston, Massachusetts 02110
Annual Report 23
<PAGE>
[COVER GRAPHIC]
SSgA(R) funds
ANNUAL REPORT
Emerging Markets Fund
August 31, 2000
<PAGE>
SSgA(R) Funds
Emerging Markets Fund
Annual Report
August 31, 2000
Table of Contents
Page
Chairman's Letter..................................................... 4
Portfolio Management Discussion and Analysis.......................... 6
Report of Independent Accountants..................................... 8
Financial Statements.................................................. 9
Financial Highlights.................................................. 22
Notes to Financial Statements......................................... 23
Tax Information....................................................... 30
Fund Management and Service Providers................................. 31
"SSgA(R)" 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
Distributors, Inc., is the distributor of the SSgA Funds.
<PAGE>
SSgA Emerging Markets Fund
--------------------------------------------------------------------------------
Letter From the Chairman of State Street Global Advisors
--------------------------------------------------------------------------------
Dear Shareholders,
It is our pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 2000. The SSgA Fund Family has grown to include
twenty-four portfolios with over $21 billion in assets as of August 31, 2000.
The Fund Family provides a wide range of strategies covering the world's major
markets. The enclosed information provides an overview of the investment process
for the SSgA Emerging Markets Fund. This overview contains the portfolio
management discussion, performance updates and financial information for the
Fund.
In an ongoing effort to develop competitive products and services that provide
investment solutions for our clients, we have added the SSgA Intermediate
Municipal Bond Fund to the SSgA Fund Family. This Fund's investment objective
seeks to provide federally tax-exempt current income by investing primarily in a
diversified portfolio of municipal debt securities with a dollar-weighted
average maturity between three and ten years.
We are also pleased with the success of our SSgA Emerging Markets and SSgA
Growth and Income Funds as they were included in Money(R) Magazine's June 2000
issue listing of the 'Top 100 Mutual Funds'. This is the second year in a row
that these funds have been selected.
Additionally, the SSgA Tax Free Money Market and the SSgA Active International
Funds have achieved five-year performance history during the 2000 fiscal year.
Currently, all of our SSgA Money Market Funds have at least a five-year
performance history. We strive to meet our clients' needs by providing funds
with long-term records and competitive performance.
We would like to thank you for choosing the SSgA Funds. Our reputation is based
on our tradition of designing and delivering exceptional financial services to
our clients. We look forward to continue sharing the benefit of our experience
with you.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
/s/ Timothy B. Harbert
Timothy B. Harbert
State Street Global Advisors
President and Chief Operating Officer, SSgA
4 Annual Report
<PAGE>
SSgA Emerging Markets Fund
--------------------------------------------------------------------------------
Management of the Funds
--------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
[PHOTO]
Timothy B. Harbert
President and Chief Operating 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. Brad Aham, CFA, Principal, has been the portfolio manager primarily
responsible for investment decisions regarding the SSgA Emerging Markets Fund
since September 1999. He has worked with the active emerging markets product
since its inception. In addition to managing portfolios, Mr. Aham performs
quantitative and qualitative research on SSgA's emerging markets products. He
has been working in the investment management field since he joined the firm in
1993. He holds an MBA from Boston University and BA degrees from Brandeis
University in Mathematics and Economics. There are seven other portfolio
managers working with Mr. Aham.
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 having a
substantial portion of their business, in countries having a developing economy
or securities market.
Strategy: The Fund invests in securities of issuers located in emerging market
countries with prospects for sustained macro 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 those countries.
--------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
Dates Emerging Markets Fund I F C Investable Composite Index**
Inception* $10,000 $10,000
1994 $11,450 $10,529
1995 $10,387 $8,357
1996 $11,201 $8,881
1997 $12,895 $9,190
1998 $7,045 $4,830
1999 $11,713 $8,173
2000 $13,019 $8,682
================================================================================
Performance Review
For the fiscal year ended August 31, 2000, the SSGA Emerging Markets Fund posted
a return of 11.05%. This compared favorably with the Fund's benchmark, the
International Finance Corporation Investable (IFCI) Composite Index, which
returned 6.22% over the same period.
Market and Portfolio Highlights
Emerging markets rallied for a second year in a row as this year's 11.05% rise
added to fiscal year 1999's 66.41% return for the Fund. This year saw the
markets weather Y2K concerns, numerous elections and a change in monetary
conditions from easing to a more aggressive tightening posture. Economic
conditions improved in most markets as the continued strong performance of the
US economy provided the engine for global growth. Additionally, the strong
performance of NASDAQ and Technology shares boosted many of the holdings in the
Fund. However, rising oil prices and a series of interest rate hikes by the
Federal Reserve served to caution the markets as the fiscal year ended.
--------------------------------------------------------------------------------
SSgA Emerging Markets Fund
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
-------------------- ----------- ------------
1 Year $ 11,105 11.05%
5 Years $ 12,534 4.62%+
Inception $ 13,019 4.14%+
--------------------------------------------------------------------------------
International Finance Corporation
Investable Composite Index
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
-------------------- ----------- ------------
1 Year $ 10,622 6.22%
5 Years $ 10,389 0.77%+
Inception $ 8,682 (2.15)%+
See related Notes on following page.
6 Annual Report
<PAGE>
SSgA Emerging Markets Fund
--------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
--------------------------------------------------------------------------------
Latin America was the top region in the IFC Investable Composite Index (the
"Index"), returning 35% for the fiscal year. The star performer were Brazil
holdings in the Index, surging an incredible 82% for the period. Much of the
performance was generated in the fourth calendar quarter of 1999 when both the
currency and the stock market rallied. Confirmation that inflation was under
control and industrial production was increasing bolstered confidence in the
market. The new central bank governor, Arminio Fraga, brought considerable
credibility to monetary policy and engineered several interest rate cuts over
the year. The Fund has been overweighted in Brazil since the end of 1999,
contributing much of the benchmark-relative outperformance. Some of the Fund's
strong performers in Brazil include Petrobras and Embratel, posting fiscal year
returns of 114% and 229%, respectively. Elsewhere, Mexico saw the presidential
victory of Vicente Fox, which solidified the democratization process by ending
71 years of single party rule. Mexican holdings in the Index were up 32% for the
year. The Mexican securities markets benefited from a relatively calm election
process, strong oil prices and the robust US economy. Telefonos de Mexico, the
Fund's largest holding in Mexico and fourth largest position in the Fund, gained
45% over the year. Venezuela was the other big winner in the Latin America
region in the Index, jumping 54% on the back of the takeover of Electricidad de
Caracas by AES Corp.
The Index's holdings in Eastern Europe gained 35% for the year, led by Russia
and Turkey, which posted gains of 137% and 65%, respectively. Russia's economic
outlook was uncertain when Boris Yeltsin resigned on New Year's Eve 1999, but
Vladimir Putin's election win in March marked a great transition for the
country. This political optimism, combined with stronger oil prices, led to a
dramatic stock market rally, with the Fund's largest Russian holding,
Surgutneftegaz, gaining 146% for the fiscal year. Turkey's economy has also been
strong on the basis of a new coalition government and an IMF-endorsed
anti-inflation program. The Fund benefited from its benchmark relative
underweight of Greek securities. Greek holdings in the Index lost 43% during the
fiscal year, as that market faced a lack of foreign interest and locals selling
off after 1999's strong returns.
Index holdings in the Mideast and Africa region, up 19% for the period, were
powered by Israeli securities, which rose 70% for the year. Teva Pharmaceuticals
rose over 150% on continued positive news over its multiple sclerosis drug,
Copaxone. Another Israeli issue, Check Point Software, gained over 200% since
the Fund purchased it in January 2000. The company is a global leader in
Internet security software. The Fund has benchmark-relative overweight
allocations in both Teva and Check Point.
The Asian region of the Index experienced disappointing performance and lost
over 8% for the period. The top performers within the Index were Chinese
holdings, gaining 63% on the basis of improved economic data and strong
expectations from WTO entry in 2000. The Fund's largest holding in China and
second largest in the portfolio, China Telecom, rose 148% as its subscriber
growth continues to be tremendous. Korean holdings lagged this year, as
continued concerns over large conglomerates weighed on the market. The Fund's
largest Korean holding, Samsung Electronics, managed to gain 22% as its DRAM
business profited from strength in the global electronics market. However,
Taiwan securities in the Index lost 1% for the year, where a focus on the
presidential election and Chen Shui-bian's victory marked the end of over 50
years of KMT rule. The market declined after the election on uncertainty over
the policies of the new administration. The Fund's underweight to the smaller
markets in Asia helped performance as Index holdings in Indonesia, the
Philippines and Thailand fell 35%, 38% and 32% respectively.
-----------------------------------------------------------------------
Top Ten Equity Holdings
(as a percent of Total Investments) August 31, 2000
-----------------------------------------------------------------------
Samsung Electronics 4.0%
China Telecom (Hong Kong), Ltd. 2.5
Taiwan Semiconductor Manufacturing Co. 2.0
Telefonos de Mexico SA Series L - ADR 1.9
Surgutneftegaz SP - ADR 1.8
Petroleo Brasileiro SA 1.6
Telefonos de Mexico SA Series L 1.4
De Beers Centenary Linked Units 1.4
Teva Pharmaceutical Industries, Ltd. - ADR 1.3
Lukoil Oil Co. - ADR 1.3
-----------------------------------------------------------------------
-------------------------------
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, 2000, 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 accounting principles generally
accepted in the United States of America. 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 auditing standards
generally accepted in the United States of America 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, 2000 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
Boston, Massachusetts
October 11, 2000
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
Emerging Markets Fund
Statement of Net Assets
August 31, 2000
Market
Number Value
of (000)
Shares $
------ ------
Common Stocks - 82.0%
Argentina - 0.5%
Banco Frances Rio 31,214 228
El Sitio, Inc. (a) 11,858 47
Grupo Financiero Galicia SA Class B New (a) 163,800 288
Inversiones y Representaciones SA Class B 57,048 139
PC Holdings SA Class B 245,736 410
Siderca SAIC Class A 160,601 349
Telecom Argentina Class B 67,549 318
-------
1,779
-------
Brazil - 4.0%
Brasil Telecom Participacoes SA - ADR 14,000 986
Centrais Eletricas Brasileiras SA 101,358,600 1,900
Companhia Cervejaria Brahma 2,548,700 2,031
Companhia de Saneamento
Basico do Estado de Sao Paulo 7,619,000 825
Companhia Siderurgica de Tubarao 7,300,000 79
Companhia Siderurgica Nacional 12,799,000 465
Embratel Participacoes SA 64,803,300 1,229
Globo Cabo SA - ADR 60,000 960
Petroleo Brasileiro SA 59,268 1,878
Petroleo Brasileiro SA - ADR (a) 21,500 684
Souza Cruz 147,977 728
Tele Celular Sul Participacoes SA 151,907,296 484
Tele Centro Sul Participacoes SA 89,564,096 984
Tele Norte Leste Participacoes SA 136,572,192 2,680
-------
15,913
-------
Chile - 1.0%
Banco de A. Edwards Series A - ADR 15,553 205
Banco Santander Chile Series A - ADR 13,400 203
Chile Fund, Inc. 130,700 1,242
Compania de Telecomunicaciones de
Chile SA - ADR 38,850 685
Cristalerias de Chile - ADR 7,500 118
Embotelladora Andina SA Series A - ADR 20,200 263
Enersis SA - ADR 21,300 367
Five Arrows Chile Investment Trust (a)(d) 330,000 452
Gener SA - ADR 31,300 399
Vina Concha Y Toro SA - ADR 4,800 173
-------
4,107
-------
China - 3.7%
Beijing Datang Power Generation Co.,
Ltd. Class H 2,646,000 621
China Merchants Holdings International
Co., Ltd. 768,000 601
China Resources Enterprise, Ltd. 278,000 413
China Shipping Development Co., Ltd.
Class H (a) 690,000 135
China Telecom (Hong Kong), Ltd. (a) 1,221,100 9,394
Cosco Pacific, Ltd. 685,100 619
Guangdong Kelon Electrical Holdings
Co., Ltd. Class H 694,000 229
Guangshen Railway Co., Ltd. 1,858,000 253
Huaneng Power International, Inc.
Class H 2,162,000 901
PetroChina Co., Ltd. Class H New 4,246,200 1,013
Shanghai Petrochemical Co., Ltd. Class H 704,000 115
Yizheng Chemical Fibre Class H 1,700,000 436
-------
14,730
-------
Annual Report 9
<PAGE>
SSgA
Emerging Markets Fund
Statement of Net Assets, continued
August 31, 2000
Market
Number Value
of (000)
Shares $
------ ------
Egypt - 0.5%
Commercial International Bank 31,070 302
Eastern Co. Tobacco & Cigarettes 9,800 206
Egyptian Mobile Phone Network (a) 21,899 561
National Societe Generale Bank 22,760 188
Orascom Construction (a) 37,500 443
Suez Cement Co. - GDR 24,970 233
-------
1,933
-------
Greece - 2.1%
Aluminum Co. of Greece SA 10,260 373
Bank of Piraues 27,580 439
Commercial Bank of Greece 17,714 717
Credit Bank (Regd) 31,910 973
EFG Eurobank 26,160 592
Hellenic Bottling Co. SA 30,380 335
Hellenic Petroleum SA 26,442 278
Hellenic Technodomiki SA 11,800 215
Hellenic Telecommunication
Organization SA - GDR 48,411 900
Intracom SA 19,606 608
Michaniki SA 19,400 98
Minoan Lines Shipping SA 32,746 281
National Bank of Greece SA 36,583 1,236
Panafon Hellenic Telecom SA 68,320 664
Papastratos Cigarettes Co. 10,260 127
Titan Cement Co. SA 10,680 371
-------
8,207
-------
Hong Kong - 1.2%
China Eastern Airlines Corp., Ltd. (a) 904,000 151
China Everbright - IHD Pacific, Ltd. 252,000 236
China Unicom, Ltd. (a) 928,000 2,154
Citic Pacific, Ltd. 106,000 506
Legend Holdings, Ltd. 1,320,000 1,404
Shanghai Industrial Holdings, Ltd. 76,000 162
-------
4,613
-------
Hungary - 1.3%
BorsodChem Rt. 4,600 146
Danubius Hotel (Regd) 9,317 174
Egis Gyogyszergyar 5,743 281
Gedeon Richter, Ltd. - GDR 6,300 351
Magyar Olaj Es Gas 26,082 356
Magyar Tavkozlesi Rt. (Regd) 509,550 2,814
Mol Magyar Olaj-Es Gazipari Rt. - GDR 10,300 140
OTP Bank Rt. 13,685 734
Tiszai Vegyi Kombinat Rt. 15,790 188
-------
5,184
-------
India - 0.9%
Bharat Heavy Electricals, Ltd. 34,200 99
Bharat Petroleum Corp., Ltd. 18,400 71
CESC, Ltd. (a) 87,500 43
Dr. Reddy's Laboratories, Ltd. 5,500 159
Hindustan Lever, Ltd. 256,000 1,379
ITC, Ltd. 27,400 465
Madras Refineries, Ltd. 105,300 69
Mahanagar Telephone Nigam, Ltd. 25,100 84
Mahindra & Mahindra, Ltd. 12,500 50
Reliance Industries, Ltd. 96,200 708
Tata Engineering and Locomotive Co., Ltd. 72,850 159
Tata Iron and Steel Co., Ltd. 64,700 153
Videsh Sanchar Nigam, Ltd. 16,900 299
-------
3,738
-------
Israel - 6.2%
Agis Industries, Ltd. 49,363 485
Bank Hapoalim Ltd. - GDR 12,210 192
Bank Hapoalim, Ltd. 913,375 2,908
Bank Leumi Le-Israel 762,483 1,756
Bezeq Israeli Telecommunication Corp., Ltd. 189,650 1,177
Check Point Software Technologies, Ltd. (a) 10,000 1,458
10 Annual Report
<PAGE>
SSgA
Emerging Markets Fund
Statement of Net Assets, continued
August 31, 2000
Market
Number Value
of (000)
Shares $
------ ------
Clal Industries, Ltd. 28,086 348
ECI Telecom, Ltd. 19,100 598
Elco Holdings, Ltd. 28,761 286
F.I.B.I. Holdings, Ltd. 20,537 206
Formula Systems (1985), Ltd. (a) 10,187 514
Gilat Satellite Networks, Ltd. (a) 3,278 262
IDB Development Corp., Ltd. 23,338 1,090
IDB Holding Corp., Ltd. 33,514 1,414
Israel Chemicals, Ltd. 467,764 585
Koor Industries, Ltd. 13,135 1,394
Leumi Insurance Holdings 471,227 507
Magic Software Enterprises, Ltd. (a) 9,170 82
NICE Systems, Ltd. (a) 13,033 1,038
Optibase, Ltd. (a) 10,810 212
Orbotech, Ltd. NPV (a) 4,166 403
Osem Investment, Ltd. 86,545 644
RADVision, Ltd. (a) 9,899 317
Supersol, Ltd. 159,451 598
Teva Pharmaceutical Industries, Ltd. 13,497 829
Teva Pharmaceutical Industries, Ltd. - ADR 83,693 5,075
-------
24,378
-------
Malaysia - 5.2%
AMMB Holdings Berhad 121,000 398
Arab Malaysian Finance (Alien Market) 238,000 248
Berjaya Sports 134,000 215
Commerce Asset-Holding Berhad 359,000 945
Edaran Otomobil 182,000 498
Faber Group Berhad (a) 445,600 46
Genting Berhad 311,000 876
Golden Hope Plantation 390,000 380
Hong Leong Credit 140,000 258
Hong Leong Industries Berhad 159,000 515
IGB Corp. Berhad 175,000 58
IOI Corporated Berhad 1,109,000 946
Kuala Lumpur Kepong 259,000 368
Magnum CP Berhad 1,403,000 882
Malakoff Berhad 152,000 396
Malayan Banking Berhad 827,000 3,177
Malaysian International Shipping Corp.
Berhad (Alien Market) 551,000 834
Malaysian Pacific 91,000 790
Perlis Plantations 157,000 186
Petronas Gas Berhad 565,000 892
Public Bank Berhad (Alien Market) 565,000 494
Resorts World Berhad 204,000 421
RHB Capital Berhad 403,000 437
Rothmans of Pall Mall (Malaysia) Berhad 196,000 1,831
Sime Darby Berhad 1,058,000 1,175
Tanjong PLC 185,000 402
Telekom Malaysia Berhad 317,000 901
Tenaga Nasional Berhad 346,000 1,156
YTL Corp. Berhad 701,600 885
-------
20,610
-------
Mexico - 11.8%
Alfa SA de CV Class A 454,662 1,253
Altos Hornos de Mexico SA (a)(d) 499,000 0
Carso Global Telecom Series A1 (a) 1,358,000 3,498
Cemex SA de CV 727,159 3,414
Cemex SA de CV 2002 Warrants (a) 43,000 21
Compania Cervecerias Unidas SA - ADR 9,750 225
Controladora Comercial Mexicana SA de
CV Units 842,000 1,080
El Puerto de Liverpool SA de CV 220,000 311
Empresa Nacional de Electricidad SA - ADR 19,650 210
Fomento Economico Mexicano SA de CV Units 204,000 922
Fomento Economico Mexicano SA de CV
Series B - ADR 19,400 884
Grupo Bimbo SA de CV Series A 708,761 1,132
Grupo Carso Series A1 (a) 442,000 1,571
Annual Report 11
<PAGE>
SSgA
Emerging Markets Fund
Statement of Net Assets, continued
August 31, 2000
Market
Number Value
of (000)
Shares $
------ ------
Grupo Cementos Chihuahua Series B 180,000 137
Grupo Financiero Banamex Accival SA de
CV (Banacci) Class O (a) 735,000 3,754
Grupo Financiero Banorte SA de CV (a) 364,000 483
Grupo Financiero Class O (a) 3,086,000 1,851
Grupo Gigante SA (a) 598,333 1,027
Grupo Herdez SA Class B 1,408,000 413
Grupo Iusacell SA de CV - ADR (a) 44,000 561
Grupo Mexico SA Series B 436,108 1,948
Grupo Televisa SA (a) 447,000 1,445
Grupo Television SA de CV - GDR (a) 27,330 1,770
Kimberly-Clark, Mexico Class A 257,000 799
Organizacion Soriana SA de CV Series B 225,000 971
Savia SA de CV (a) 78,000 355
Telefonos de Mexico SA Series L 1,953,800 5,330
Telefonos de Mexico SA Series L - ADR 133,400 7,262
TV Azteca SA de CV 515,000 429
Wal-Mart de Mexico SA de CV Series V (a) 1,513,661 3,785
-------
46,841
-------
Russia - 3.6%
Golden Telecom, Inc. (a) 10,100 306
Lukoil Oil Co. - ADR 77,410 5,016
Rostelecom - ADR 43,607 627
Surgutneftegaz SP - ADR (a) 359,335 6,989
Unified Energy Systems - ADR 4,345 73
Unified Energy Systems - GDR 78,295 1,324
-------
14,335
-------
South Africa - 10.2%
AECI, Ltd. 367,402 701
Amalgamated Banks of South Africa 358,867 1,482
Anglo American Platinum Corp., Ltd. 85,500 3,342
AngloGold, Ltd. 37,742 1,472
Anglovaal Industries, Ltd. 424,839 448
Barlow, Ltd. 60,500 395
Bidvest Group, Ltd. 162,112 1,174
Coronation Holdings, Ltd. Class N 27,000 441
De Beers Centenary Linked Units 188,444 5,242
Del Monte Royal Food, Ltd. 764,539 489
Driefontein Consolidated 186,800 688
Ellerine Holdings, Ltd. 173,000 614
FirstRand, Ltd. 1,322,600 1,451
Foschini, Ltd. 269,200 432
Gencor, Ltd. 219,800 812
Impala Platinum Holdings, Ltd. 34,000 1,609
Imperial Holdings, Ltd. (a) 68,336 657
Investec Group, Ltd. 20,800 746
Iscor, Ltd. (a) 487,255 1,132
Johnnies Industrial Corp., Ltd. 54,400 753
Liberty Life Association of Africa 176,600 1,646
M-Cell, Ltd. 32,900 142
Murray & Roberts Holdings, Ltd. 624,600 298
Nedcor, Ltd. 107,139 2,427
Persetel Holdings, Ltd. 236,700 367
Rembrandt Group, Ltd. 277,594 2,747
Reunert, Ltd. 391,700 657
Sanlam, Ltd. 1,609,470 1,939
Sappi, Ltd. 165,432 1,447
Sasol 348,946 2,852
Standard Bank Investment Corp., Ltd. 350,700 1,483
Tongaat-Hulett Group, Ltd. 67,719 349
-------
40,434
-------
12 Annual Report
<PAGE>
SSgA
Emerging Markets Fund
Statement of Net Assets, continued
August 31, 2000
Market
Number Value
of (000)
Shares $
------ ------
South Korea - 13.3%
Anam Semiconductor, Inc. (a) 44,810 412
Cheil Jedang Corp. 9,880 414
Dacom Corp. (a) 5,230 472
Daum Communications Corp. (a) 2,400 150
Dongwon Securities 28,814 182
Haansoft, Inc. (a) 13,000 154
Hana Bank 60,720 326
Hanjin Heavy Industries 87,171 226
Housing & Commercial Bank, Korea 77,957 1,666
Hyosung T&C Co. 33,507 316
Hyundai Electronics Industries Co. (a) 153,710 2,814
Hyundai Motor Co., Ltd. 81,260 1,231
Kookmin Bank 130,410 1,588
Korea Electric Power Corp. 121,650 3,577
Korea Telecom Corp. 52,090 3,566
Korea Telecom Freetel (a) 6,390 295
Korean Air 29,557 210
LG Cable & Machinery, Ltd. 25,700 355
LG Chemical, Ltd. 62,520 1,054
LG Electronics, Inc. 76,440 1,944
LG Securities 87,420 919
Nong Shim Co., Ltd. 7,533 272
Pacific Corp. 13,300 329
Pohang Iron & Steel Co., Ltd. 18,020 1,333
Poongsan Corp. 39,260 247
Samsung Corp. 72,490 657
Samsung Display Devices Co. 23,660 1,056
Samsung Electro-Mechanics Co. (a) 25,150 1,068
Samsung Electronics 61,711 15,223
Samsung Fire & Marine Insurance 25,537 682
Samsung Heavy Industries (a) 130,482 512
Samsung Securities Co., Ltd. 53,438 1,089
SEROME Technology, Inc. 6,340 143
Shin Han Bank 124,020 1,353
Shinsegae Department Store Co. 9,150 456
Sindo Ricoh Co. 12,121 300
SK Corp. 55,290 937
SK Global 28,600 306
SK Telecom Co., Ltd. (a) 18,270 4,021
Ssangyong Oil Refining Co. 23,000 532
Trigem Computer, Inc. (a) 21,580 378
-------
52,765
-------
Taiwan - 10.3%
Acer, Inc. 589,070 734
Advanced Semiconductor Engineering, Inc. (a) 262,026 485
Asia Cement Corp. 721,492 393
Asustek Computer, Inc. 246,298 1,516
Cathay Construction Corp. 613,200 164
Cathay Life Insurance 815,456 1,878
Chang Hwa Bank 206,800 129
China Development Industrial Bank (a) 1,150,830 1,190
China Steel Corp. 2,131,569 1,415
Chinatrust Commercial Bank (a) 923,452 729
CMC Magnetics Corp. (a) 284,600 623
Compal Electronics, Inc. 446,420 856
Delta Electronics, Inc. 129,000 495
Ensure Co., Ltd. (a) 151,008 21
Evergreen Marine Corp. (a) 135,302 87
Far Eastern Department Stores, Ltd. 759,132 382
Far Eastern Textile Co., Ltd. 520,733 580
First Commercial Bank 341,000 297
Formosa Chemicals & Fibre Corp. 1,404,031 1,578
Formosa Plastics Corp. 672,028 1,083
Formosa Taffeta Co. 734,202 466
Fubon Insurance Co. 299,574 200
GigaMedia, Ltd. (a) 19,630 206
Hon Hai Precision Industry Co. 284,960 2,176
Hua Nan Bank 399,386 317
International Bank of Taipei (a) 617,017 256
International Commercial Bank of China 538,450 423
Inventec Co., Ltd. 194,640 323
Annual Report 13
<PAGE>
SSgA
Emerging Markets Fund
Statement of Net Assets, continued
August 31, 2000
Market
Number Value
of (000)
Shares $
------ ------
Lite-On Electronics, Inc. 241,776 315
Macronix International Co., Ltd. (a) 445,170 968
Mosel Vitelic, Inc. (a) 722,400 1,245
Nan Ya Plastic Corp. 860,805 1,428
Pacific Electrical Wire & Cable (a) 691,271 514
Ritek, Inc. (a) 121,108 478
Taiwan Cement Corp. 173,448 110
Taiwan Semiconductor Manufacturing Co. (a) 1,772,119 7,679
Tatung Co., Ltd. 803,396 497
Teco Electric & Machinery 367,736 320
United Microelectronics Corp., Ltd. (a) 1,847,080 4,909
Walsin Lihwa Wire 1,093,288 796
Winbond Electronics Corp. (a) 599,590 1,487
Yageo Corp. 617,665 740
Yang Ming Marine Transport 373,120 140
Yue Loong Motor 244,600 174
-------
40,802
-------
Thailand - 0.0%
Finance One Public Co., Ltd. (Alien
Market) (a)(d) 158,300 0
-------
Turkey - 4.5%
Akbank TAS 128,896,352 787
Aksigorta AS 21,882,000 418
Anadolu Isuzu Otom 5,843,000 526
Arcelik AS 17,595,900 557
Brisa Bridgestone Sabanci Lastik San.
Ve Tic AS 9,898,000 680
Dogan Sirketler Grubu Holding AS (a) 25,544,800 595
Eregli Demir ve Celik Fabrikalari TAS (a) 18,630,000 619
Ford Otomotiv Sanayi AS (a) 5,120,000 293
Haci Omer Sabanci Holding AS 170,503,808 1,666
Koc Holding AS 23,800,000 1,308
Migros 2,907,000 395
Tupras 9,850,000 444
Turkcell Iletisim Hizmetleri AS (a) 6,472,000 346
Turkcell Iletisim Hizmetleri AS - ADR (a) 170,230 2,287
Turkiye Garanti Bankasi AS (a) 125,882,400 1,288
Turkiye Is Bankasi 191,065,792 3,865
Yapi ve Kredi Bankasi AS 189,801,776 1,593
-------
17,667
-------
United Kingdom - 1.2%
Dimension Data Holdings PLC (a) 447,140 4,360
Old Mutual PLC 82,000 205
-------
4,565
-------
United States - 0.2%
Comverse Technology, Inc. (a) 4,570 420
StarMedia Network, Inc. (a) 24,235 206
-------
626
-------
Venezuela - 0.3%
Banco Provincial SA 222,000 160
Companhia Anonima Nacional Telefonos
de Venezuela - ADR 32,000 788
Corp. Industrial de Energia 1,536,172 16
Mavesa SA 2,019,899 134
Venezolana de Cementos S.A.C.A. 821,169 279
-------
1,377
-------
Total Common Stocks
(cost $294,922) 324,604
-------
Preferred Stocks - 8.8%
Brazil - 8.3%
Aracruz Celulose SA Class B 402,100 809
Banco Bradesco SA 289,755,680 2,437
Banco do Estado de Sao Paulo 18,432,200 625
Banco Itau SA 24,010,300 2,296
CIA Energetica De Minas Gerais 51,839,044 929
Companhia Cervejaria Brahma 1,427,000 1,431
14 Annual Report
<PAGE>
SSgA
Emerging Markets Fund
Statement of Net Assets, continued
August 31, 2000
Market
Number Value
of (000)
Shares $
------ ------
Companhia Paranaense de Energia -
Copel Class B 60,462,900 549
Companhia Siderurgica de Tubarao 39,236,900 524
Companhia Vale Do Rio Doce Series A 103,565 2,800
Copene-Petroquimica do Nordeste Series
A (Regd) 2,509,541 1,048
Embratel Participacoes SA - ADR 124,500 2,723
Gerdau SA 54,388,200 780
Itausa Investimentos Itau SA 1,001,179 1,062
Petroleo Brasileiro SA 202,650 6,137
Tele Centro Oeste Celular
Participacoes SA - ADR 79,500 1,014
Tele Centro Sul Participacoes SA 18,314,200 262
Tele Norte Leste Participacoes SA 39,368,240 997
Tele Norte Leste Participacoes SA - ADR 33,736 860
Telecomunicacoes de Minas Gerais Class B 14,825,100 649
Telesp Celular Participacoes SA 70,440,048 1,041
Telesp Celular Participacoes SA - ADR 24,050 884
Uniao de Bancos Brasileiros SA (Units) 18,015,700 1,257
Usinas Siderurgicas de Minas Gerais SA 217,100 1,265
Votorantim Celulose e Papel SA 14,214,000 563
-------
32,942
-------
South Africa - 0.0%
Mobile Industries, Ltd. (conv.) (a) 4,083 1
-------
South Korea - 0.5%
Hyundai Motor Co., Ltd. 62,500 321
Samsung Electronics, Ltd. 14,050 1,622
-------
1,943
-------
Total Preferred Stocks
(cost $28,169) 34,886
-------
Principal
Amount
(000)
$
-----------
Long-Term Investments - 0.1%
Chile - 0.1%
Five Arrows Chile Investment Trust (conv.)
3.500% due 11/13/40 (a)(d) 220 308
-------
Total Long-Term Investments
(cost $336) 308
-------
Short-Term Investments - 5.7%
United States - 5.7%
AIM Short-Term Investment Prime
Portfolio Class A (b) 6,784 6,784
Associates Corp. of North America
6.910% due 06/14/01 (e) 2,000 2,001
Federated Investors Prime Cash
Obligations Fund (b) 7,528 7,528
Fleet Boston Financial Corp. Series P
6.707% due 03/13/01 (e) 3,200 3,200
Ford Motor Credit Co.
6.904% due 07/16/01 (c)(e) 3,100 3,101
-------
Total Short-Term Investments
(cost $22,618) 22,614
-------
Annual Report 15
<PAGE>
SSgA
Emerging Markets Fund
Statement of Net Assets, continued
August 31, 2000
Market
Value
(000)
$
-----------
Total Investments - 96.6%
(identified cost $346,045) 382,412
-------
Other Assets and Liabilities,
Net - 3.4% 13,514
-------
Net Assets - 100.0% 395,926
=======
(a) Nonincome-producing security.
(b) At amortized cost, which approximates market.
(c) Adjustable or floating rate security.
(d) These securities have been valued by the Security Valuation Committee of
The Board of Trustees. It is possible that the estimated value may differ
significantly from the amount that might ultimately be realized.
(e) Held as collateral in connection with equity swap agreements held by the
Fund.
(f) At August 31, 2000, $844 cash was held as collateral in connection with
open futures contracts held by the Fund.
Abbreviations:
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
Foreign Currency Abbreviations:
BRL - Brazilian real
GRD - Greek drachma
HKD - Hong Kong dollar
IDR - Indonesian rupiah
KRW - South Korean won
USD - United States dollar
ZAR - South African rand
Unrealized
Number Appreciation
of (Depreciation)
Contracts (000)
--------- --------------
MSCI Index Futures Contracts
(Taiwan) expiration
date 09/00 270 $ (774)
--------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased (f) $ (774)
========
Forward Foreign Currency Exchange Contracts
Unrealized
Contracts to In Exchange Appreciation
Deliver For Settlement (Depreciation)
(000) (000) Date (000)
--------------- ------------------ ---------- --------------
USD 13,887 GRD 5,137,605 11/17/00 $ (416)
USD 4,879 IDR 41,094,636 11/17/00 (6)
BRL 8,564 USD 4,617 11/17/00 10
HKD 41,318 USD 5,305 11/17/00 2
KRW 5,287,446 USD 4,729 11/17/00 (50)
ZAR 22,621 USD 3,236 11/17/00 18
--------
$ (442)
========
See accompanying notes which are an integral part of the financial statements.
16 Annual Report
<PAGE>
SSgA
Emerging Markets Fund
Statement of Net Assets, continued
August 31, 2000
Market
% of Value
Industry Diversification Net (000)
(Unaudited) Assets $
------ -------
Basic Industries 9.8% 38,811
Capital Goods 4.5 17,907
Consumer Basics 5.8 23,061
Consumer Durables 2.0 7,958
Consumer Non-Durables 2.8 11,088
Consumer Services 0.7 2,608
Consumer Staples 0.5 1,831
Energy 7.3 28,814
Finance 17.7 70,100
General Business 1.7 6,666
Miscellaneous 3.0 12,084
Producer Durables 0.1 300
Shelter 0.1 397
Technology 14.8 58,548
Transportation 0.6 2,322
Utilities 19.5 77,303
Short-Term Investments 5.7 22,614
------ -------
Total Investments 96.6 382,412
Other Assets and Liabilities, Net 3.4 13,514
------ -------
Net Assets 100.0% 395,926
====== =======
Market
% of Value
Geographic Diversification Net (000)
(Unaudited) Assets $
------ -------
Africa 10.2% 40,435
Europe 4.5 17,956
Latin America 26.1 103,267
Middle East 12.1 47,716
Pacific Basin 34.2 135,463
Other 3.8 14,961
Short-Term Investments 5.7 22,614
------ -------
Total Investments 96.6 382,412
Other Assets and Liabilities, Net 3.4 13,514
------ -------
Net Assets 100.0% 395,926
====== =======
See accompanying notes which are an integral part of the financial statements.
Annual Report 17
<PAGE>
SSgA
Emerging Markets Fund
Statement of Net Assets, continued
August 31, 2000
Equity Swaps
<TABLE>
<CAPTION>
Notional Unrealized
Amount Appreciation
(000) Termination (Depreciation)
Underlying Security Index $ Floating Rate Date (000)
-------------------------------- -------- -------------------------- ----------- --------------
<S> <C> <C> <C> <C>
IFC Emerging Markets Investable
Total Return Chile Index 3,238 USD LIBOR-BBA minus .60% 03/30/01 $ (122)
IFC Emerging Markets Investable
Total Return India Index 3,047 USD LIBOR-BBA minus 3.75% 06/29/01 (326)
IFC Emerging Markets Investable
Total Return Russia Index 2,000 USD LIBOR-BBA minus 3.00% 06/25/01 584
------
$ 136
======
</TABLE>
See accompanying notes which are an integral part of the financial statements.
18 Annual Report
<PAGE>
SSgA
Emerging Markets Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amount) August 31, 2000
<TABLE>
<S> <C> <C>
Assets
Investments at market (identified cost $346,045) ................................................... $ 382,412
Cash ............................................................................................... 844
Foreign currency holdings (identified cost $2,201) ................................................. 2,184
Unrealized appreciation on forward foreign currency exchange contracts ............................. 30
Receivables:
Dividends and interest .......................................................................... 926
Investments sold ................................................................................ 530
Fund shares sold ................................................................................ 9,915
Daily variation margin on futures contracts ..................................................... 137
Prepaid expenses ................................................................................... 11
Short-term investments held as collateral for securities loaned, at market ......................... 29,332
Receivable for equity swap ......................................................................... 136
---------
Total assets ................................................................................. 426,457
Liabilities
Payables:
Investments purchased ................................................................ $ 116
Fund shares redeemed ................................................................. 175
Accrued fees to affiliates ........................................................... 436
Unrealized depreciation on forward foreign currency exchange contracts .................. 472
Payable upon return of securities loaned, at market ..................................... 29,332
---------
Total liabilities ............................................................................ 30,531
---------
Net Assets ......................................................................................... $ 395,926
=========
Net Assets Consist of:
Accumulated distributions in excess of net investment income ....................................... $ (65)
Accumulated net realized gain (loss) ............................................................... (6,277)
Unrealized appreciation (depreciation) on:
Investments ..................................................................................... 36,367
Futures contracts ............................................................................... (774)
Equity swaps .................................................................................... 136
Foreign currency-related transactions ........................................................... (505)
Shares of beneficial interest ...................................................................... 35
Additional paid-in capital ......................................................................... 367,009
---------
Net Assets ......................................................................................... $ 395,926
=========
Net Asset Value, offering and redemption price per share:
($395,926,475 divided by 34,819,927 shares of $.001 par value
shares of beneficial interest outstanding) ................................................... $ 11.37
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Annual Report 19
<PAGE>
SSgA
Emerging Markets Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 2000
<TABLE>
<S> <C> <C>
Investment Income
Dividends (net of foreign taxes withheld of $737) ............................................... $ 7,832
Interest ........................................................................................ 226
---------
Total investment income ...................................................................... 8,058
Expenses
Advisory fees ........................................................................ $ 2,821
Administrative fees .................................................................. 270
Custodian fees ....................................................................... 1,293
Distribution fees .................................................................... 330
Transfer agent fees .................................................................. 82
Professional fees .................................................................... 33
Registration fees .................................................................... 47
Shareholder servicing fees ........................................................... 267
Trustees' fees ....................................................................... 12
Miscellaneous ........................................................................ 18
---------
Expenses before reductions ........................................................... 5,173
Expense reductions ................................................................... (471)
---------
Expenses, net ................................................................................ 4,702
---------
Net investment income .............................................................................. 3,356
---------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments .......................................................................... 21,207
Futures contracts .................................................................... 187
Equity swaps ......................................................................... (100)
Foreign currency-related transactions ................................................ (1,736) 19,558
---------
Net change in unrealized appreciation (depreciation) on:
Investments .......................................................................... 17,703
Futures contracts .................................................................... (1,038)
Equity swaps ......................................................................... (235)
Foreign currency-related transactions ................................................ (384) 16,046
--------- ---------
Net realized and unrealized gain (loss) ............................................................ 35,604
---------
Net increase (decrease) in net assets from operations .............................................. $ 38,960
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
20 Annual Report
<PAGE>
SSgA
Emerging Markets Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Year Ended August 31,
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income .................................................................. $ 3,356 $ 4,830
Net realized gain (loss) ............................................................... 19,558 (8,139)
Net change in unrealized appreciation (depreciation) ................................... 16,046 135,065
--------- ---------
Net increase (decrease) in net assets from operations ............................... 38,960 131,756
--------- ---------
Distributions
From net investment income ............................................................. (7,555) (8,219)
--------- ---------
Share Transactions
Net increase (decrease) in net assets from share transactions .......................... 28,866 5,748
--------- ---------
Total net increase (decrease) in net assets ............................................... 60,271 129,285
Net Assets
Beginning of period .................................................................... 335,655 206,370
--------- ---------
End of period (including accumulated distributions in excess of net investment income
of $65 and undistributed net investment income of $5,540, respectively) ............ $ 395,926 $ 335,655
========= =========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Annual Report 21
<PAGE>
SSgA
Emerging Markets Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
-----------------------------------------------------------------------
2000 1999 1998 1997 1996
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .......... $ 10.47 $ 6.52 $ 12.33 $ 10.87 $ 10.30
----------- ----------- ----------- ----------- -----------
Income From Operations
Net investment income (a) .................. .09 .15 .18 .12 .11
Net realized and unrealized gain (loss) .... 1.04 4.07 (5.58) 1.51 .68
----------- ----------- ----------- ----------- -----------
Total income from operations ............ 1.13 4.22 (5.40) 1.63 .79
----------- ----------- ----------- ----------- -----------
Distributions
From net investment income ................. (.23) (.27) (.15) (.11) (.12)
From net realized gain ..................... -- -- (.26) (.06) (.10)
----------- ----------- ----------- ----------- -----------
Total distributions ..................... (.23) (.27) (.41) (.17) (.22)
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period ................ $ 11.37 $ 10.47 $ 6.52 $ 12.33 $ 10.87
=========== =========== =========== =========== ===========
Total Return (%) .............................. 11.05 66.41 (45.36) 15.12 7.83
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ... 395,926 335,655 206,370 252,708 120,216
Ratios to average net assets (%):
Operating expenses, net (b) ............. 1.25 1.25 1.25 1.25 1.28
Operating expenses, gross (b) ........... 1.38 1.34 1.38 1.51 1.67
Net investment income ................... .89 1.78 1.85 1.07 1.10
Portfolio turnover rate (%) ................ 55.62 39.64 38.94 15.00 4.36
</TABLE>
(a) For the periods subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.
(b) See Note 4 for current period amounts.
22 Annual Report
<PAGE>
SSgA
Emerging Markets Fund
Notes to Financial Statements
August 31, 2000
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 24 investment portfolios which are in operation as
of August 31, 2000. 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 accounting
principles generally accepted in the United States 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.
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.
At August 31, 2000, the Fund had net tax basis capital loss carryover of
$5,809,147 which may be applied against any realized net taxable gains in
each year or until its expiration date of August 31, 2007.
Annual Report 23
<PAGE>
SSgA
Emerging Markets Fund
Notes to Financial Statements, continued
August 31, 2000
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, 2000 are as follows:
Net
Unrealized
Federal Tax Unrealized Unrealized Appreciation
Cost Appreciation (Depreciation) (Depreciation)
------------ ------------ -------------- --------------
$347,971,837 $68,599,492 $(34,158,838) $34,440,654
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 year
may differ significantly from distributions during such year. The
differences between tax regulations and GAAP relate primarily to
investments in swaps, futures, forward contracts, passive foreign
investment companies, foreign denominated investments, and certain
securities sold at a loss. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting
its net asset value.
Expenses: Most expenses can be directly attributed to the Fund. Expenses
of the investment company which cannot be directly attributed are
allocated among all funds based principally on their relative net assets.
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
24 Annual Report
<PAGE>
SSgA
Emerging Markets Fund
Notes to Financial Statements, continued
August 31, 2000
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"). 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, 2000
are presented in 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 (eg. 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
Annual Report 25
<PAGE>
SSgA
Emerging Markets Fund
Notes to Financial Statements, continued
August 31, 2000
counterparties; however, the Fund does not anticipate non-performance by
the counterparties. The Fund has segregated certain short-term investments
(identified in the accompanying Statement of Net Assets) as collateral for
the notional amount under the equity swap agreements.
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, 2000, purchases and
sales of investment securities, excluding short-term investments and
futures contracts, aggregated to $214,330,146 and $194,037,045,
respectively.
Securities lending: The Investment Company has a securities lending
program whereby each Fund can loan securities with a value up to 33 1/3%
of its total assets to certain brokers. The Fund receives cash (U.S.
currency), U.S. Government or U.S. Government agency obligations as
collateral against the loaned securities. To the extent that a loan is
secured by cash collateral, such collateral shall be invested by State
Street Bank and Trust Company in short-term instruments, money market
mutual funds, and such other short-term investments, provided the
investments meet certain quality and diversification requirements. Under
the securities lending arrangement, the collateral received is recorded on
the Fund's statement of assets and liabilities along with the related
obligation to return the collateral. In those situations where the Company
has relinquished control of securities transferred, it derecognizes the
securities and records a receivable from the counterparty.
Income generated from the investment of cash collateral, less negotiated
rebate fees paid to participating brokers and transaction costs, is
divided between the Fund and State Street Bank and Trust Company and is
recorded as interest income for the Fund. To the extent that a loan is
secured by non-cash collateral, brokers pay the Fund negotiated lenders'
fees, which are divided between the Fund and State Street Bank and Trust
Company and are recorded as interest income for the Fund. All collateral
received will be in an amount at least equal to 102% (for loans of U.S.
securities) or 105% (for non-U.S. securities) of the market value of the
loaned securities at the inception of each loan. Should the borrower of
the securities fail financially, there is a risk of delay in recovery of
the securities or loss of rights in the collateral. Consequently, loans
are made only to borrowers which are deemed to be of good financial
standing. As of August 31, 2000, the value of outstanding securities on
loan and the value of collateral amounted to $27,856,411 and $29,332,424,
respectively. Included in interest income is securities lending income of
$151,367 for the year ended August 31, 2000.
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, through State Street Global Advisors, the investment management
group of 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. The
Adviser has voluntarily agreed to
26 Annual Report
<PAGE>
SSgA
Emerging Markets Fund
Notes to Financial Statements, continued
August 31, 2000
reimburse the Fund for all expenses in excess of 1.25% of its average
daily net assets on an annual basis. The total amount of the reimbursement
for the year ended August 31, 2000 was $460,085. As of August 31, 2000,
the receivable due from the Adviser for reimbursed expenses in excess of
the expense cap has been netted against the Advisory 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.
In addition, the Fund has entered into arrangements with its Adviser
whereby custody credits realized as a result of uninvested cash balances
were used to reduce a portion of the Fund's expenses. During the year, the
Fund's custodian fees were reduced by $10,704 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly-owned subsidiary of The Northwestern Mutual Life Insurance Company,
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 and services, including telephone
service, utilities, stationery supplies, and similar items. The Investment
Company pays the Administrator for services supplied by the Administrator
pursuant to the Administration Agreement, an annual fee, payable monthly
on a pro rata basis. For the period September 1, 1999 to April 30, 2000,
it is 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 up to and including $1 billion - .06%, over $1 billion
up to and including $1.5 billion - .04%, over $1.5 billion - .03%.
Effective May 1, 2000, the annual fee is based on the following
percentages of the average daily net assets of all International
portfolios: $0 up to $1 billion - .07%; over $1 billion - .05%. The
Administrator will also charge a flat fee of $30,000 per year per Fund
with less than $500 million in net assets and $1,500 per year for monthly
performance reports and use of Russell Performance Universe software
product. In addition, the Fund reimburses the Administrator for
out-of-pocket expenses and start-up costs for new funds.
Distributor and Shareholder Servicing: The Investment Company has 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 enter 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 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 Shareholder 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
Annual Report 27
<PAGE>
SSgA
Emerging Markets Fund
Notes to Financial Statements, continued
August 31, 2000
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, 2000, the Fund was charged
shareholder servicing expenses of $93,363, $3,478, $32,873, $484 and
$5,911 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 of the Fund on an
annual basis. The shareholder servicing payments shall not exceed .20% of
the average daily value of net assets of the Fund on an annual basis.
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, 2000.
Board of Trustees: The Investment Company paid each Trustee not affiliated
with the Investment Company an annual retainer, plus specified amounts for
board and committee meetings attended. 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, 2000 were
as follows:
Advisory fees $208,849
Administration fees 21,375
Custodian fees 99,001
Distribution fees 9,082
Shareholder servicing fees 80,233
Transfer agent fees 14,887
Trustees' fees 2,148
--------
$435,575
========
Beneficial Interest: As of August 31, 2000, one shareholder was a record
owner of approximately 31% of the total outstanding shares of the Fund.
28 Annual Report
<PAGE>
SSgA
Emerging Markets Fund
Notes to Financial Statements, continued
August 31, 2000
5. Fund Share Transactions (amounts in thousands)
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
-------------------------------------------
2000 1999
-------------------- -------------------
Shares Dollars Shares Dollars
------- -------- ------- --------
<S> <C> <C> <C> <C>
Proceeds from shares sold ...................... 40,913 $ 479,583 25,947 $ 225,323
Proceeds from reinvestment of distributions .... 642 6,594 993 7,446
Payments for shares redeemed ................... (38,779) (457,311) (26,560) (227,021)
------- --------- ------- ---------
Total net increase (decrease) .................. 2,776 $ 28,866 380 $ 5,748
======= ========= ======= =========
</TABLE>
6. Interfund Lending Program
The Fund and all the other funds of the Investment Company received from
the Securities and Exchange Commission an exemptive order on December 23,
1999 to establish and operate an Interfund Credit Facility. This allows
the Funds to directly lend to and borrow money from the SSgA Money Market
Fund for temporary purposes in accordance with certain conditions. The
borrowing Funds are charged the average of the current Repo Rate and the
Bank Loan Rate. Miscellaneous Expenses on the Statement of Operations
include $3,024 of interest expense paid under the interfund lending
program.
Annual Report 29
<PAGE>
SSgA
Emerging Markets Fund
Tax Information
August 31, 2000 (Unaudited)
The Fund paid foreign taxes of $737,001 and recognized $7,396,017 of
foreign source income during the taxable year ended August 31, 2000.
Pursuant to Section 853 of the Internal Revenue Code, the Fund designates
$.0212 per share of foreign taxes paid and $.2124 of gross income earned
from foreign sources in the taxable year ended August 31, 2000.
Please consult a tax advisor for questions about federal or state income
tax laws.
30 Annual Report
<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, Treasurer and CEO
Mark E. Swanson, Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Treasurer
Carla L. Anderson, Assistant 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
160 Federal Street
Boston, Massachusetts 02110
Annual Report 31
<PAGE>
[COVER GRAPHIC]
SSgA(R) funds
ANNUAL REPORT
Tuckerman Active REIT Fund
August 31, 2000
<PAGE>
SSgA(R) Funds
Tuckerman Active REIT Fund
Annual Report
August 31, 2000
Table of Contents
Page
Chairman's Letter......................................................... 4
Portfolio Management Discussion and Analysis.............................. 6
Report of Independent Accountants......................................... 8
Financial Statements...................................................... 9
Financial Highlights...................................................... 13
Notes to Financial Statements............................................. 14
Fund Management and Service Providers..................................... 19
"SSgA(R)" 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 Tuckerman Active REIT Fund
--------------------------------------------------------------------------------
Letter From the Chairman of State Street Global Advisors
--------------------------------------------------------------------------------
Dear Shareholders,
It is our pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 2000. The SSgA Fund Family has grown to include
twenty-four portfolios with over $21 billion in assets as of August 31, 2000.
The Fund Family provides a wide range of strategies covering the world's major
markets. The enclosed information provides an overview of the investment process
for the SSgA Tuckerman Active REIT Fund. This overview contains the portfolio
management discussion, performance updates and financial information for the
Fund.
In an ongoing effort to develop competitive products and services that provide
investment solutions for our clients, we have added the SSgA Intermediate
Municipal Bond Fund to the SSgA Fund Family. This Fund's investment objective
seeks to provide federally tax-exempt current income by investing primarily in a
diversified portfolio of municipal debt securities with a dollar-weighted
average maturity between three and ten years.
We are also pleased with the success of our SSgA Emerging Markets and SSgA
Growth and Income Funds as they were included in Money(R) Magazine's June 2000
issue listing of the `Top 100 Mutual Funds'. This is the second year in a row
that these funds have been selected.
Additionally, the SSgA Tax Free Money Market and the SSgA Active International
Funds have achieved five-year performance history during the 2000 fiscal year.
Currently, all of our SSgA Money Market Funds have at least a five-year
performance history. We strive to meet our clients' needs by providing funds
with long-term records and competitive performance.
We would like to thank you for choosing the SSgA Funds. Our reputation is based
on our tradition of designing and delivering exceptional financial services to
our clients. We look forward to continue sharing the benefit of our experience
with you.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
/s/ Timothy B. Harbert
Timothy B. Harbert
State Street Global Advisors
President and Chief Operating Officer, SSgA
4 Annual Report
<PAGE>
SSgA Tuckerman Active REIT Fund
--------------------------------------------------------------------------------
Management of the Funds
--------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
[PHOTO]
Timothy B. Harbert
President and Chief Operating 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. Arthur J. Hurley, CFA, Principal, has been the portfolio manager primarily
responsible for investment decisions regarding the SSgA Tuckerman Active REIT
Fund since May 2000. He also acts as the Senior Equity Analyst for the Tuckerman
Group. Mr. Hurley joined State Street in 1995. He also is in charge of the
creation and modification of model REIT portfolios. Prior to his current
responsibilities, he was an Equity Analyst, specializing in Real Estate
Investment Trusts for the Tuckerman Group. Before joining the Tuckerman Group,
Mr. Hurley worked for SSgA's Active Fixed Income Group where he managed
portfolios, traded fixed income instruments, and conducted credit analyses. He
holds a BA in Finance from the University of Massachusetts/Dartmouth. There are
two other portfolio managers working with Mr. Hurley.
Annual Report 5
<PAGE>
SSgA Tuckerman Active REIT 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: Real Estate Investment Trust (REIT) securities, primarily from those
securities in the Wilshire REIT Index and across different types and regions
based on the fundamental research of the Advisor
Strategy: The Fund seeks to meet its objective primarily 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 Manager
conducts through its strategy and research analyst team.
--------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
Dates Tuckerman Active REIT Fund Wilshire REIT Index ** S&P(R)REIT Index ***
<S> <C> <C> <C>
Inception* $10,000 $10,000 $10,000
1998 $8,201 $8,357 $8,228
1999 $8,700 $8,831 $8,447
2000 $10,571 $10,208 $9,422
</TABLE>
================================================================================
Performance Review
For the fiscal year ended August 31, 2000, the SSgA Tuckerman Active REIT Fund
had a total return of 21.51%, outperforming the Wilshire REIT Index return of
15.63% by 5.88%. The Fund's performance is net of operating expenses, whereas
the Index results do not include expenses of any kind.
Market and Portfolio Highlights
While the technical dynamics in the market did not favor REITs in late 1999, the
fundamentals of the real estate market remained strong, and sentiment finally
changed for REITs in the spring of 2000. The REIT rally of the first half of
2000 began in March, and coincided almost perfectly with the peak of the NASDAQ
market. Investors suddenly became much less attracted to the "new economy"
stocks with very little near term positive cash flows, and turned to investments
with stable cash flows and high current returns. REITs with attractive
valuations, a dividend yield of approximately 9.00% during this time and stable
cash flows attracted investors to the sector.
--------------------------------------------------------------------------------
SSgA Tuckerman Active REIT Fund
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
-------------- ------------ -------
1 Year $ 12,151 21.51%
Inception $ 10,571 2.41%+
--------------------------------------------------------------------------------
Wilshire REIT Index
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
-------------- ------------ -------
1 Year $ 11,563 15.63%
Inception $ 10,208 0.88%+
--------------------------------------------------------------------------------
Standard & Poor's(R) REIT Index
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
-------------- ------------ -------
1 Year $ 11,158 11.58%
Inception $ 9,422 (2.52)%+
See related Notes on following page.
6 Annual Report
<PAGE>
SSgA Tuckerman Active REIT Fund
--------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
--------------------------------------------------------------------------------
While REIT share prices suffered over the last two years, the fundamentals of
the real estate market continued to be strong. The real estate market remains in
a state of equilibrium, with the recent supply of space in balance with the near
term demand. With limited new supply, and continued strength in the US economy,
vacancy rates are at or near all time lows in most property types. This has
allowed real estate owners to raise rents to very attractive rates, and as a
result, many REITs exceeded expectations in the second quarter of 2000.
The Manager continues to find attractive valuations in the REIT group. A year
ago, REITs were trading at discounts of 15-20% of their liquidation values. As
of August 31, 2000, however, the Manager estimates the REIT group is trading at
a discount to liquidation value of approximately 5-8%.
In August 2000, the Fund moved from an overweighting to an underweighting in the
hotel sector versus the benchmark. Prior to August 2000, this segment was
significantly undervalued when compared to other property types, considering the
strong economic environment they were operating under. As the hotel REITs
reported financial results well ahead of expectations in both the first and
second quarters of 2000, their share prices began to better reflect the positive
fundamentals of the underlying business. As of August 31, 2000, hotel REITs are
up 32.71%, well ahead of the Wilshire REIT Index. Due to the strong price move,
and what the Manager believes to be less favorable fundamentals looking forward,
the Manager has decided to capitalize on profits in this property type and
reduce the weighting in the portfolio. At August 31, 2000, the Fund held a 5.2%
weighting in hotels versus the benchmark weighting of 6.2%.
The Fund maintained its overweight position in the office segment throughout the
fiscal year, which helped the benchmark-relative performance for the period. At
August 31, 2000, the Fund held 32.2% in office REITs versus the benchmark weight
of 26.0%. The Manager continues to favor office companies focused in the
downtown markets where supply of space is inherently constrained. These
companies have been able to raise rents to attractive rates, and generate
internal growth well in excess of their peers. The Fund also benefited
significantly from its overweight to the Apartment sector. As of August 31,
2000, the Fund held 28.2% in the apartment property type versus the Wilshire
REIT Index weight of 24.2%. The Apartment sector has benefited from the limited
supply of available multi-family units, and the continued demand from strong job
growth in the US. Similar to the Office sector, the Manager also focuses on
apartment REITs operating in inherently supply-constrained areas located in the
Northeast and West Coast. Because the development process in the Southeast and
the Southwest are much slower and more difficult than in any other region in the
US, these regions continue to be underweighted to the Index.
---------------------------------------------------------
Top Ten Equity Holdings
(as a percent of Total Investments) August 31, 2000
---------------------------------------------------------
Equity Office Properties Trust 10.6%
Equity Residential Properties Trust 9.6
Apartment Investment & Management Co.
Class A 6.8
Duke Weeks Realty Corp. 6.7
Avalonbay Communities, Inc. 6.5
Simon Property Group, Inc. 5.5
Spieker Properties, Inc. 5.3
MeriStar Hospitality Corp. 5.2
Alexandria Real Estate Equities, Inc. 4.9
Chelsea GCA Realty, Inc. 4.6
---------------------------------------------------------
---------------------
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 Wilshire REIT Index is a market capitalization-weighted index
comprised of publicly traded Real Estate Investment Trusts (REITs). No
special purpose or healthcare REITs are included. The index is rebalanced
monthly and reconstituted quarterly.
*** The Standard & Poor's(R) 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.
+ 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 Tuckerman Active REIT Fund (the "Fund")
at August 31, 2000, 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 May 1, 1998 (commencement of operations) to
August 31, 1998, in conformity with accounting principles generally accepted in
the United States of America. 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 auditing standards
generally accepted in the United States of America 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, 2000 by correspondence with the custodian, provide a reasonable basis for
our opinion.
Boston, Massachusetts
October 11, 2000
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
Tuckerman Active REIT Fund
Statement of Net Assets
August 31, 2000
Market
Number Value
of (000)
Shares $
------ ------
Common Stocks (a) - 98.3%
Apartment - 28.1%
Apartment Investment & Management
Co. Class A 66,500 2,984
Archstone Communities Trust 39,800 980
Avalonbay Communities, Inc. 63,700 2,847
Equity Residential Properties
Trust 87,500 4,200
Essex Property Trust, Inc. 26,200 1,289
-------
12,300
-------
Hotels/Leisure - 1.3%
LaSalle Hotel Properties 39,800 572
-------
Leasing - 6.9%
Captec Net Lease Realty, Inc. 75,000 769
MeriStar Hospitality Corp. 101,900 2,254
-------
3,023
-------
Office/Industrial - 44.2%
Alexandria Real Estate Equities,
Inc. 60,900 2,132
Boston Properties, Inc. 29,000 1,173
Brandywine Realty Trust 70,000 1,435
CenterPoint Properties Corp. 31,000 1,358
Duke-Weeks Realty Corp. 122,498 2,910
Equity Office Properties Trust 160,500 4,634
Prentiss Properties Trust 18,800 457
ProLogis Trust 43,900 1,004
SL Green Realty Corp. 71,200 1,909
Spieker Properties, Inc. 42,600 2,327
-------
19,339
-------
Outlet Centers - 4.6%
Chelsea GCA Realty, Inc. 59,600 2,000
-------
Regional Malls - 8.8%
CBL & Associates Properties, Inc. 58,900 1,406
Simon Property Group, Inc. 105,700 2,411
-------
3,817
-------
Shopping Center - 4.4%
Equity One, Inc. 21,600 219
Kimco Realty Corp. 42,200 1,714
-------
1,933
-------
Total Common Stocks
(cost $36,972) 42,984
-------
Principal
Amount
(000)
$
---------
Short-Term Investments - 1.5%
AIM Short Term Investment Prime
Portfolio Class A (b) 632 632
Federated Investors Prime Cash
Obligations Fund (b) 26 26
-------
Total Short-Term Investments
(cost $658) 658
-------
Total Investments - 99.8%
(identified cost $37,630) 43,642
Other Assets and Liabilities,
Net - 0.2% 106
-------
Net Assets - 100.0% 43,748
=======
(a) All common stocks held are Real Estate Investment Trusts (REITs).
(b) At amortized cost, which approximates market.
See accompanying notes which are an integral part of the financial statements.
Annual Report 9
<PAGE>
SSgA
Tuckerman Active REIT Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amount) August 31, 2000
<TABLE>
<S> <C> <C>
Assets
Investments at market (identified cost $37,630) ............................................ $ 43,642
Receivables:
Dividends ............................................................................... 4
Investments sold ........................................................................ 17
Fund shares sold ........................................................................ 188
Prepaid expenses ........................................................................... 4
Short-term investments held as collateral for securities loaned, at market ................. 2,801
--------
Total assets ......................................................................... 46,656
Liabilities
Payables:
Fund shares redeemed ......................................................... $ 62
Accrued fees to affiliates ................................................... 35
Other accrued expenses ....................................................... 10
Payable upon return of securities loaned, at market ............................. 2,801
--------
Total liabilities .................................................................... 2,908
--------
Net Assets ................................................................................. $ 43,748
========
Net Assets Consist of:
Undistributed net investment income ........................................................ $ 153
Accumulated net realized gain (loss) ....................................................... (4,330)
Unrealized appreciation (depreciation) on investments ...................................... 6,012
Shares of beneficial interest .............................................................. 5
Additional paid-in capital ................................................................. 41,908
--------
Net Assets ................................................................................. $ 43,748
========
Net Asset Value, offering and redemption price per share:
($43,747,616 divided by 4,779,470 shares of $.001 par value
shares of beneficial interest outstanding) ........................................... $ 9.15
========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
10 Annual Report
<PAGE>
SSgA
Tuckerman Active REIT Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 2000
<TABLE>
<S> <C> <C>
Investment Income
Dividends ........................................................................ $ 2,728
Interest ......................................................................... 10
-------
Total investment income ....................................................... 2,738
Expenses
Advisory fees .......................................................... $ 237
Administrative fees .................................................... 23
Custodian fees ......................................................... 18
Distribution fees ...................................................... 19
Transfer agent fees .................................................... 28
Professional fees ...................................................... 15
Registration fees ...................................................... 30
Shareholder servicing fees ............................................. 11
Trustees' fees ......................................................... 5
Miscellaneous .......................................................... 5
-------
Expenses before reductions ............................................. 391
Expense reductions ..................................................... (26)
-------
Expenses, net ................................................................. 365
-------
Net investment income ............................................................... 2,373
-------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on investments ............................................. (2,540)
Net change in unrealized appreciation (depreciation) on investments ................. 6,565
-------
Net realized and unrealized gain (loss) ............................................. 4,025
-------
Net increase (decrease) in net assets from operations ............................... $ 6,398
=======
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Annual Report 11
<PAGE>
SSgA
Tuckerman Active REIT Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Years Ended August 31,
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ............................................... $ 2,373 $ 2,248
Net realized gain (loss) ............................................ (2,540) (3,566)
Net change in unrealized appreciation (depreciation) ................ 6,565 3,593
-------- --------
Net increase (decrease) in net assets from operations ............ 6,398 2,275
-------- --------
Distributions
From net investment income .......................................... (2,369) (2,374)
-------- --------
Share Transactions
Net increase (decrease) in net assets from share transactions ....... (5,809) 27,169
-------- --------
Total net increase (decrease) in net assets ............................ (1,780) 27,070
Net Assets
Beginning of period ................................................. 45,528 18,458
-------- --------
End of period (including undistributed net investment income of
$153 and $149, respectively) ..................................... $ 43,748 $ 45,528
======== ========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
12 Annual Report
<PAGE>
SSgA
Tuckerman Active REIT Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
Fiscal Years Ended August 31,
-----------------------------
2000 1999 1998*
------- ------- -------
Net Asset Value, Beginning of Period .......... $ 8.08 $ 8.17 $ 10.00
------- ------- -------
Income From Operations
Net investment income (a) .................. .52 .50 .15
Net realized and unrealized gain (loss) .... 1.10 (.01) (1.94)
------- ------- -------
Total income from operations ............ 1.62 .49 (1.79)
------- ------- -------
Distributions
From net investment income ................. (.55) (.58) (.04)
------- ------- -------
Net Asset Value, End of Period ................ $ 9.15 $ 8.08 $ 8.17
======= ======= =======
Total Return (%)(b) ........................... 21.51 6.09 (17.99)
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ... 43,748 45,528 18,458
Ratios to average net assets (%)(c):
Operating expenses, net (d) ............. 1.00 1.00 1.00
Operating expenses, gross (d) ........... 1.07 1.09 1.38
Net investment income ................... 6.51 6.25 5.21
Portfolio turnover rate (%) ................ 102.88 60.13 17.36
* For the period May 1, 1998 (commencement of operations) to August 31,
1998.
(a) For the periods subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for the period ended August 31, 1998 are annualized.
(d) See Note 4 for current period amounts.
Annual Report 13
<PAGE>
SSgA
Tuckerman Active REIT Fund
Notes to Financial Statements
August 31, 2000
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 24 investment portfolios which are in operation as
of August 31, 2000. These financial statements report on one portfolio,
the SSgA Tuckerman Active REIT Fund (formerly SSgA Real Estate Equity
Fund)(the "Fund"). The Investment Company is a registered and 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 accounting
principles generally accepted in the United States 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.
Money market instruments maturing within 60 days of the valuation date are
valued at amortized cost.
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.
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.
14 Annual Report
<PAGE>
SSgA
Tuckerman Active REIT Fund
Notes to Financial Statements, continued
August 31, 2000
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, 2000, the Fund had a net tax basis capital loss carryovers
of $471,979 and $3,092,433, which may be applied against any realized net
taxable gains in each succeeding year or until its expiration dates of
August 31, 2007 and August 31, 2008, respectively, whichever occurs first.
The Fund's aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of August 31, 2000 are as follows:
Net Unrealized
Federal Tax Unrealized Unrealized Appreciation
Cost Appreciation (Depreciation) (Depreciation)
----------- ------------ -------------- --------------
$38,396,202 $5,496,104 $(250,046) $5,246,058
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 monthly. 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 year may differ significantly from
distributions during such year. 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
of the investment company which cannot be directly attributed are
allocated among all funds based principally on their relative net assets.
3. Securities Transactions
Investment transactions: For the year ended August 31, 2000, purchases and
sales of investment securities, excluding short-term investments,
aggregated to $36,750,299 and $43,058,786, respectively. A redemption
in-kind of securities resulted in a realized gain of $1,828,694.
Securities lending: The Investment Company has a securities lending
program whereby each Fund can loan securities with a value up to 33 1/3%
of its total assets to certain brokers. The Fund receives cash (U.S.
currency), U.S. Government or U.S. Government agency obligations as
collateral against the loaned securities. To the extent that a loan is
secured by cash collateral, such collateral shall be invested by State
Street Bank and Trust Company in short-term instruments, money market
mutual funds, and such other short-term investments, provided the
investments meet certain quality and diversification requirements. Under
the securities lending arrangement, the collateral received is recorded on
the Fund's statement of assets and liabilities along with the related
obligation to return the collateral. In those situations where the Company
has relinquished control of securities transferred, it derecognizes the
securities and records a receivable from the counterparty.
Annual Report 15
<PAGE>
SSgA
Tuckerman Active REIT Fund
Notes to Financial Statements, continued
August 31, 2000
Income generated from the investment of cash collateral, less negotiated
rebate fees paid to participating brokers and transaction costs, is
divided between the Fund and State Street Bank and Trust Company and is
recorded as interest income for the Fund. To the extent that a loan is
secured by non-cash collateral, brokers pay the Fund negotiated lenders'
fees, which are divided between the Fund and State Street Bank and Trust
Company and are recorded as interest income for the Fund. All collateral
received will be in an amount at least equal to 102% (for loans of U.S.
securities) or 105% (for non-U.S. securities) of the market value of the
loaned securities at the inception of each loan. Should the borrower of
the securities fail financially, there is a risk of delay in recovery of
the securities or loss of rights in the collateral. Consequently, loans
are made only to borrowers which are deemed to be of good financial
standing. As of August 31, 2000, the value of outstanding securities on
loan and the value of collateral amounted to $2,702,913 and $2,800,682,
respectively. Included in interest income is securities lending income of
$7,251 for the year ended August 31, 2000.
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, through State Street Global Advisors, the investment management
group of 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. The
Adviser voluntarily agreed to reimburse up to the full amount of its
Advisory fee to the extent that total expenses exceed 1.00% of average
daily net assets on an annual basis. The total amount of reimbursement for
the year ended August 31, 2000 was $25,828. As of August 31, 2000, the
receivable due from the Adviser for reimbursed expenses in excess of the
expense cap has been netted against the Advisory 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.
In addition, the Fund has entered into arrangements with its Adviser
whereby custody credits realized as a result of uninvested cash balances
were used to reduce a portion of the Fund's expenses. During the year, the
Fund's custodian fees were reduced by $555 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly-owned subsidiary of The Northwestern Mutual Life Insurance Company,
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 for services supplied by the
Administrator pursuant to the Administration Agreement, an annual fee,
payable monthly on a pro rata basis. For the period September 1, 1999 to
April 30, 2000, it is 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 up to and including $1 billion -
.05%; over $1 billion - .03%. Effective May 1, 2000, the annual fee is
based on the following percentages of the average daily net assets of all
U.S. Equity portfolios: $0 to $2 billion - .0315%; over $2 billion -
.029%. The Administrator will charge a flat fee of $30,000 per year per
Fund with less than $500 million in net assets and $1,500 per year for
monthly performance reports and use of Russell Performance Universe
software product. In addition, the Fund reimburses the Administrator for
out-of-pocket expenses and start-up costs for new funds.
16 Annual Report
<PAGE>
SSgA
Tuckerman Active REIT Fund
Notes to Financial Statements, continued
August 31, 2000
Distributor and Shareholder Servicing: The Investment Company has 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 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 Shareholder 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 August 31, 2000, the Fund was
charged shareholder servicing expenses of $9,111, $1,164 and $271 by the
Adviser, SSBSI, and Commercial Banking, respectively. The Fund did not
incur any expenses from RIS and Solutions during this year.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets of the Fund on an
annual basis. The shareholder servicing payments shall not exceed .20% of
the average daily value of net assets of the Fund on an annual basis.
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, 2000.
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 $6,640 for the year ended
August 31, 2000.
Board of Trustees: The Investment Company paid each Trustee not affiliated
with the Investment Company an annual retainer, plus specified amounts for
board and committee meetings attended. These expenses are allocated among
all of the funds based upon their relative net assets.
Annual Report 17
<PAGE>
SSgA
Tuckerman Active REIT Fund
Notes to Financial Statements, continued
August 31, 2000
Accrued fees payable to affiliates and trustees as of August 31, 2000 were
as follows:
Advisory fees $25,883
Administration fees 5,007
Custodian fees 399
Distribution fees 794
Shareholder servicing fees 1,731
Transfer agent fees 1,360
Trustees' fees 227
-------
$35,401
=======
Beneficial Interest: As of August 31, 2000, two shareholders (one of which
was also an affiliate of the Investment Company) were record owners of
approximately 12% and 10%, respectively, of the total outstanding shares
of the Fund.
5. Fund Share Transactions (amounts in thousands)
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
------------------------------------------
2000 1999
------------------ ------------------
Shares Dollars Shares Dollars
------ -------- ------ --------
<S> <C> <C> <C> <C>
Proceeds from shares sold ........................ 3,132 $ 26,729 3,647 $ 29,401
Proceeds from reinvestment of distributions ...... 74 595 139 1,135
Payments for shares redeemed ..................... (4,062) (33,133) (411) (3,367)
------ -------- ------ --------
Total net increase (decrease) .................... (856) $ (5,809) 3,375 $ 27,169
====== ======== ====== ========
</TABLE>
6. Interfund Lending Program
The Fund and all other funds of the Investment Company received from the
Securities and Exchange Commission an exemptive order on December 23, 1999
to establish and operate an Interfund Credit Facility. This allows the
Funds to directly lend to and borrow money from the SSgA Money Market Fund
for temporary purposes in accordance with certain conditions. The
borrowing Funds are charged the average of the current Repo Rate and the
Bank Loan Rate. The Fund did not utilize the interfund lending program
during this year.
7. Dividends
On September 1, 2000, the Board of Trustees declared a dividend of $.0322
from net investment income, payable on September 8, 2000 to shareholders
of record on September 5, 2000.
18 Annual Report
<PAGE>
SSgA Tuckerman Active REIT 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, Treasurer and CEO
Mark E. Swanson, Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Treasurer
Carla L. Anderson, Assistant 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
160 Federal Street
Boston, Massachusetts 02110
Annual Report 19
<PAGE>
[COVER GRAPHIC]
SSgA(R) funds
ANNUAL REPORT
International Growth Opportunities Fund
August 31, 2000
<PAGE>
SSgA(R) Funds
International Growth Opportunities Fund
Annual Report
August 31, 2000
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(R)" 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,
It is our pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 2000. The SSgA Fund Family has grown to include
twenty-four portfolios with over $21 billion in assets as of August 31, 2000.
The Fund Family provides a wide range of strategies covering the world's major
markets. The enclosed information provides an overview of the investment process
for the SSgA International Growth Opportunities Fund. This overview contains the
portfolio management discussion, performance updates and financial information
for the Fund.
In an ongoing effort to develop competitive products and services that provide
investment solutions for our clients, we have added the SSgA Intermediate
Municipal Bond Fund to the SSgA Fund Family. This Fund's investment objective
seeks to provide federally tax-exempt current income by investing primarily in a
diversified portfolio of municipal debt securities with a dollar-weighted
average maturity between three and ten years.
We are also pleased with the success of our SSgA Emerging Markets and SSgA
Growth and Income Funds as they were included in Money(R) Magazine's June 2000
issue listing of the `Top 100 Mutual Funds'. This is the second year in a row
that these funds have been selected.
Additionally, the SSgA Tax Free Money Market and the SSgA Active International
Funds have achieved five-year performance history during the 2000 fiscal year.
Currently, all of our SSgA Money Market Funds have at least a five-year
performance history. We strive to meet our clients' needs by providing funds
with long-term records and competitive performance.
We would like to thank you for choosing the SSgA Funds. Our reputation is based
on our tradition of designing and delivering exceptional financial services to
our clients. We look forward to continue sharing the benefit of our experience
with you.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
/s/ Timothy B. Harbert
Timothy B. Harbert
State Street Global Advisors
President and Chief Operating Officer, SSgA
4 Annual Report
<PAGE>
SSgA International Growth Opportunities Fund
--------------------------------------------------------------------------------
Management of the Funds
--------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
[PHOTO]
Timothy B. Harbert
President and Chief Operating 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. Ed Allinson, CFA, Principal, has been the portfolio manager primarily
responsible for investment decisions regarding the SSgA International Growth
Opportunities Fund since December 1999. Prior to joining SSgA, he worked at
Brown Brothers Harriman, New York, as Senior Portfolio Manager in the
International Equities Group, managing pension, endowment, and mutual fund
assets, including the highly successful 59 Wall Street Pacific Basin Fund.
Before this, he worked at First Pacific Securities, Hong Kong, as Assistant
Director in institutional Asian equity sales. Mr. Allinson has been in the
investment field since 1985. He earned his BA at the University of Pennsylvania
and holds an MBA in Finance from the Wharton School. There are three other
portfolio managers working with Mr. Allinson.
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: Primarily securities of foreign issuers included in the MSCI EAFE
(Morgan Stanley Capital International Europe, Australia, Far East) Index.
Strategy: The Fund will attempt to meet its objective through the active
selection of foreign equity securities based on the fundamental analysis of
companies and investment themes. The investment approach is defined
predominantly by a bottom-up stock selection process, informed by a top-down
macroeconomic outlook.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
Dates International Growth Opportunities Fund MSCI EAFE Index ** MSCI All Country World Ex-US ***
<S> <C> <C> <C>
Inception* $10,000 $10,000 $10,000
1998 $8,420 [NEED PLOT POINTS] $8,463
1999 $11,374 [NEED PLOT POINTS] $11,054
2000 $14,651 $12,292 $12,386
==============================================================================================================================
</TABLE>
Performance Review
For the fiscal year ended August 31, 2000, the Fund gained 28.82% versus the
MSCI-EAFE return of 9.81%. International markets in general, and growth stocks
in particular, performed well throughout much of this time. Despite a moderate
correction in the international markets during the spring, many of the Fund's
holdings had staged a modest recovery by August 1, 2000.
Market and Portfolio Highlights
The fiscal year started well in September 1999, with the Energy and Financial
sectors rising strongly. Supported by a general market recovery, the Fund's
Japanese holdings also reacted with performance results moving upward.
Throughout the remainder of 1999 the Fund's benchmark-relative overweight
positions in Technology and Communications issues propelled the Fund far ahead
of its benchmark. Sony, Nokia, Ericsson and SAP, all
--------------------------------------------------------------------------------
SSgA International Growth Opportunities Fund
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
------------------- ------------ --------
1 Year $ 12,882 28.82%
Inception $ 14,651 17.78%+
--------------------------------------------------------------------------------
MSCI EAFE Index
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
------------------- ------------ --------
1 Year $ 10,981 9.81%
Inception $ 12,292 9.25%+
--------------------------------------------------------------------------------
MSCI All Country World Ex-US
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
------------------- ------------ --------
1 Year $ 11,202 12.02%
Inception $ 12,386 9.61%+
See related Notes on following page.
6 Annual Report
<PAGE>
SSgA International Growth Opportunities Fund
--------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
--------------------------------------------------------------------------------
held by the Fund, ended calendar year 1999 at or near their highs.
Partly as a reaction to the huge absolute returns chalked up over the previous
four months, the Manager began 2000 by adopting a slightly more defensive
position. Some of the Fund's winning growth stocks were liquidated, and those
proceeds reassigned into the Health Care sector, specifically biotech companies
such as Biovail of Canada. Retaining an overweighting in the financial services
sector, the Manager shifted emphasis away from banks and towards more defensive
insurance stocks, including Allianz and Munich Reinsurance. Similarly, the Fund
invested in some domestic-oriented Japanese stocks such as Uni-Charm, a sanitary
products company, rather than the export-driven companies the Fund previously
favored. At the same time, the Fund added to holdings within the Consumer
Cyclicals sector, including positions in Philips Electronics, Sony and Hutchison
Whampoa. Finally, the Fund maintained an overweighting in energy stocks, and
through April this paid off handsomely, especially with the European economies
growing at a reasonable clip. Mergers and acquisitions activity continued apace
in the Telecommunications industry, albeit not quite at the heady pace of 1999,
fueling further rises in the sector.
The environment changed towards the end of March 2000, after a NASDAQ market
correction in the wake of the Federal Reserve's decision to tighten monetary
policy. Amid renewed fears of inflation within the US, international markets
followed suit. The three months ending June 30, 2000 witnessed a wave of
unrelieved selling among growth stocks, notably among Technology and
Communications issues. This sell off was due to both the markets' reaction to
Fed policy, as well as the high valuation levels previously reached. Compounding
anxieties, energy prices began to accelerate sharply at the same time. As a
result, the Fund lost 9.49% for the quarter ended June 30, 2000. Throughout this
time, the Fund maintained its positions based on the view that the market was
overreacting on seasonally thin volume. The last two months of the fiscal year
saw some buying in these extremely depressed sectors, enabling the Fund to post
a loss of 1.75% and a gain of 2.20% for July and August respectively.
-------------------------------------------------------------
Top Ten Equity Holdings
(as a percent of Total Investments) August 31, 2000
-------------------------------------------------------------
Vodafone Airtouch PLC 3.4%
Takeda Chemical Industries 2.9
Alcatel Alsthom Compagnie Generale
d'Electricite - ADR 2.9
Uni-Charm Corp. 2.5
Elan Corp. PLC - ADR 2.3
HSBC Holdings PLC 2.3
Cap Gemini Sogeti 2.3
Telefonaktiebolaget LM Ericsson
Class B - ADR 2.2
Cable & Wireless PLC 2.1
Telefonaktiebolaget LM Ericsson AB 2.1
-------------------------------------------------------------
----------------------
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 comparisons 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.
+ 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 International Growth Opportunities Fund
(the "Fund") at August 31, 2000, 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 May 1, 1998
(commencement of operations) to August 31, 1998, in conformity with accounting
principles generally accepted in the United States of America. 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 auditing
standards generally accepted in the United States of America 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, 2000 by correspondence with the custodian and
brokers, provide a reasonable basis for our opinion.
Boston, Massachusetts
October 11, 2000
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
International Growth Opportunities Fund
Statement of Net Assets
August 31, 2000
Market
Number Value
of (000)
Shares $
--------- -------
Common Stocks - 95.2%
Canada - 2.2%
Alberta Energy Co., Ltd. 34,400 1,267
Biovail Corp. (a) 27,800 1,781
--------
3,048
--------
Denmark - 1.2%
Tele Danmark A/S 11,900 716
Tele Danmark A/S - ADR 29,720 882
--------
1,598
--------
Finland - 2.6%
Nokia Oyj 39,900 1,749
Nokia Corp. - ADR 39,840 1,790
--------
3,539
--------
France - 11.9%
Alcatel Alsthom Compagnie Generale
d'Electricite - ADR 48,450 4,016
AXA - ADR 22,740 1,599
AXA 12,400 1,765
Banque Nationale Paris 29,300 2,692
Cap Gemini Sogeti 15,000 3,129
Sanofi-Synthelabo SA 39,000 1,901
Total Fina SA Class B 4,100 608
Total Fina SA - ADR 8,850 659
--------
16,369
--------
Germany - 6.0%
Allianz AG 7,230 2,436
Bayer AG 16,600 700
Bayer AG - ADR 22,180 938
DaimlerChrysler AG 25,000 1,291
Muenchener Rueckversicherungs-
Gesellschaft AG 5,450 1,494
SAP AG - ADR 22,740 1,461
--------
8,320
--------
Hong Kong - 2.1%
Hutchison Whampoa, Ltd. 201,900 2,848
--------
Ireland - 1.1%
Jefferson Smurfit Group PLC 773,400 1,526
--------
Japan - 23.3%
Bank of Tokyo - Mitsubishi, Ltd. 129,000 1,580
Bank of Tokyo -
Mitsubishi, Ltd. - ADR 87,940 1,077
Canon, Inc. 38,000 1,700
Canon, Inc. - ADR 38,980 1,759
Fuji Bank, Ltd. 94,000 715
Honda Motor Co., Ltd. 37,000 1,353
Honda Motor Co., Ltd. - ADR 10,640 771
Internet Initiative
Japan, Inc. - ADR (a) 11,900 427
Matsushita Electric Industrial
Co., Ltd. 102,000 2,793
Nikko Securities Co., Ltd. 236,000 2,277
Nomura Securities Co., Ltd. 97,000 2,269
NTT Data Corp. 99 1,095
NTT Mobile Communication
Network, Inc. 75 1,983
Sony Corp. 22,600 2,522
Sony Corp. - ADR 19,220 2,196
Takeda Chemical Industries 68,100 4,029
Uni-Charm Corp. 68,000 3,539
--------
32,085
--------
Netherlands - 10.4%
ING Groep 40,000 2,677
Koninklijke (Royal) Philips
Electronics (a) 24,840 1,208
Koninklijke (Royal) Philips
Electronics ADR (a) 37,147 1,832
Koninklijke Ahold 46,559 1,315
Koninklijke KPN (a) 74,818 1,993
Royal Dutch Petroleum Co. 20,600 1,253
Royal Dutch Petroleum Co. - ADR 18,010 1,102
Annual Report 9
<PAGE>
SSgA
International Growth Opportunities Fund
Statement of Net Assets, continued
August 31, 2000
Market
Number Value
of (000)
Shares $
--------- -------
United Pan-Europe
Communications (a) 77,300 1,888
United Pan-Europe
Communications - ADR (a) 45,300 1,088
--------
14,356
--------
Spain - 4.5%
Banco Santander Central Hispano SA 191,800 2,060
Endesa SA 33,700 657
Endesa SA - ADR 29,450 578
Telefonica de Espana SA - ADR (a) 24,767 1,419
Telefonica SA (a) 55,000 1,055
Terra Networks SA (a) 9,295 437
Terra Networks SA Rights (a) 9,295 1
--------
6,207
--------
Sweden - 4.4%
Tele1 Europe Holding AB - ADR (a) 14,235 173
Telefonaktiebolaget LM
Ericsson AB (a) 142,800 2,882
Telefonaktiebolaget LM
Ericsson Class B - ADR 147,280 3,019
--------
6,074
--------
Switzerland - 1.1%
Zurich Allied AG 3,000 1,545
--------
United Kingdom - 22.6%
AstraZeneca Group PLC - ADR 15,170 691
Barclays PLC 80,100 1,999
Barclays PLC - ADR 7,090 730
BP Amoco PLC 229,600 2,101
BP Amoco PLC - ADR 12,694 701
British Telecom PLC 137,300 1,743
British Telecom PLC - ADR 3,850 492
Cable & Wireless PLC 158,800 2,933
Cable & Wireless PLC - ADR 5,400 298
Diageo PLC 242,200 2,067
Diageo PLC - ADR 39,160 1,349
Elan Corp. PLC - ADR (a) 55,420 3,232
HSBC Holdings PLC 219,584 3,158
Unilever PLC 250,600 1,569
Unilever PLC - ADR 34,163 871
Vodafone Group PLC 1,174,365 4,742
Vodafone Group PLC - ADR 19,300 790
Zeneca Group PLC 34,900 1,590
--------
31,056
--------
United States - 1.8%
Global TeleSystems Group, Inc. (a) 132,200 1,140
Schlumberger, Ltd. 15,800 1,348
--------
2,488
--------
Total Common Stocks
(cost $119,003) 131,059
--------
Preferred Stocks - 0.3%
Germany - 0.3%
SAP AG 1,900 479
--------
Total Preferred Stocks
(cost $417) 479
--------
10 Annual Report
<PAGE>
SSgA
International Growth Opportunities Fund
Statement of Net Assets, continued
August 31, 2000
Principal Market
Amount Value
(000) (000)
$ $
--------- -------
Short-Term Investments - 5.3%
United States - 5.3%
AIM Short Term Investment Prime
Portfolio (b) 4,707 4,707
Federated Investors Prime Cash
Obligations Fund (b) 2,581 2,581
--------
Total Short-Term Investments
(cost $7,288) 7,288
--------
Total Investments - 100.8%
(identified cost $126,708) 138,826
Other Assets and Liabilities,
Net - (0.8%) (1,187)
Net Assets - 100.0% 137,639
========
(a) Nonincome-producing security.
(b) At amortized cost, which approximates market.
Abbreviations:
ADR - American Depositary Receipt
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 11
<PAGE>
SSgA
International Growth Opportunities Fund
Statement of Net Assets, continued
August 31, 2000
Market
% of Value
Industrial Diversification Net (000)
(Unaudited) Assets $
-------- -------
Basic Industries 2.3% 3,165
Capital Goods 5.1 7,055
Consumer Basics 17.4 23,933
Consumer Durables 7.9 10,926
Consumer Non-Durables 1.2 1,700
Consumer Services 2.3 3,129
Energy 7.0 9,617
Finance 21.8 30,074
General Business 0.9 1,181
Miscellaneous 2.1 2,849
Technology 8.4 11,558
Utilities 19.1 26,351
Short-Term Investments 5.3 7,288
----- -------
Total Investments 100.8 138,826
Other Assets and Liabilities, Net (0.8) (1,187)
----- -------
Net Assets 100.0% 137,639
===== =======
Market
% of Value
Geographic Diversification Net (000)
(Unaudited) Assets $
-------- -------
Europe 43.5% 60,013
Japan 23.3 32,085
Other 4.0 5,536
Pacific Basin 2.1 2,848
United Kingdom 22.6 31,056
Short-Term Investments 5.3 7,288
----- -------
Total Investments 100.8 138,826
Other Assets and Liabilities, Net (0.8) (1,187)
----- -------
Net Assets 100.0% 137,639
===== =======
See the accompanying notes which are an integral part of the financial
statements.
12 Annual Report
<PAGE>
SSgA
International Growth Opportunities Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amount) August 31, 2000
<TABLE>
<S> <C> <C>
Assets
Investments at market (identified cost $126,708) ........................................... $138,826
Foreign currency holdings (identified cost $103) ........................................... 101
Receivables:
Dividends ............................................................................... 298
Fund shares sold ........................................................................ 1,455
Prepaid expenses ........................................................................... 3
Short-term investments held as collateral for securities loaned, at market ................. 34,144
--------
Total assets ......................................................................... 174,827
Liabilities
Payables:
Investments purchased ........................................................ $ 2,158
Fund shares redeemed ......................................................... 739
Accrued fees to affiliates ................................................... 117
Other accrued expenses ....................................................... 30
Payable upon return of securities loaned, at market ............................. 34,144
--------
Total liabilities .................................................................... 37,188
--------
Net Assets ................................................................................. $137,639
========
Net Assets Consist of:
Undistributed net investment income ........................................................ $ 608
Accumulated net realized gain (loss) ....................................................... 6,858
Unrealized appreciation (depreciation) on investments ...................................... 12,118
Shares of beneficial interest .............................................................. 10
Additional paid-in capital ................................................................. 118,045
--------
Net Assets ................................................................................. $137,639
========
Net Asset Value, offering and redemption price per share:
($137,638,831 divided by 9,576,677 shares of $.001 par value
shares of beneficial interest outstanding) ........................................... $ 14.37
========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Annual Report 13
<PAGE>
SSgA
International Growth Opportunities Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 2000
<TABLE>
<S> <C> <C>
Investment Income
Dividends (net of foreign taxes withheld of $168) ............................... $ 1,383
Securities Lending Income ....................................................... 110
--------
Total investment income ...................................................... 1,493
Expenses
Advisory fees ....................................................... $ 707
Administrative fees ................................................. 76
Custodian fees ...................................................... 131
Distribution fees ................................................... 45
Transfer agent fees ................................................. 39
Professional fees ................................................... 21
Registration fees ................................................... 35
Shareholder servicing fees .......................................... 31
Trustees' fees ...................................................... 7
Miscellaneous ....................................................... 6
--------
Expenses before reductions .......................................... 1,098
Expense reductions .................................................. (61)
--------
Expenses, net ................................................................ 1,037
--------
Net investment income .............................................................. 456
--------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments ......................................................... 8,033
Foreign currency-related transactions ............................... 218 8,251
--------
Net change in unrealized appreciation (depreciation) on investments ................ 6,686
--------
Net realized and unrealized gain (loss) ............................................ 14,937
--------
Net increase (decrease) in net assets from operations .............................. $ 15,393
========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
14 Annual Report
<PAGE>
SSgA
International Growth Opportunities Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Years Ended August 31,
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ............................................... $ 456 $ 433
Net realized gain (loss) ............................................ 8,251 (650)
Net change in unrealized appreciation (depreciation) ................ 6,686 10,342
--------- ---------
Net increase (decrease) in net assets from operations ............ 15,393 10,125
--------- ---------
Distributions
From net investment income .......................................... (400) (140)
From net realized gain .............................................. (529)
--------- ---------
Net decrease in net assets from distributions .................... (929) (140)
--------- ---------
Share Transactions
Net increase (decrease) in net assets from share transactions ....... 69,759 20,465
--------- ---------
Total net increase (decrease) in net assets ............................ 84,223 30,450
Net Assets
Beginning of period ................................................. 53,416 22,966
--------- ---------
End of period (including undistributed net investment income of
$608 and $334, respectively) ..................................... $ 137,639 $ 53,416
========= =========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Annual Report 15
<PAGE>
SSgA
International Growth Opportunities Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
--------------------------------
2000 1999 1998*
-------- -------- --------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period ............. $ 11.31 $ 8.42 $ 10.00
-------- -------- --------
Income From Operations
Net investment income (a) ..................... .07 .11 .03
Net realized and unrealized gain (loss) ....... 3.17 2.83 (1.61)
-------- -------- --------
Total income from operations ............... 3.24 2.94 (1.58)
-------- -------- --------
Distributions
From net investment income .................... (.08) (.05) --
From net realized gain ........................ (.10) -- --
-------- -------- --------
Total distributions ........................ (.18) (.05) --
-------- -------- --------
Net Asset Value, End of Period ................... $ 14.37 $ 11.31 $ 8.42
======== ======== ========
Total Return (%)(b) .............................. 28.82 35.08 (15.80)
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ...... 137,639 53,416 22,966
Ratios to average net assets (%)(c):
Operating expenses, net (d) ................ 1.10 1.10 1.10
Operating expenses, gross (d) .............. 1.16 1.30 1.66
Net investment income ...................... .48 1.16 1.27
Portfolio turnover rate (%)(c) ................ 45.76 39.19 17.24
</TABLE>
* For the period May 1, 1998 (commencement of operations) to August 31,
1998.
(a) For the period subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for the period ended August 31, 1998 are annualized.
(d) See Note 4 for current period amounts.
16 Annual Report
<PAGE>
SSgA
International Growth Opportunities Fund
Notes to Financial Statements
August 31, 2000
1. Organization
The SSgA Funds (the Investment Company) is a series mutual fund, currently
comprised of 24 investment portfolios which are in operation as of August
31, 2000. 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 accounting
principles generally accepted in the United States 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.
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.
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 17
<PAGE>
SSgA
International Growth Opportunities Fund
Notes to Financial Statements, continued
August 31, 2000
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, 2000 are as follows:
Net Unrealized
Federal Tax Unrealized Unrealized Appreciation
Cost Appreciation (Depreciation) (Depreciation)
------------ ------------ -------------- --------------
$126,810,654 $20,077,223 $(8,061,396) $12,015,827
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 year
may differ significantly from distributions during such year. 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.
Expenses: Most expenses can be directly attributed to the individual Fund.
Expenses of the investment company which cannot be directly attributed are
allocated among all funds based principally on their relative net assets.
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
18 Annual Report
<PAGE>
SSgA
International Growth Opportunities Fund
Notes to Financial Statements, continued
August 31, 2000
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 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.
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, 2000, purchases and
sales of investment securities, excluding short-term investments,
aggregated to $105,149,976 and $41,154,383, respectively.
Securities lending: The Investment Company has a securities lending
program whereby each Fund can loan securities with a value up to 33 1/3%
of its total assets to certain brokers. The Fund receives cash (U.S.
currency), U.S. Government or U.S. Government agency obligations as
collateral against the loaned securities. To the extent that a loan is
secured by cash collateral, such collateral shall be invested by State
Street Bank and Trust Company in short-term instruments, money market
mutual funds, and such other short-term investments, provided the
investments meet certain quality and diversification requirements. Under
the securities lending arrangement, the
Annual Report 19
<PAGE>
SSgA
International Growth Opportunities Fund
Notes to Financial Statements, continued
August 31, 2000
collateral received is recorded on the Fund's statement of assets and
liabilities along with the related obligation to return the collateral. In
those situations where the Company has relinquished control of securities
transferred, it derecognizes the securities and records a receivable from
the counterparty.
Income generated from the investment of cash collateral, less negotiated
rebate fees paid to participating brokers and transaction costs, is
divided between the Fund and State Street Bank and Trust Company and is
recorded as interest income for the Fund. To the extent that a loan is
secured by non-cash collateral, brokers pay the Fund negotiated lenders'
fees, which are divided between the Fund and State Street Bank and Trust
Company and are recorded as interest income for the Fund. All collateral
received will be in an amount at least equal to 102% (for loans of U.S.
securities) or 105% (for non-U.S. securities) of the market value of the
loaned securities at the inception of each loan. Should the borrower of
the securities fail financially, there is a risk of delay in recovery of
the securities or loss of rights in the collateral. Consequently, loans
are made only to borrowers which are deemed to be of good financial
standing. As of August 31, 2000, the value of outstanding securities on
loan and the value of collateral amounted to $33,012,944 and $34,143,582,
respectively. Securities lending income of $110,000 is included in the
Statement of Operations for the year ended August 31, 2000.
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, through State Global Advisors, the investment management group of
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. The Adviser
voluntarily agreed to reimburse the Fund for all expenses in excess of
1.10% of its average daily net assets on an annual basis. The total amount
of the reimbursement for the year ended August 31, 2000 was $59,768. As of
August 31, 2000, the receivable due from the Adviser for reimbursed
expenses in excess of the expense cap has been netted against the Advisory
fees 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.
In addition, the Fund has entered into arrangements with its Adviser
whereby custody credits realized as a result of uninvested cash balances
were used to reduce a portion of the Fund's expenses. During the year, the
Fund's custodian fees were reduced by $1,197 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly-owned subsidiary of The Northwestern Mutual Life Insurance Company,
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 for services supplied by the
Administrator pursuant to the Administration Agreement, an annual fee,
payable monthly on a pro rata basis. For the period September 1, 1999 to
April 30, 2000, it is 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 up to and including $1 billion - .06%,
over $1 billion to and including $1.5 billion - .04%, over $1.5 billion -
.03%. Effective May 1, 2000, the annual fee is based on the following
20 Annual Report
<PAGE>
SSgA
International Growth Opportunities Fund
Notes to Financial Statements, continued
August 31, 2000
percentages of the average daily net assets of all International
portfolios: $0 up to $1 billion - .07%; over $1 billion - .05%. The
Administrator will also charge a flat fee of $30,000 per year per Fund
with less than $500 million in net assets and $1,500 per year for monthly
performance reports and use of Russell Performance Universe software
product. In addition, the Fund reimburses the Administrator for
out-of-pocket expenses and start-up costs for new funds.
Distributor and Shareholder Servicing: The Investment Company has 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 enter 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 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 Shareholder 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, 2000, the Fund
was charged shareholder servicing expenses of $23,581, $1,218, $3,635, $28
and $2,348 by the Adviser, SSBSI, Commercial Banking, RIS and Solutions,
respectively.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets of the Fund on an
annual basis. The shareholder servicing payments shall not exceed .20% of
the average daily value of net assets of the Fund on an annual basis.
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, 2000.
Board of Trustees: The Investment Company paid each Trustee not affiliated
with the Investment Company an annual retainer, plus specified amounts for
board and committee meetings attended. These expenses are allocated among
all of the funds based upon their relative net assets.
Annual Report 21
<PAGE>
SSgA
International Growth Opportunities Fund
Notes to Financial Statements, continued
August 31, 2000
Accrued fees payable to affiliates and trustees as of August 31, 2000 were
as follows:
Advisory fees $ 83,255
Administration fees 9,442
Custodian fees 13,613
Distribution fees 4,260
Shareholder servicing fees 2,683
Transfer agent fees 2,439
Trustees' fees 1,686
--------
$117,378
========
5. Fund Share Transactions (amounts in thousands)
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
---------------------------------------------
2000 1999
------------------- -------------------
Shares Dollars Shares Dollars
------ --------- ------ ---------
<S> <C> <C> <C> <C>
Proceeds from shares sold ........................ 10,511 $ 150,525 2,497 $ 25,720
Proceeds from reinvestment of distributions ...... 30 397 5 43
Payments for shares redeemed ..................... (5,689) (81,163) (504) (5,298)
------ --------- ------ ---------
Total net increase (decrease) .................... 4,852 $ 69,759 1,998 $ 20,465
====== ========= ====== =========
</TABLE>
6. Interfund Lending Program
The Fund and all other funds of the Investment Company received from the
Securities and Exchange Commission an exemptive order on December 23, 1999
to establish and operate an Interfund Credit Facility. This allows the
Funds to directly lend to and borrow money from the SSgA Money Market Fund
for temporary purposes in accordance with certain conditions. The
borrowing Funds are charged the average of the current Repo Rate and the
Bank Loan Rate. The Fund did not utilize the interfund lending program
during this year.
22 Annual Report
<PAGE>
SSgA
International Growth Opportunities Fund
Tax Information
August 31, 2000 (Unaudited)
The Fund paid distributions of $529,854 from net long-term capital gains
during its taxable year ended August 31, 2000.
The Fund paid foreign taxes of $167,522 and recognized $725,611 of foreign
source income during the taxable year ended August 31, 2000. Pursuant to
Section 853 of the Internal Revenue Code, the Fund designates $.0175 per
share of foreign taxes paid and $.0758 of gross income earned from foreign
sources in the taxable year ended August 31, 2000.
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, Treasurer and CEO
Mark E. Swanson, Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Treasurer
Carla L. Anderson, Assistant 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
160 Federal Street
Boston, Massachusetts 02110
24 Annual Report
<PAGE>
[COVER GRAPHIC]
SSgA(R) funds
ANNUAL REPORT
High Yield Bond Fund
August 31, 2000
<PAGE>
SSgA(R) Funds
High Yield Bond Fund
Annual Report
August 31, 2000
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......................... 21
"SSgA(R)" 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,
It is our pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 2000. The SSgA Fund Family has grown to include
twenty-four portfolios with over $21 billion in assets as of August 31, 2000.
The Fund Family provides a wide range of strategies covering the world's major
markets. The enclosed information provides an overview of the investment process
for the SSgA High Yield Bond Fund. This overview contains the portfolio
management discussion, performance updates and financial information for the
Fund.
In an ongoing effort to develop competitive products and services that provide
investment solutions for our clients, we have added the SSgA Intermediate
Municipal Bond Fund to the SSgA Fund Family. This Fund's investment objective
seeks to provide federally tax-exempt current income by investing primarily in a
diversified portfolio of municipal debt securities with a dollar-weighted
average maturity between three and ten years.
We are also pleased with the success of our SSgA Emerging Markets and SSgA
Growth and Income Funds as they were included in Money(R) Magazine's June 2000
issue listing of the 'Top 100 Mutual Funds'. This is the second year in a row
that these funds have been selected.
Additionally, the SSgA Tax Free Money Market and the SSgA Active International
Funds have achieved five-year performance history during the 2000 fiscal year.
Currently, all of our SSgA Money Market Funds have at least a five-year
performance history. We strive to meet our clients' needs by providing funds
with long-term records and competitive performance.
We would like to thank you for choosing the SSgA Funds. Our reputation is based
on our tradition of designing and delivering exceptional financial services to
our clients. We look forward to continue sharing the benefit of our experience
with you.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
/s/ Timothy B. Harbert
Timothy B. Harbert
State Street Global Advisors
President and Chief Operating Officer, SSgA
4 Annual Report
<PAGE>
SSgA High Yield Bond Fund
--------------------------------------------------------------------------------
Management of the Funds
--------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
[PHOTO]
Timothy B. Harbert
President and Chief Operating 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. He joined the firm in 1987. Before joining
the Fixed Income Group in July 1993 as a credit analyst, Mr. Walbridge was an
assistant portfolio manager in the International Equities Group. Prior to the
launch of the SSgA High Yield Bond Fund, he managed several domestic bond
portfolios. Utilizing his credit analysis background, Mr. Walbridge's focus over
the last six years has been on corporate bond analysis and trading. There are
three other portfolio managers 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 that enables the Fund to seek
excess returns over the Lehman Brothers High Yield Bond Index.
--------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
Dates High Yield Bond Fund Lehman Brothers High Yield Bond Index **
Inception* $10,000 $10,000
1998 $9,941 $9,569
1999 $11,056 $9,962
2000 $11,904 $10,074
================================================================================
Performance Review
For the fiscal year ended August 31, 2000, the SSgA High Yield Bond Fund posted
a gain of 7.67% versus 1.13% for the Lehman Brothers High Yield Bond Index.
The Fund outperformed the benchmark during the first four months of the fiscal
year due primarily to its underweighted position in lower quality and smaller
size issues. Larger and higher quality issues outperformed due to the premium
placed on liquidity. Uncertainty regarding the direction of interest rates,
stock market volatility, rising default rates, and the limited flow of new money
into the high yield market resulted in defensive posturing by portfolio managers
as markets moved toward Y2K.
The Fund outperformed the benchmark during the remaining eight months primarily
due to superior sector selection and
--------------------------------------------------------------------------------
SSgA High Yield Fund
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
-------------- ------------ -------
1 Year $ 10,767 7.67%
Inception $ 11,904 7.75%+
--------------------------------------------------------------------------------
Lehman Brothers High Yield Bond Index
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
-------------- ------------ -------
1 Year $ 10,113 1.13%
Inception $ 10,074 0.32%+
See related Notes on following page.
6 Annual Report
<PAGE>
SSgA High Yield Bond Fund
--------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
--------------------------------------------------------------------------------
security selection. Careful sector selection was critical, and continued to be
rewarded, due to wide sector return dispersions in a difficult market
environment. Through May 2000 the capital markets were focused on the Federal
Reserve's need to slow the economy in order to reduce inflation fears. In June
2000 the capital markets embraced the notion that the Fed was on hold, and the
high yield market turned in three consecutive months of positive total return.
Market and Portfolio Highlights
The Fund's objective is to invest in companies that have strong management
teams, assets that can be valued, and predictable capital requirements. The
Fund's current sector allocations include an overweight in Energy, Technology
and Telecommunications. The Fund has benchmark-relative neutral weight targets
for Consumer Cyclicals, Media, and Utilities and an underweight target to Basic
Industries, Capital Goods and Consumer Non-Cyclicals. The Fund's largest
overweighting is in Telecommunications, where the Manager believes this position
will continue to have a positive impact on performance on a long-term basis.
Telecommunications is currently an attractive sector due to the growth in data
traffic driven by the Internet, multimedia applications and the need for network
capacity. The Fund will seek to underweight the lowest quality securities. The
Fund's tremendous performance over the last year was also due in part to
avoidance of any distressed securities within the lowest quality securities.
The Fund was managed consistently with its objective to maximize total return by
investing in fixed income securities, including those represented in the Lehman
Brothers High Yield Bond Index. At August 31, 2000 The Fund's duration was 4.16
versus 4.59 for the Index. The Fund seeks to track the duration of the Index
with a minimal level of variance.
--------------------------------------------------------
Top Ten Issuers
(as a percent of Total Investments) August 31, 2000
--------------------------------------------------------
Federal Home Loan Bank 11.4%
NTL, Inc. 2.9
Calpine Corp. 2.9
Williams Communications Group, Inc. 2.8
Metromedia Fiber Network, Inc. 2.4
Ocean Energy, Inc. 2.3
KPNQwest BV 2.2
Lear Corp. 2.1
R & B Falcon Corp. 2.1
Fairchild Semiconductor Corp. 2.0
--------------------------------------------------------
--------------------
Notes: The following notes relate to the Growth of $10,000 graph and table on
the 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.
+ 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 High Yield Bond Fund (the "Fund") at
August 31, 2000, 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 May 5, 1998 (commencement of operations) to
August 31, 1998, in conformity with accounting principles generally accepted in
the United States of America. 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 auditing standards
generally accepted in the United States of America 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, 2000 by correspondence with the custodian, provide a reasonable basis for
our opinion.
Boston, Massachusetts
October 11, 2000
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
High Yield Bond Fund
Statement of Net Assets
August 31, 2000
Principal Market
Amount Value
(000) (000)
$ $
--------- ---------
Long-Term Investments - 84.0%
Corporate Bonds and Notes - 72.9%
Acme Television Step Up Bond
Series B
Zero Coupon due 09/30/04 (a) 500 475
Adelphia Communications Corp.
Series B
7.750% due 01/15/09 500 423
Argosy Gaming Co.
10.750% due 06/01/09 500 526
Alamosa PCS Holdings, Inc.
Step Up Bond
Zero Coupon due 02/15/10 (a) 1,000 570
Calpine Corp.
8.250% due 08/15/05 500 497
8.625% due 08/15/10 1,000 1,019
Canandaigua Brands, Inc.
8.500% due 03/01/09 500 480
Citadel Broadcasting Co.
9.250% due 11/15/08 1,000 999
Coaxial Communications of Central Ohio, Inc.
10.000% due 08/15/06 500 493
Concentra Operating Corp.
13.000% due 08/15/09 500 448
Crown Castle International Corp.
Step Up Bond
Zero Coupon due 05/15/11 (a) 1,000 650
CSC Holdings, Inc.
9.250% due 11/01/05 600 606
Echostar DBS Corp.
9.250% due 02/01/06 500 493
Exodus Communications, Inc.
11.625% due 07/15/10 500 510
Fairchild Semiconductor Corp.
10.375% due 10/01/07 1,000 1,023
Flowserve Corp.
12.250% due 08/15/10 500 506
Focal Communications Corp.
11.875% due 01/15/10 500 455
Globix Corp.
12.500% due 02/01/10 1,000 750
Grey Wolf, Inc.
8.875% due 07/01/07 825 804
Gulf Canada Resources, Ltd.
9.625% due 07/01/05 500 513
Hayes Lemmerz International, Inc.
9.125% due 07/15/07 350 320
HCA - The Healthcare Co.
8.750% due 09/01/10 500 499
HMH Properties, Inc.
Series A
7.875% due 08/01/05 1,000 950
Huntsman ICI Chemicals
10.125% due 07/01/09 500 509
Interface, Inc.
Series B
9.500% due 11/15/05 250 228
Intersil Corp.
13.250% due 08/15/09 575 661
Iron Mountain, Inc.
8.750% due 09/30/09 450 424
ITC Deltacom, Inc.
9.750% due 11/15/08 500 410
K. Hovnanian Enterprises
9.125% due 05/01/09 500 468
L-3 Communications Corp.
8.500% due 05/15/08 525 478
Lear Corp.
9.500% due 07/15/06 600 609
Series B
7.960% due 05/15/05 500 481
Level 3 Communications
Step Up Bond
Zero Coupon due 03/15/10 (a) 1,500 851
Mandalay Resort Group
9.500% due 08/01/08 250 256
Annual Report 9
<PAGE>
SSgA
High Yield Bond Fund
Statement of Net Assets, continued
August 31, 2000
Principal Market
Amount Value
(000) (000)
$ $
--------- ---------
McLeodUSA, Inc.
8.125% due 02/15/09 750 683
Metromedia Fiber Network, Inc.
10.000% due 12/15/09 1,250 1,234
MGC Communications, Inc.
13.000% due 04/01/10 500 420
MGM Grand, Inc.
9.750% due 06/01/07 500 524
NEXTLINK Communications, Inc.
Step Up Bond
Zero Coupon due 06/01/09 (a) 1,500 845
Nortek, Inc.
9.875% due 03/01/04 500 483
NorthPoint Communications Group, Inc.
12.875% due 02/15/10 500 486
NTL, Inc. Step Up Bond
Series A
12.750% due 04/15/05 (a) 1,500 1,530
Ocean Energy, Inc.
8.625% due 08/01/05 700 686
Series B
8.375% due 07/01/08 500 499
Plains Resources, Inc.
Series B
10.250% due 03/15/06 830 840
R&B Falcon Corp.
9.500% due 12/15/08 1,000 1,080
RCN Corp. Step Up Bond
Zero Coupon due 10/15/07 (a) 750 446
Riverwood International Corp.
10.625% due 08/01/07 750 743
Santa Fe Snyder Corp.
8.050% due 06/15/04 500 493
Sinclair Broadcast Group, Inc.
10.000% due 09/30/05 1,000 970
Spectrasite Holdings, Inc.
Series B
10.750% due 03/15/10 750 750
Station Casinos, Inc.
8.875% due 12/01/08 500 473
9.875% due 07/01/10 500 495
Team Health, Inc.
Series B
12.000% due 03/15/09 500 430
Telecorp PCS, Inc.
10.625% due 07/15/10 250 259
Telecorp PCS, Inc. Step Up Bond
11.625% due 04/15/09 (a) 1,000 695
Verio, Inc.
10.625% due 11/15/09 500 588
Voicestream Wireless Corp.
Step-Up Bond
11.875% due 11/15/09 (a) 1,000 730
Williams Communications Group, Inc.
10.875% due 10/01/09 1,000 964
11.875% due 08/01/10 500 498
Willis Corroon Corp.
9.000% due 02/01/09 500 454
Worldwide Fiber, Inc.
12.000% due 08/01/09 500 452
XM Satellite Radio Holdings, Inc.
14.000% due 03/15/10 500 462
Ziff Davis Media, Inc.
12.000% due 07/15/10 500 517
------
39,113
------
Eurodollar Bonds - 7.3%
Energis PLC
9.750% due 06/15/09 1,000 995
Flextronics International, Ltd.
9.875% due 07/01/10 500 518
GT Group Telecom, Inc.
Step Up Bond
Series UNIT
13.250% due 02/01/10 (a) 1,500 773
10 Annual Report
<PAGE>
SSgA
High Yield Bond Fund
Statement of Net Assets, continued
August 31, 2000
Principal Market
Amount Value
(000) (000)
$ $
--------- ---------
KPNQwest BV
8.125% due 06/01/09 1,250 1,150
Ono Finance PLC
13.000% due 05/01/09 500 474
------
3,910
------
Yankee Bonds - 3.8%
Iron Mountain, Inc.
8.125% due 05/15/08 700 632
Millar Western Forest Products
9.875% due 05/15/08 1,000 990
Versatel Telecom International
11.875% due 07/15/09 500 450
------
2,072
------
Total Long-Term Investments
(cost $45,901) 45,095
------
Number
of
Shares
------
Preferred Stocks - 0.9%
Global Crossing Holdings, Ltd. 5,000 500
------
Total Preferred Stocks
(cost $580) 500
------
Principal
Amount
(000)
$
---------
Short-Term Investments - 11.9%
Federal Home Loan Bank
Consolidated Discount Note
6.510% due 09/01/00 (b) 6,000 6,000
Federated Investors Prime Cash
Obligations Fund (b) 378 378
------
Total Short-Term Investments
(cost $6,378) 6,378
------
Number
of
Shares
------
Warrants - 0.9%
Intersil Corp., expiration date 08/15/09 500 414
Ono Finance PLC, expiration date 05/31/09 500 50
------
Total Warrants (cost $0) 464
------
Total Investments - 97.7%
(identified cost $52,859) 52,437
Other Assets and Liabilities,
Net - 2.3% 1,252
------
Net Assets - 100.0% 53,689
======
(a) Adjustable floating rate security.
(b) At amortized cost, which approximates market.
See accompanying notes which are an integral part of the financial statements.
Annual Report 11
<PAGE>
SSgA
High Yield Bond Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amount) August 31, 2000
<TABLE>
<S> <C> <C>
Assets
Investments at market (identified cost $52,859) ................................... $ 52,437
Receivables:
Dividends and interest ......................................................... 967
Investments sold ............................................................... 65
Fund shares sold ............................................................... 298
-----------
Total assets ................................................................ 53,767
Liabilities
Payables:
Fund shares redeemed ........................................... $ 40
Accrued fees to affiliates ..................................... 25
Other accrued expenses ......................................... 13
==========
Total liabilities ........................................................... 78
-----------
Net Assets ........................................................................ $ 53,689
===========
Net Assets Consist of:
Undistributed net investment income ............................................... $ 1,067
Accumulated net realized gain (loss) .............................................. (863)
Unrealized appreciation (depreciation) on investments ............................. (422)
Shares of beneficial interest ..................................................... 5
Additional paid-in capital ........................................................ 53,902
-----------
Net Assets ........................................................................ $ 53,689
===========
Net Asset Value, offering and redemption price per share:
($53,688,831 divided by 5,294,782 shares of $.001 par value
shares of beneficial interest outstanding) .................................. $ 10.14
===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
12 Annual Report
<PAGE>
SSgA
High Yield Bond Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 2000
<TABLE>
<S> <C> <C>
Investment Income
Interest ................................................................................. $ 3,868
Dividends ................................................................................ 200
----------
Total investment income ............................................................... 4,068
Expenses
Advisory fees ............................................................. $ 119
Administrative fees ....................................................... 24
Custodian fees ............................................................ 25
Distribution fees ......................................................... 13
Transfer agent fees ....................................................... 29
Professional fees ......................................................... 14
Registration fees ......................................................... 34
Shareholder servicing fees ................................................ 9
Trustees' fees ............................................................ 5
Miscellaneous ............................................................. 7
---------
Expenses before reductions ................................................ 279
Expense reductions ........................................................ (8)
---------
Expenses, net ......................................................................... 271
----------
Net investment income ....................................................................... 3,797
----------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on investments ..................................................... (863)
Net change in unrealized appreciation (depreciation) on investments ......................... 71
----------
Net realized and unrealized gain (loss) ..................................................... (792)
----------
Net increase (decrease) in net assets from operations ....................................... $ 3,005
==========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Annual Report 13
<PAGE>
SSgA
High Yield Bond Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Years Ended August 31,
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income .......................................... $ 3,797 $ 1,677
Net realized gain (loss) ....................................... (863) 9
Net change in unrealized appreciation (depreciation) ........... 71 (158)
----------- ----------
Net increase (decrease) in net assets from operations ....... 3,005 1,528
----------- ----------
Distributions
From net investment income ..................................... (3,379) (1,196)
From net realized gain ......................................... (1) (1)
----------- ----------
Net decrease in net assets from distributions ............... (3,380) (1,197)
----------- ----------
Share Transactions
Net increase (decrease) in net assets from share transactions .. 19,217 22,608
----------- ----------
Total net increase (decrease) in net assets ....................... 18,842 22,939
Net Assets
Beginning of period ............................................ 34,847 11,908
----------- ----------
End of period (including undistributed net investment income of
$1,067 and $649, respectively) .............................. $ 53,689 $ 34,847
=========== ==========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
14 Annual Report
<PAGE>
SSgA
High Yield Bond Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
Fiscal Years Ended
August 31,
-------------------------------
2000 1999 1998*
-------- -------- --------
Net Asset Value, Beginning of Period ......... $ 10.32 $ 9.90 $ 10.00
Income From Operations
Net investment income (a) ................. .96 .78 .18
Net realized and unrealized gain (loss) ... (.21) .30 (.24)
-------- -------- --------
Total income from operations ........... .75 1.08 (.06)
-------- -------- --------
Distributions
From net investment income ................ (.93) (.66) (.04)
From net realized gain .................... -- --
-------- -------- --------
Net Asset Value, End of Period ............... $ 10.14 $ 10.32 $ 9.90
======== ======== ========
Total Return (%)(b) .......................... 7.67 11.21 (.59)
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) .. 53,689 34,847 11,908
Ratios to average net assets (%)(c):
Operating expenses, net (d) ............ .68 .65 .65
Operating expenses, gross (d) .......... .69 .87 1.66
Net investment income .................. 9.56 7.97 6.38
Portfolio turnover rate (%)(e) ............ 164.01 234.31 173.64
* For the period May 5, 1998 (commencement of operations) to August 31,
1998.
(a) For the period subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for the period ended August 31, 1998 are annualized.
(d) See Note 4 for current period amounts.
(e) The ratio for the period ended August 31, 1998 has not been annualized due
to the Fund's short period of operations.
Annual Report 15
<PAGE>
SSgA
High Yield Bond Fund
Notes to Financial Statements
August 31, 2000
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 24 investment portfolios which are in operation as
of August 31, 2000. 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 accounting
principles generally accepted in the United States 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.
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.
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.
16 Annual Report
<PAGE>
SSgA
High Yield Bond Fund
Notes to Financial Statements, continued
August 31, 2000
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, 2000 the Fund had net tax basis capital loss carryover of
$108,278, which may be applied against realized net taxable gains in each
succeeding year or until its expiration date of August 31, 2008. As
permitted by tax regulations, the Fund intends to defer a net realized
capital loss of $740,464 incurred from November 1, 1999 to August 31,
2000, and treat it as arising in fiscal year 2001.
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, 2000 are as follows:
Net Unrealized
Federal Tax Unrealized Unrealized Appreciation
Cost Appreciation (Depreciation) (Depreciation)
----------- ------------ -------------- --------------
$52,873,130 $ 1,214,791 $ (1,651,254) $ (436,463)
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 year may differ significantly from
distributions during such year. The differences between tax regulations
and GAAP relate primarily to investment in certain fixed income securities
purchased at a discount, mortgage-backed securities and certain securities
sold at a loss. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting
its net asset value.
Expenses: Most expenses can be directly attributed to the Fund. Expenses
of the investment company which cannot be directly attributed are
allocated among all funds based principally on their relative net assets.
3. Securities Transactions
Investment transactions: For the year ended August 31, 2000, purchases and
sales of investment securities, excluding US Government and Agency
obligations and short-term investments, aggregated to $73,473,834 and
$60,254,280, respectively.
Securities lending: The Investment Company has a securities lending
program whereby each Fund can loan securities with a value up to 33 1/3%
of its total assets to certain brokers. The Fund receives cash (U.S.
currency), U.S. Government or U.S. Government agency obligations as
collateral against the loaned securities. To the extent that a loan is
secured by cash collateral, such collateral shall be invested by State
Street Bank and Trust Company in short-term instruments, money market
mutual funds, and such other short-term investments, provided the
investments meet certain quality and diversification requirements. Under
the securities lending arrangement, the collateral received is recorded on
the Fund's statement of assets and liabilities along with the related
obligation to
Annual Report 17
<PAGE>
SSgA
High Yield Bond Fund
Notes to Financial Statements, continued
August 31, 2000
return the collateral. In those situations where the Company has
relinquished control of securities transferred, it derecognizes the
securities and records a receivable from the counterparty.
Income generated from the investment of cash collateral, less negotiated
rebate fees paid to participating brokers and transaction costs, is
divided between the Fund and State Street Bank and Trust Company and is
recorded as interest income for the Fund. To the extent that a loan is
secured by non-cash collateral, brokers pay the Fund negotiated lenders'
fees, which are divided between the Fund and State Street Bank and Trust
Company and are recorded as interest income for the Fund. All collateral
received will be in an amount at least equal to 102% (for loans of U.S.
securities) or 105% (for non-U.S. securities) of the market value of the
loaned securities at the inception of each loan. Should the borrower of
the securities fail financially, there is a risk of delay in recovery of
the securities or loss of rights in the collateral. Consequently, loans
are made only to borrowers which are deemed to be of good financial
standing. As of August 31, 2000, there were no outstanding securities on
loan and no income earned during the year.
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, through State Street Global Advisors, the investment management
group of 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 period September 1, 1999 to December 31, 1999, the Adviser has agreed
to reimburse the Fund for all expenses in excess of .65% of average daily
net assets on an annual basis. Effective January 1, 2000, the Adviser has
agreed to reimburse the Fund for all expenses in excess of .75% of its
average daily net assets on an annual basis. The total amount of
reimbursement for the year ended August 31, 2000 was $2,074. As of August
31, 2000, the receivable due from the Adviser for reimbursed expenses in
excess of the expense cap has been netted against the Advisory 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.
In addition, the Fund has entered into arrangements with its Adviser
whereby custody credits realized as a result of uninvested cash balances
were used to reduce a portion of the Fund's expenses. During the year, the
Fund's custodian fees were reduced by $5,770 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly-owned subsidiary of The Northwestern Mutual Life Insurance Company,
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 for services supplied by the
Administrator pursuant to the Administration Agreement, an annual fee,
payable monthly on a pro rata basis. For the period September 1, 1999 to
April 30, 2000, it is 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 up to and including $1 billion - .05%;
over $1 billion - .03%. Effective May 1, 2000, the annual fee is based on
the following percentages of the average daily net assets of all U.S.
Fixed Income portfolios: $0 up to $1 billion - .0315%; over $1 billion -
.029%. The Administrator will also charge a flat fee of
18 Annual Report
<PAGE>
SSgA
High Yield Bond Fund
Notes to Financial Statements, continued
August 31, 2000
$30,000 per year per Fund with less than $500 million in net assets and
$1,500 per year for monthly performance reports and use of Russell
Performance Universe software product. In addition, the Fund reimburses
the Administrator for out-of-pocket expenses and start-up costs for new
funds.
Distributor and Shareholder Servicing: The Investment Company has 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 enter 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 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 Shareholder 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, 2000, the Fund
was charged shareholder servicing expenses of $8,017, $212, $28 and $30 by
the Adviser, SSBSI, Commercial Banking and Solutions, respectively. The
Fund did not incur any expenses from RIS during this year.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets of the Fund on an
annual basis. The shareholder servicing payments shall not exceed .20% of
the average daily value of net assets of the Fund on an annual basis.
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, 2000.
Board of Trustees: The Investment Company paid each Trustee not affiliated
with the Investment Company an annual retainer, plus specified amounts for
board and committee meetings attended. These expenses are allocated among
all of the funds based upon their relative net assets.
Annual Report 19
<PAGE>
SSgA
High Yield Bond Fund
Notes to Financial Statements, continued
August 31, 2000
Accrued fees payable to affiliates and trustees as of August 31, 2000 were
as follows:
Advisory fees $ 13,144
Administration fees 5,243
Custodian fees 1,495
Distribution fees 331
Shareholder servicing fees 1,904
Transfer agent fees 1,888
Trustees' fees 594
----------
$ 24,599
==========
Beneficial Interest: As of August 31, 2000, two shareholders (who are also
affiliates of the Investment Company) were record owners of approximately
15% and 10%, respectively, of the total outstanding shares of the Fund.
5. Fund Share Transactions (amounts in thousands)
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
----------------------------------------------------------
2000 1999
-------------------------- ---------------------------
Shares Dollars Shares Dollars
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Proceeds from shares sold ....................................... 2,958 $ 29,717 2,289 $ 23,775
Proceeds from reinvestment of distributions ..................... 77 775 13 131
Payments for shares redeemed .................................... (1,118) (11,275) (127) (1,298)
------- -------- ------- --------
Total net increase (decrease) ................................... 1,917 $ 19,217 2,175 $ 22,608
======= ======== ======= ========
</TABLE>
6. Interfund Lending Program
The Fund and all other funds of the Investment Company received from the
Securities and Exchange Commission an exemptive order on December 23, 1999
to establish and operate an Interfund Credit Facility. This allows the
Funds to directly lend to and borrow money from the SSgA Money Market Fund
for temporary purposes in accordance with certain conditions. The
borrowing Funds are charged the average of the current Repo Rate and the
Bank Loan Rate. The Fund did not utilize the interfund lending program
during this year.
7. Dividends
On September 1, 2000, the Board of Trustees declared a dividend of $.2039
from net investment income, payable on September 8, 2000 to shareholders
of record on September 5, 2000.
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, Treasurer and CEO
Mark E. Swanson, Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Treasurer
Carla L. Anderson, Assistant 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
160 Federal Street
Boston, Massachusetts 02110
Annual Report 21
<PAGE>
[COVER GRAPHIC]
SSgA(R) funds
ANNUAL REPORT
Special Equity Fund
August 31, 2000
<PAGE>
SSgA(R) Funds
Special Equity Fund
Annual Report
August 31, 2000
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(R)" 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,
It is our pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 2000. The SSgA Fund Family has grown to include
twenty-four portfolios with over $21 billion in assets as of August 31, 2000.
The Fund Family provides a wide range of strategies covering the world's major
markets. The enclosed information provides an overview of the investment process
for the SSgA Special Equity Fund. This overview contains the portfolio
management discussion, performance updates and financial information for the
Fund.
In an ongoing effort to develop competitive products and services that provide
investment solutions for our clients, we have added the SSgA Intermediate
Municipal Bond Fund to the SSgA Fund Family. This Fund's investment objective
seeks to provide federally tax-exempt current income by investing primarily in a
diversified portfolio of municipal debt securities with a dollar-weighted
average maturity between three and ten years.
We are also pleased with the success of our SSgA Emerging Markets and SSgA
Growth and Income Funds as they were included in Money(R) Magazine's June 2000
issue listing of the 'Top 100 Mutual Funds'. This is the second year in a row
that these funds have been selected.
Additionally, the SSgA Tax Free Money Market and the SSgA Active International
Funds have achieved five-year performance history during the 2000 fiscal year.
Currently, all of our SSgA Money Market Funds have at least a five-year
performance history. We strive to meet our clients' needs by providing funds
with long-term records and competitive performance.
We would like to thank you for choosing the SSgA Funds. Our reputation is based
on our tradition of designing and delivering exceptional financial services to
our clients. We look forward to continue sharing the benefit of our experience
with you.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
/s/ Timothy B. Harbert
Timothy B. Harbert
State Street Global Advisors
President and Chief Operating Officer, SSgA
4 Annual Report
<PAGE>
SSgA Special Equity Fund
--------------------------------------------------------------------------------
Management of the Funds
--------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
[PHOTO]
Timothy B. Harbert
President and Chief Operating 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 Special Equity Fund
since May 2000. Prior to his current responsibilities, he was Managing Director
for the Tuckerman Group, SSgA's real estate subsidiary. In this role he
developed, marketed and managed the SSgA Tuckerman Active REIT strategy. His
experience also includes extensive equity analysis with various industry
coverage responsibilities including the REITs, financial services, media,
business services, waste management and cable television. Mr. Smith is also
experienced in managing diversified equity and fixed income portfolios for
SSgA's high net worth and charitable asset management clients. He holds a BA in
Economics with a concentration in Financial Markets from the University of
Massachusetts/Amherst and an MS in Finance from Suffolk University.
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 Portfolio Management Team applies a disciplined fundamental
investment approach to identify smaller companies positioned to outperform on a
strategic basis. The investment approach emphasizes bottom-up stock selection
informed by top-down macroeconomic analysis. The team focuses on identifying
higher quality, smaller cap stocks with strong fundamentals. In addition, the
Fund can invest in IPOs (Initial Public Offerings).
--------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
Russell Special Small Cap
Dates Special Equity Fund Completeness Index **
Inception* $10,000 $10,000
1998 $7,170 $7,345
1999 $9,182 $10,113
2000 $16,495 $14,422
================================================================================
--------------------------------------------------------------------------------
SSgA Special Equity Fund
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
-------------- ------------ -------
1 Year $ 17,965 79.65%
Inception $ 16,495 23.92%+
--------------------------------------------------------------------------------
Russell Special Small Cap Completeness Index
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
-------------- ------------ -------
1 Year $ 14,261 42.61%
Inception $ 14,422 16.99%+
See related Notes on following page.
6 Annual Report
<PAGE>
SSgA Special Equity Fund
--------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
--------------------------------------------------------------------------------
Performance Review
For the fiscal year ended August 31, 2000, the SSgA Special Equity Fund gained
79.65% versus 42.61% for its benchmark, the Russell Small Cap Completeness
Index. The fiscal year-end performance of the Fund can be, in part, attributed
to investments made in Initial Public Offerings (IPOs). There is no guarantee
that the Fund will continue to participate in the IPO market, and due to their
inherent volatility, there can be no assurance that IPOs will continue to have a
positive impact on Fund performance.
The Fund's positive performance during the period was largely attributed to its
exposure to the Technology and the Financial sectors. At fiscal year end, 40% of
the portfolio was invested in Technology issues, versus a benchmark weighting of
31%. Within Technology, the Internet services and software firms were the
strongest, led by BEA Systems, Micromuse, and Rational Software posting
impressive gains of 1,029%, 432%, and 376%, respectively. The Fund's weighting
of 11% in the Financials sector was slightly under the Index allocation of 14%,
because many companies in the sector lacked strong growth prospects. However,
two firms held in the Fund for the fiscal year, ACE Limited and Legg Mason,
performed soundly versus the benchmark, returning 64% and 38%, respectively.
Telecommunications issues continued to be positive contributors to Fund results.
VoiceStream Wireless was the strongest performer in this sector, with a 173%
return for the fiscal year. Within Health Care, biotech companies Human Genome
Sciences and MedImmune Inc. posted gains of 391% and 143%, respectively.
Market and Portfolio Highlights
The small cap market rallied during the fiscal year, posting a return of 39.1%
for small cap growth stocks, as measured by the Russell 2000(R) Growth Index.
Mid-cap stocks performed in line with small caps, with the S&P(R) Mid-Cap 400
returning 39.8%. The large cap rally of the past several years appears to have
abated relative to smaller companies, as the S&P 500(R) Index returned 16.3% for
the twelve months ended August 31, 2000. While the strength of this return
speaks for itself, it is still not up to par compared with recent small cap
results.
For the fiscal year ended August 31, 2000, the SSgA Special Equity Fund held 42
stocks with an average weighted market capitalization of $9.4 billion, versus
$10.5 billion for the benchmark. The Fund has portfolio characteristics in line
with those of the benchmark, reflecting the risk-controlled nature of the
investment process. As the Fund's objective is achieved through active
fundamental stock selection, the portfolio will seek to be fully invested at all
times.
--------------------------------------------------------
Top Ten Equity Holdings
(as a percent of Total Investments) August 31, 2000
--------------------------------------------------------
Rational Software Corp. 4.3%
Teekay Shipping Corp. 4.0
Brocade Communications Systems, Inc. 3.8
Apache Corp. 3.7
ACE, Ltd. 3.7
Avanex Corp. New 3.5
BEA Systems, Inc. 3.4
Legg Mason, Inc. 3.4
Noble Drilling Corp. 3.2
Exodus Communications, Inc. 2.9
--------------------------------------------------------
---------------------
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 Small Cap Completeness Index is defined as the Russell 3000(R)
Index minus the S&P 500(R) Index. Approximately 40% of the Russell Small
Cap Completeness Index is comprised of the small cap stocks, while the
remaining 60% are mid-cap issues.
+ 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 Special Equity Fund (the "Fund") at
August 31, 2000, 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
ended and the financial highlights for each of the two fiscal years in the
period ended and for the period May 1, 1998 (commencement of operations) to
August 31, 1998, in conformity with accounting principles generally accepted in
the United States of America. 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 auditing standards
generally accepted in the United States of America 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, 2000 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
Boston, Massachusetts
October 11, 2000
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
Special Equity Fund
Statement of Net Assets
August 31, 2000
Market
Number Value
of (000)
Shares $
------- -------
Common Stocks - 95.3%
Basic Industries - 3.1%
Smurfit-Stone Container Corp. (a) 112,800 1,466
Steel Dynamics, Inc. (a) 98,400 1,187
-------
2,653
-------
Consumer Basics - 16.2%
Biogen, Inc. (a) 12,700 878
Chiron Corp. (a) 34,300 1,848
Enzon, Inc. (a) 23,500 1,431
Hain Celestial Group, Inc. (a) 52,300 1,631
Human Genome Sciences, Inc. (a) 11,500 1,920
IDEC Pharmaceuticals Corp. (a) 16,000 2,234
MedImmune, Inc. (a) 29,000 2,445
Outback Steakhouse, Inc. (a) 63,400 1,454
-------
13,841
-------
Consumer Durables - 0.8%
Linens 'N Things, Inc. (a) 25,000 675
-------
Consumer Services - 1.9%
Brinker International, Inc. (a) 51,700 1,641
-------
Energy - 11.2%
Apache Corp. 50,200 3,163
Barrett Resources Corp. (a) 39,900 1,382
Noble Drilling Corp. (a) 56,600 2,745
Smith International, Inc. (a) 28,800 2,289
-------
9,579
-------
Finance - 10.5%
ACE, Ltd. 88,600 3,112
Affiliated Managers Group, Inc. (a) 29,300 1,633
Alexandria Real Estate Equities, Inc. 38,300 1,341
Legg Mason, Inc. 55,300 2,917
-------
9,003
-------
General Business - 2.1%
Entravision Communications Corp. Class A New (a) 49,145 974
USA Networks, Inc. (a) 33,600 806
-------
1,780
-------
Technology - 39.9%
Avanex Corp. New (a) 19,700 2,985
BEA Systems, Inc. (a) 42,900 2,917
Brocade Communications Systems, Inc. (a) 14,400 3,252
Conexant Systems, Inc. (a) 36,900 1,372
Digex, Inc. (a) 26,500 2,243
Entrust Technologies, Inc. (a) 32,600 968
Exodus Communications, Inc. (a) 36,300 2,484
Gentex Corp. (a) 75,500 1,954
Micromuse, Inc. (a) 14,500 2,202
Phone.com, Inc. (a) 21,200 1,960
Rational Software Corp. (a) 28,000 3,602
RF Micro Devices, Inc. (a) 43,800 1,955
VeriSign, Inc. (a) 10,600 2,108
Vitesse Semiconductor Corp. (a) 27,300 2,422
Zoran Corp. (a) 26,800 1,654
-------
34,078
-------
Transportation - 4.0%
Teekay Shipping Corp. 73,300 3,390
-------
Utilities - 5.6%
Allegiance Telecom, Inc. (a) 28,200 1,406
Copper Mountain Networks, Inc. (a) 17,500 1,049
ITC^DeltaCom, Inc. (a) 48,400 678
VoiceStream Wireless Corp. (a) 14,900 1,677
-------
4,810
-------
Total Common Stocks
(cost $61,090) 81,450
-------
Annual Report 9
<PAGE>
SSgA
Special Equity Fund
Statement of Net Assets, continued
August 31, 2000
Principal Market
Amount Value
(000) (000)
$ $
--------- -------
Short-Term Investments - 3.7%
AIM Short-Term Investment Prime Portfolio
Class A (b) 1,598 1,598
Federated Investors Prime Cash Obligations
Fund (b) 1,598 1,598
-------
Total Short-Term Investments
(cost $3,196) 3,196
-------
Total Investments - 99.0%
(identified cost $64,286) 84,646
Other Assets and Liabilities,
Net - 1.0% 843
-------
Net Assets - 100.0% 85,489
=======
(a) Nonincome-producing security.
(b) At amortized cost, which approximates market.
See accompanying notes which are an integral part of the financial statements.
10 Annual Report
<PAGE>
SSgA
Special Equity Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amount) August 31, 2000
<TABLE>
<S> <C> <C>
Assets
Investments at market (identified cost $64,286) ...................................... $ 84,646
Receivables:
Dividends ........................................................................ 16
Investments sold ................................................................. 662
Fund shares sold ................................................................. 281
Prepaid expenses ..................................................................... 4
Short-term investments held as collateral for securities loaned, at market............ 21,854
---------
Total assets ................................................................. 107,463
Liabilities
Payables:
Investments purchased ................................................ $ 16
Fund shares redeemed ................................................. 20
Accrued fees to affiliates ........................................... 67
Other accrued expenses ............................................... 17
Payable upon return of securities loaned, at market ...................... 21,854
---------
Total liabilities ............................................................ 21,974
---------
Net Assets ........................................................................... $ 85,489
=========
Net Assets Consist of:
Accumulated net realized gain (loss) ................................................. $ (4,666)
Unrealized appreciation (depreciation) on investments ................................ 20,360
Shares of beneficial interest ........................................................ 5
Additional paid-in capital ........................................................... 69,790
---------
Net Assets ........................................................................... $ 85,489
=========
Net Asset Value, offering and redemption price per share:
($85,488,647 divided by 5,191,980 shares of $.001 par value
shares of beneficial interest outstanding) ................................... $ 16.47
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Annual Report 11
<PAGE>
SSgA
Special Equity Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 2000
<TABLE>
<S> <C> <C>
Investment Income
Dividends ................................................................ $ 254
Securities Lending Income ................................................ 55
Interest ................................................................. 22
--------
Total investment income .............................................. 331
Expenses
Advisory fees ................................................. $ 341
Administrative fees ........................................... 26
Custodian fees ................................................ 24
Distribution fees ............................................. 24
Transfer agent fees ........................................... 34
Professional fees ............................................. 15
Registration fees ............................................. 34
Shareholder servicing fees .................................... 15
Trustees' fees ................................................ 4
Miscellaneous ................................................. 5
--------
Expenses before reductions .................................... 522
Expense reductions ............................................ (22)
--------
Expenses, net ........................................................ 500
--------
Net investment income (loss) ................................................. (169)
--------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on investments ...................................... (1,693)
Net change in unrealized appreciation (depreciation) on investments........... 19,293
--------
Net realized and unrealized gain (loss) ...................................... 17,600
--------
Net increase (decrease) in net assets from operations ........................ $ 17,431
========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
12 Annual Report
<PAGE>
SSgA
Special Equity Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Years Ended August 31,
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) ................................... $ (169) $ 1
Net realized gain (loss) ....................................... (1,693) (2,399)
Net change in unrealized appreciation (depreciation) ........... 19,293 5,675
-------- --------
Net increase (decrease) in net assets from operations ...... 17,431 3,277
-------- --------
Distributions
From net investment income ..................................... (6) (18)
-------- --------
Share Transactions
Net increase (decrease) in net assets from share transactions .. 57,443 (5,784)
-------- --------
Total net increase (decrease) in net assets ........................ 74,868 (2,525)
Net Assets
Beginning of period ............................................ 10,621 13,146
-------- --------
End of period .................................................. $ 85,489 $ 10,621
======== ========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Annual Report 13
<PAGE>
SSgA
Special Equity Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
--------------------------------
2000 1999 1998*
-------- -------- --------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period .......... $ 9.17 $ 7.17 $ 10.00
-------- -------- --------
Income From Operations
Net investment income (loss)(a) ........... (.05) -- .01
Net realized and unrealized gain (loss) ... 7.35 2.01 (2.84)
-------- -------- --------
Total income from operations .......... 7.30 2.01 (2.83)
-------- -------- --------
Distributions
From net investment income ................ -- (.01) --
-------- -------- --------
Net Asset Value, End of Period ................ $ 16.47 $ 9.17 $ 7.17
======== ======== ========
Total Return (%)(b) ........................... 79.65 28.06 (28.30)
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) .. 85,489 10,621 13,146
Ratios to average net assets (%)(c):
Operating expenses, net (d) ........... 1.10 1.10 1.10
Operating expenses, gross (d) ......... 1.14 1.57 1.55
Net investment income (loss) .......... (.37) .01 .24
Portfolio turnover rate (%)(c) ............ 46.45 211.30 88.36
</TABLE>
* For the period May 1, 1998 (commencement of operations) to August 31,
1998.
(a) For the periods subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for the period ended August 31, 1998 are annualized.
(d) See Note 4 for current period amounts.
14 Annual Report
<PAGE>
SSgA
Special Equity Fund
Notes to Financial Statements
August 31, 2000
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 24 investment portfolios which are in operation as
of August 31, 2000. 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 accounting
principles generally accepted in the United States 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.
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.
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 15
<PAGE>
SSgA
Special Equity Fund
Notes to Financial Statements, continued
August 31, 2000
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, 2000, the Fund had a net tax basis capital loss carryovers
of $1,171,085 and $1,700,738, which may be applied against any realized
net taxable gains in each succeeding year or until its expiration dates of
August 31, 2007, and August 31, 2008, respectively, whichever occurs
first. As permitted by tax regulations, the Fund intends to defer a net
realized capital loss of $1,674,091 incurred from November 1, 1999 to
August 31, 2000, and treat it as arising in fiscal year 2001.
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, 2000 are as follows:
Net
Unrealized
Federal Tax Unrealized Unrealized Appreciation
Cost Appreciation (Depreciation) (Depreciation)
----------- ------------ -------------- --------------
$64,405,481 $ 24,119,529 $ (3,879,478) $ 20,240,051
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 year may differ significantly from
distributions during such year. 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
of the investment company which cannot be directly attributed are
allocated among all funds based principally on their relative net assets.
3. Securities Transactions
Investment transactions: For the year ended August 31, 2000, purchases and
sales of investment securities, excluding short-term investments and
futures contracts, aggregated to $74,140,933 and $19,864,001,
respectively.
Securities lending: The Investment Company has a securities lending
program whereby each Fund can loan securities with a value up to 33 1/3%
of its total assets to certain brokers. The Fund receives cash (U.S.
currency), U.S. Government or U.S. Government agency obligations as
collateral against the loaned securities. To the extent that a loan is
secured by cash collateral, such collateral shall be invested by State
Street Bank and Trust Company in short-term instruments, money market
mutual funds, and such other short-term investments, provided the
investments meet certain quality and diversification requirements. Under
the securities lending arrangement, the collateral received is recorded on
the Fund's statement of assets and liabilities along with the related
obligation to return the collateral. In those situations where the Company
has relinquished control of securities transferred, it derecognizes the
securities and records a receivable from the counterparty.
16 Annual Report
<PAGE>
SSgA
Special Equity Fund
Notes to Financial Statements, continued
August 31, 2000
Income generated from the investment of cash collateral, less negotiated
rebate fees paid to participating brokers and transaction costs, is
divided between the Fund and State Street Bank and Trust Company and is
recorded as interest income for the Fund. To the extent that a loan is
secured by non-cash collateral, brokers pay the Fund negotiated lenders'
fees, which are divided between the Fund and State Street Bank and Trust
Company and are recorded as interest income for the Fund. All collateral
received will be in an amount at least equal to 102% (for loans of U.S.
securities) or 105% (for non-U.S. securities) of the market value of the
loaned securities at the inception of each loan. Should the borrower of
the securities fail financially, there is a risk of delay in recovery of
the securities or loss of rights in the collateral. Consequently, loans
are made only to borrowers which are deemed to be of good financial
standing. As of August 31, 2000, the value of outstanding securities on
loan and the value of collateral amounted to $21,196,708 and $21,853,786,
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, through State Street Global Advisors, the investment management
group of 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. 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 total
amount of the reimbursement for the year ended August 31, 2000 was
$19,442. As of August 31, 2000, the receivable due from the Adviser for
reimbursed expenses in excess of the expense cap has been netted against
the Advisory 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.
In addition, the Fund has entered into arrangements with its Adviser
whereby custody credits realized as a result of uninvested cash balances
were used to reduce a portion of the Fund's expenses. During the year, the
Fund's custodian fees were reduced by $3,016 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly-owned subsidiary of The Northwestern Mutual Life Insurance Company,
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 for services supplied by the
Administrator pursuant to the Administration Agreement, an annual fee,
payable monthly on a pro rata basis. For the period September 1, 1999 to
April 30, 2000, the following percentages of the average daily net assets
of all domestic funds: $0 up to and including $500 million - .06%; over
$500 million up to and including $1 billion - .05%; over $1 billion -
.03%. Effective May 1, 2000, the annual fee is based on the following
percentages of the average daily net assets of all U.S. Equity portfolios:
$0 to $2 billion - .0315%; over $2 billion - .029%. The Administrator will
charge a flat fee of $30,000 per year per Fund with less than $500 million
in net assets and $1,500 per year for monthly performance reports and use
of Russell Performance Universe software product. In addition, the Fund
reimburses the Administrator for out-of-pocket expenses and start-up costs
for new funds.
Annual Report 17
<PAGE>
SSgA
Special Equity Fund
Notes to Financial Statements, continued
August 31, 2000
Distributor and Shareholder Servicing: The Investment Company has 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 enter 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 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 Shareholder 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, 2000, the Fund
was charged shareholder servicing expenses of $11,378, $755, $1,898, and
$1,365 by the Adviser, SSBSI, Commercial Banking and Solutions,
respectively. The Fund did not incur any expenses from RIS during this
year.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets of the Fund on an
annual basis. The shareholder servicing payments shall not exceed .20% of
the average daily value of net assets of the Fund on an annual basis.
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, 2000.
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 $1,170 for the year ended
August 31, 2000.
Board of Trustees: The Investment Company paid each Trustee not affiliated
with the Investment Company an annual retainer, plus specified amounts for
board and committee meetings attended. These expenses are allocated among
all of the funds based upon their relative net assets.
18 Annual Report
<PAGE>
SSgA
Special Equity Fund
Notes to Financial Statements, continued
August 31, 2000
Accrued fees payable to affiliates and trustees as of August 31, 2000 were
as follows:
Advisory fees $54,964
Administration fees 6,053
Custodian fees 941
Distribution fees 1,857
Shareholder servicing fees 1,936
Transfer agent fees 1,027
Trustees' fees 443
-------
$67,221
=======
5. Fund Share Transactions (amounts in thousands)
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
------------------------------------------
2000 1999
------------------ ------------------
Shares Dollars Shares Dollars
------ -------- ------ --------
<S> <C> <C> <C> <C>
Proceeds from shares sold ........ 5,282 $ 75,226 1,173 $ 10,190
Proceeds from reinvestment of
distributions .................. -- -- 2 17
Payments for shares redeemed ..... (1,248) (17,783) (1,849) (15,991)
------ -------- ------ --------
Total net increase (decrease) .... 4,034 $ 57,443 (674) $ (5,784)
====== ======== ====== ========
</TABLE>
6. Interfund Lending Program
The Fund and all other funds of the Investment Company received from the
Securities and Exchange Commission an exemptive orderon December 23, 1999
to establish and operate an Interfund Credit Facility. This allows the
Funds to directly lend to and borrow money from the SSgA Money Market Fund
for temporary purposes in accordance with certain conditions. The
borrowing Funds are charged the average of the current Repo Rate and the
Bank Loan Rate. The Fund did not utilize the interfund lending program
during this year.
Annual Report 19
<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, Treasurer and CEO
Mark E. Swanson, Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Treasurer
Carla L. Anderson, Assistant 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
160 Federal Street
Boston, Massachusetts 02110
20 Annual Report
<PAGE>
[COVER GRAPHIC]
SSgA(R) funds
ANNUAL REPORT
Aggressive Equity Fund
August 31, 2000
<PAGE>
SSgA(R) Funds
Aggressive Equity Fund
Annual Report
August 31, 2000
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(R)" 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 Aggressive Equity Fund
--------------------------------------------------------------------------------
Letter From the Chairman of State Street Global Advisors
--------------------------------------------------------------------------------
Dear Shareholders,
It is our pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 2000. The SSgA Fund Family has grown to include
twenty-four portfolios with over $21 billion in assets as of August 31, 2000.
The Fund Family provides a wide range of strategies covering the world's major
markets. The enclosed information provides an overview of the investment process
for the SSgA Aggressive Equity Fund. This overview contains the portfolio
management discussion, performance updates and financial information for the
Fund.
In an ongoing effort to develop competitive products and services that provide
investment solutions for our clients, we have added the SSgA Intermediate
Municipal Bond Fund to the SSgA Fund Family. This Fund's investment objective
seeks to provide federally tax-exempt current income by investing primarily in a
diversified portfolio of municipal debt securities with a dollar-weighted
average maturity between three and ten years.
We are also pleased with the success of our SSgA Emerging Markets and SSgA
Growth and Income Funds as they were included in Money(R) Magazine's June 2000
issue listing of the 'Top 100 Mutual Funds'. This is the second year in a row
that these funds have been selected.
Additionally, the SSgA Tax Free Money Market and the SSgA Active International
Funds have achieved five-year performance history during the 2000 fiscal year.
Currently, all of our SSgA Money Market Funds have at least a five-year
performance history. We strive to meet our clients' needs by providing funds
with long-term records and competitive performance.
We would like to thank you for choosing the SSgA Funds. Our reputation is based
on our tradition of designing and delivering exceptional financial services to
our clients. We look forward to continue sharing the benefit of our experience
with you.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
/s/ Timothy B. Harbert
Timothy B. Harbert
State Street Global Advisors
President and Chief Operating Officer, SSgA
4 Annual Report
<PAGE>
SSgA Aggressive Equity Fund
--------------------------------------------------------------------------------
Management of the Fund
--------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
[PHOTO]
Timothy B. Harbert
President and Chief Operating 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. Richard B. Weed, CFA, Principal, is the portfolio manager primarily
responsible for investment decisions regarding the SSgA Aggressive Equity Fund
since its inception in December 1998. Mr. Weed joined SSgA in November 1995. His
responsibilities include research, product development, and portfolio management
for the US Active Strategy. He holds an MS in Finance and Accounting from the
MIT Sloan School of Management, and has an MS in Chemical Engineering from
Northeastern University, and a BS in Chemical Engineering from Worcester
Polytech Institute. Mr. Weed is a member of the Boston Analysts Society and
AIMR. There are seven other portfolio managers working with Mr. Weed.
Annual Report 5
<PAGE>
SSgA Aggressive Equity Fund
--------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
--------------------------------------------------------------------------------
Objective: Provide total returns that exceed over time the Russell
2500(TM)Growth Index.
Invests in: US equity securities.
Strategy: The Fund management team uses a systematic approach to uncover equity
securities which are believed to be undervalued, with superior growth potential.
This disciplined approach rests on a modeling process that evaluates vast
amounts of financial and market data and corporate earnings forecasts. The
result is an investment process that seeks to provide positive long-term total
returns through strong bottom-up stock selection. In addition the Fund can
invest in IPOs (Initial Public Offerings).
--------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
Dates Aggressive Equity Fund Russell 2500 Growth Index**
Inception* $10,000 $10,000
1999 $12,730 $11,077
2000 $27,041 $17,295
================================================================================
Performance Review
For the fiscal year ended August 31, 2000, the SSgA Aggressive Equity Fund had a
total return of 112.42%, as compared to the Russell 2500(TM) Growth Index gain
of 56.13% for the same period. The Fund's performance is net of operating
expenses, whereas Index results do not include expenses of any kind.
The Fund did well this year primarily due to strong stock selection.
Specifically, the Fund's investments in Initial Public Offerings (IPOs) resulted
in a significant impact to current fiscal year-end performance. Although
participating in IPOs is within the Fund's investment guidelines, there is no
guarantee that the Fund will continue to participate in the IPO market in the
future. Additionally, due to their inherent volatility, there can be no
assurance that IPOs will continue to have a positive impact on Fund performance.
Market and Portfolio Highlights
For the twelve months ended August 31, 2000, the US equity market, as measured
by the Russell 2500(TM) Growth Index,
--------------------------------------------------------------------------------
SSgA Aggressive Equity Fund
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
------------------------- --------------- ------------
1 Year $ 21,242 112.42%
Inception $ 27,041 81.48%+
--------------------------------------------------------------------------------
Russell 2500(TM) Growth Index
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
------------------------- --------------- ------------
1 Year $ 15,613 56.13%
Inception $ 17,295 38.91%+
See related Notes on following page.
6 Annual Report
<PAGE>
SSgA Aggressive Equity Fund
--------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
--------------------------------------------------------------------------------
continued its momentum upward. However, valuations finally reached unsustainable
levels and after attaining record highs in March, the market reacted with a
correction in April. Subsequent to this event, valuations trended higher through
the fiscal year-end. The correction was attributable, in part, to the Federal
Reserve's previous short-term interest rate hikes which were intended to slow
the economy and dampen inflation expectations. However, as fears of future
aggressive rate increases subsided, the market was able to post additional gains
late in the fiscal year.
After generating solid performance in the first half of the fiscal year, Fund
returns dropped in the third quarter and were mixed in the fourth quarter. In
particular, the Manager's stock selection was effective with Internet-related
issues such as Network Solutions, Broadcom, and BroadVision. Medical providers
such as Express Scripts and Wellpoint Health also benefited the Fund's
fiscal-year results. However, selection in the Technology sector, particularly
stocks such as Network Appliance and Ciena, was disappointing. Returns in the
apparel sector helped deflate Fund returns, with American Eagle Outfitters
contributing some degree of under-performance.
As of August 31, 2000, the Fund was overweighted in Consumer Cyclicals, with a
12.9% allocation versus the benchmark exposure of 8.1%. Additionally, the
portfolio was underweight in the Communications Service sector, with an
allocation of 0.0% at August 31, 2000, compared to 3.1% for the Index.
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 takes controlled positions
that deviate from the benchmark in those securities with fair valuations and
strong long-term growth prospects. The Manager's stock evaluation process is
industry-relative, and as a result, if the corporate fundamentals of two
companies are equally sound, the Fund will invest in the company with the better
relative valuation. Because value is an integral component of the investment
process, the Fund will not be overweight in stocks in 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 under-performance
or market volatility. The Fund avoids responding suddenly to the current
investment environment through sector timing or top-down thematic investing.
At August 31, 2000, the SSgA Aggressive Equity Fund held 52 stocks with an
average weighted market capitalization of $36.1 billion. Due to the
risk-controlled nature of the investment process, the Fund maintains portfolio
characteristics that are consistent with the Russell 2500(TM) Growth Index. As
the Fund's objective is achieved through stock selections with a disciplined
investment approach, the portfolio will seek to be fully invested at all times.
--------------------------------------------------------------------------------
Top Ten Equity Holdings (as a percent of Total
Investments) August 31, 2000
--------------------------------------------------------------------------------
Ariba, Inc. New 2.5%
VeriSign, Inc. 2.5
Apple Computer, Inc. 2.4
EOG Resources, Inc. 2.3
Genzyme Corp. 2.3
Oxford Health Plans, Inc. 2.3
Integrated Device Technology, Inc. 2.2
Dell Computer Corp. 2.2
Anadarko Petroleum Corp. 2.2
EMC Corp. 2.2
--------------------------------------------------------------------------------
--------------------
Notes: The following notes relate to the Growth of $10,000 graph and table on
the preceding page.
* The Fund commenced operations on December 30, 1998. Index comparison also
began December 30, 1998.
** The Russell 2500(TM) Growth Index represents the performance of small and
mid-cap companies in the US. These 2500 companies represent the small end
of the Russell 3000(R) Index, and about 23% of the total capitalization of
the Russell 3000(R) Index.
+ 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 Aggressive Equity Fund (the "Fund") at
August 31, 2000, the results of its operations for the fiscal year then ended,
the changes in its net assets, and the financial highlights for the fiscal year
then ended and for the period December 30, 1998 (commencement of operations) to
August 31, 1999, in conformity with accounting principles generally accepted in
the United States of America. 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 auditing standards generally
accepted in the United States of America 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,
2000 by correspondence with the custodian and brokers, provides a reasonable
basis for our opinion.
Boston, Massachusetts
October 11, 2000
/s/ Pricewaterhousecoopers LLP
8 Annual Report
<PAGE>
SSgA
Aggressive Equity Fund
Statement of Net Assets
August 31, 2000
Market
Number Value
of (000)
Shares $
--------- ------
Common Stocks - 100.1%
Basic Industries - 4.2%
Advanced Energy
Industries, Inc. (a) 3,100 177
Mentor Graphics Corp. 9,110 171
-----
348
-----
Capital Goods - 6.9%
Cognex Corp. (a) 1,840 74
DENTSPLY International, Inc. 4,500 150
Harman International
Industries, Inc. 2,200 169
Novellus Systems, Inc. 2,940 181
-----
574
-----
Consumer Basics - 18.0%
Dura Pharmaceuticals, Inc. (a) 5,600 155
Edwards Lifesciences Corp. (a) 6,500 171
Genentech, Inc. (a) 700 133
Genzyme Corp. (a) 2,640 198
King Pharmaceuticals, Inc. (a) 4,240 136
Noven Pharmaceuticals, Inc. (a) 2,700 113
Oxford Health Plans, Inc. (a) 6,440 196
Pepsi Bottling Group, Inc. (The) 5,920 188
Topps Co., Inc. (a) 7,520 60
Wellpoint Health Networks, Inc. (a) 1,800 155
-----
1,505
-----
Consumer Non-Durables - 4.9%
Intimate Brands, Inc. Class A 8,810 141
Tiffany & Co. 4,100 171
Zale Corp. (a) 2,640 98
-----
410
-----
Consumer Services - 2.2%
International Game Technology (a) 6,400 186
-----
Energy - 4.6%
Anadarko Petroleum Corp. 2,900 191
EOG Resources, Inc. 5,200 199
-----
390
-----
Finance - 1.3%
Security Capital Group, Inc. Class B (a) 6,500 111
-----
General Business - 4.1%
Express Scripts, Inc. Class A (a) 2,560 182
Viad Corp. 5,500 161
-----
343
-----
Shelter - 1.8%
NVR, Inc. (a) 2,000 147
-----
Technology - 50.0%
Analog Devices, Inc. (a) 1,800 181
Apple Computer, Inc. (a) 3,400 207
Applied Materials, Inc. (a) 1,920 166
Ariba, Inc. New (a) 1,360 213
Barra, Inc. (a) 3,000 173
BroadVision, Inc. (a) 4,240 146
Cerner Corp. (a) 4,800 182
Cypress Semiconductor Corp. (a) 3,600 178
Dell Computer Corp. (a) 4,400 191
EMC Corp. (a) 1,920 188
Hewlett-Packard Co. 1,300 157
Integrated Device Technology, Inc. (a) 2,200 193
Intel Corp. 2,420 181
Juniper Networks, Inc. (a) 500 107
Kemet Corp. (a) 5,120 153
PMC - Sierra, Inc. (a) 700 165
RadioShack, Corp. 2,500 148
RealNetworks, Inc. (a) 2,400 117
Sun Microsystems, Inc. (a) 1,400 178
Sybase, Inc. (a) 6,640 181
Symantec Corp. (a) 3,140 153
Annual Report 9
<PAGE>
SSgA
Aggressive Equity Fund
Statement of Net Assets, continued
August 31, 2000
Market
Number Value
of (000)
Shares $
--------- ------
VeriSign, Inc. (a) 1,065 212
Viant Corp. New (a) 6,000 83
Xilinx, Inc. (a) 1,900 169
Yahoo!, Inc. (a) 1,280 156
-----
4,178
-----
Transportation - 2.1%
Boeing Co. (The) 3,200 172
-----
Total Common Stocks
(cost $7,191) 8,364
-----
Principal
Amount
(000)
$
Short-Term Investments - 3.1% ---------
AIM Short-Term Investment Prime
Portfolio Class A (b) 254 254
Federated Investors Prime Cash
Obligations Fund (b) 1 1
-----
Total Short-Term Investments
(cost $255) 255
-----
Total Investments - 103.2%
(identified cost $7,446) 8,619
Other Assets and Liabilities,
Net - (3.2%) (267)
-----
Net Assets - 100.0% 8,352
=====
(a) Nonincome-producing security.
(b) At amortized cost, which approximates market.
See the accompanying notes which are an integral part of the financial
statements.
10 Annual Report
<PAGE>
SSgA
Aggressive Equity Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amount) August 31, 2000
<TABLE>
<S> <C> <C>
Assets
Investments at market (identified cost $7,446) ........................... $ 8,619
Receivables:
Dividends ............................................................. 2
Fund shares sold ...................................................... 1
From Adviser .......................................................... 24
Prepaid expenses ......................................................... 1
Short-term investments held as collateral for securities loaned,
at market ............................................................. 2,195
-------
Total assets ....................................................... 10,842
Liabilities
Payables:
Investments purchased ...................................... $ 291
Accrued fees to affiliates ................................. 4
Payable upon return of securities loaned, at market ........... 2,195
-------
Total liabilities .................................................. 2,490
-------
Net Assets ............................................................... $ 8,352
=======
Net Assets Consist of:
Accumulated net realized gain (loss) ..................................... 6,137
Unrealized appreciation (depreciation) on investments .................... 1,173
Additional paid-in capital ............................................... 1,042
-------
Net Assets ............................................................... $ 8,352
=======
Net Asset Value, offering and redemption price per share:
($8,351,554 divided by 418,147 shares of $.001 par value
shares of beneficial interest outstanding) ......................... $ 19.97
=======
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Annual Report 11
<PAGE>
SSgA
Aggressive Equity Fund
Statement of Operations
Amounts in Thousands For the Fiscal Year Ended August 31, 2000
Investment Income
Dividends ...................................................... $ 28
Securities Lending Income ...................................... 9
-------
Total investment income ..................................... 37
Expenses
Advisory fees ........................................ $ 79
Administrative fees .................................. 14
Custodian fees ....................................... 17
Distribution fees .................................... 5
Transfer agent fees .................................. 21
Professional fees .................................... 20
Registration fees .................................... 30
Shareholder servicing fees ........................... 1
Trustees' fees ....................................... 4
Miscellaneous ........................................ 6
-------
Expenses before reductions ........................... 197
Expense reductions ................................... (81)
-------
Expenses, net ............................................... 116
-------
Net investment income (loss) ...................................... (79)
-------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on investments ........................... 7,135
Net change in unrealized appreciation (depreciation) on investments 821
-------
Net realized and unrealized gain (loss) ........................... 7,956
-------
Net increase (decrease) in net assets from operations ............. $ 7,877
=======
See accompanying notes which are an integral part of the financial statements.
12 Annual Report
<PAGE>
SSgA
Aggressive Equity Fund
Statement of Changes in Net Assets
Amounts in Thousands For the Fiscal Year Ended August 31,
<TABLE>
<CAPTION>
2000 1999*
------- -------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) ................................... $ (79) $ (23)
Net realized gain (loss) ....................................... 7,135 1,384
Net change in unrealized appreciation (depreciation) ........... 821 352
------- -------
Net increase (decrease) in net assets from operations ....... 7,877 1,713
------- -------
Distributions
From net investment income ..................................... (10) --
From net realized gain ......................................... (2,303) --
------- -------
Net decrease in net assets from distributions ............... (2,313) --
------- -------
Share Transactions
Net increase (decrease) in net assets from share transactions .. (4,397) 5,472
------- -------
Total net increase (decrease) in net assets ....................... 1,167 7,185
Net Assets
Beginning of period ............................................ 7,185 --
------- -------
End of period (including undistributed net investment income
of $10 at August 31, 1999) ................................. $ 8,352 $ 7,185
======= =======
</TABLE>
* For the period December 30, 1998 (commencement of operations) to August
31, 1999.
See accompanying notes which are an integral part of the financial statements.
Annual Report 13
<PAGE>
SSgA
Aggressive Equity Fund
Financial Highlights
The following tables includes selected data for a share outstanding througout
the period and other performance information derived from the financial
statements.
Fiscal Year Ended
August 31,
----------------------
2000 1999*
--------- ---------
Net Asset Value, Beginning of Period ................. $ 12.73 $ 10.00
--------- ---------
Income From Operations
Net investment income (loss)(a) ................... (.13) (.04)
Net realized and unrealized gain (loss) ........... 11.40 2.77
--------- ---------
Total income from operations ................... 11.27 2.73
--------- ---------
Distributions
From net investment income ........................ (.02) --
From net realized gain ............................ (4.01) --
--------- ---------
Total distributions ............................ (4.03) --
--------- ---------
Net Asset Value, End of Period ....................... $ 19.97 $ 12.73
========= =========
Total Return (%)(b) .................................. 112.42 27.30
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) .......... 8,352 7,185
Ratios to average net assets (%)(c):
Operating expenses, net (d) .................... 1.10 1.10
Operating expenses, gross (d) .................. 1.87 2.07
Net investment income (loss) ................... (.75) (.50)
Portfolio turnover rate (%)(c) .................... 336.60 179.56
* For the period December 30, 1998 (commencement of operations) to August
31, 1999.
(a) Average month-end shares outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for the period ended August 31, 1999 are annualized.
(d) See Note 4 for current period amounts.
14 Annual Report
<PAGE>
SSgA
Aggressive Equity Fund
Notes to Financial Statements
August 31, 2000
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 24 investment portfolios which are in operation as
of August 31, 2000. These financial statements report on one portfolio,
the SSgA Aggressive 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 accounting
principles generally accepted in the United States 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.
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 15
<PAGE>
SSgA
Aggressive Equity Fund
Notes to Financial Statements, continued
August 31, 2000
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, 2000 are as follows:
Net Unrealized
Unrealized Unrealized Appreciation
Federal Tax Cost Appreciation (Depreciation) (Depreciation)
---------------- ------------ -------------- --------------
$7,512,407 $1,400,781 $(294,037) $1,106,744
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 year may differ significantly from
distributions during such year. 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.
Expenses: Most expenses can be directly attributed to the Fund. Expenses
of the investment company which cannot be directly attributed are
allocated among all funds based principally on their relative net assets.
3. Securities Transactions
Investment transactions: For the year ended August 31, 2000, purchases and
sales of investment securities, excluding short-term investments,
aggregated to $33,569,175 and $40,182,848, respectively.
Securities lending: The Investment Company has a securities lending
program whereby each Fund can loan securities with a value up to 33 1/3%
of its total assets to certain brokers. The Fund receives cash (U.S.
currency), U.S. Government or U.S. Government agency obligations as
collateral against the loaned securities. To the extent that a loan is
secured by cash collateral, such collateral shall be invested by State
Street Bank and Trust Company in short-term instruments, money market
mutual funds, and such other short-term investments, provided the
investments meet certain quality and diversification requirements. Under
the securities lending arrangement, the collateral received is recorded on
the Fund's statement of assets and liabilities along with the related
obligation to
16 Annual Report
<PAGE>
SSgA
Aggressive Equity Fund
Notes to Financial Statements, continued
August 31, 2000
return the collateral. In those situations where the Company has
relinquished control of securities transferred, it derecognizes the
securities and records a receivable from the counterparty.
Income generated from the investment of cash collateral, less negotiated
rebate fees paid to participating brokers and transaction costs, is
divided between the Fund and State Street Bank and Trust Company and is
recorded as interest income for the Fund. To the extent that a loan is
secured by non-cash collateral, brokers pay the Fund negotiated lenders'
fees, which are divided between the Fund and State Street Bank and Trust
Company and are recorded as interest income for the Fund. All collateral
received will be in an amount at least equal to 102% (for loans of U.S.
securities) or 105% (for non-U.S. securities) of the market value of the
loaned securities at the inception of each loan. Should the borrower of
the securities fail financially, there is a risk of delay in recovery of
the securities or loss of rights in the collateral. Consequently, loans
are made only to borrowers which are deemed to be of good financial
standing. As of August 31, 2000, the value of outstanding securities on
loan and the value of collateral amounted to $2,129,346 and $2,195,044,
respectively. Securities lending income of $8,900 is included in the
Statement of Operations for the year ended August 31, 2000.
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, through State Street Global Advisors, the investment management
group of 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. The
Adviser has voluntarily agreed to reimburse the Fund for all expenses in
excess of 1.10% of average daily net assets on an annual basis. The total
amount of reimbursement for the year ended August 31, 2000 was $79,028. As
of August 31, 2000, the receivable due from the Adviser for reimbursed
expenses in excess of the expense cap has been netted against the Advisory
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.
In addition, the Fund has entered into arrangements with its Adviser
whereby custody credits realized as a result of uninvested cash balances
were used to reduce a portion of the Fund's expenses. During the year, the
Fund's custodian fees were reduced by $2,065 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly-owned subsidiary of The Northwestern Mutual Life Insurance Company,
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 for services supplied by the
Administrator pursuant to the Administration Agreement, an annual fee,
payable monthly on a pro rata basis. For the period September 1, 1999 to
April 30, 2000, 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 up to and including $1 billion - .05%; over $1
billion - .03%. Effective May 1, 2000, the annual fee is based on the
following percentages of the average daily net assets of all U.S. Equity
portfolios: $0 to $2 billion - .0315%; over $2 billion - .029%. The
Administrator will charge a flat fee of $30,000 per year per Fund
Annual Report 17
<PAGE>
SSgA
Aggressive Equity Fund
Notes to Financial Statements, continued
August 31, 2000
with less than $500 million in net assets and $1,500 per year for monthly
performance reports and use of Russell Performance Universe software
product. In addition, the Fund reimburses the Administrator for
out-of-pocket expenses and start-up costs for new funds.
Distributor and Shareholder Servicing: The Investment Company has 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 enter 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 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 Shareholder 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, 2000, the Fund
was charged shareholder servicing expenses of $279 and $286 by the Adviser
and SSBSI. The Fund did not incur any expenses from RIS, Commercial
Banking and Solutions during this year.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets of the Fund on an
annual basis. The shareholder servicing payments shall not exceed .20% of
the average daily value of net assets of the Fund on an annual basis.
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, 2000.
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 $11,279 for the year ended
August 31, 2000.
18 Annual Report
<PAGE>
SSgA
Aggressive Equity Fund
Notes to Financial Statements, continued
August 31, 2000
Board of Trustees: The Investment Company paid each Trustee not affiliated
with the Investment Company an annual retainer, plus specified amounts for
board and committee meetings attended. 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, 2000 were
as follows:
Administration fees $ 2,848
Custodian fees 40
Distribution fees 168
Shareholder servicing fees 759
Transfer agent fees 46
Trustees' fees 170
---------
$ 4,031
=========
Beneficial Interest: As of August 31, 2000, two shareholders (who are also
other series of the Investment Company) were record owners of
approximately 39% and 31%, respectively, of the total outstanding shares
of the Fund.
5. Fund Share Transactions (amounts in thousands)
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
--------------------------------------------
2000 1999*
-------------------- --------------------
Shares Dollars Shares Dollars
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Proceeds from shares sold .................. 278 $ 4,816 679 $ 6,814
Proceeds from reinvestment of distributions 187 2,310 -- --
Payments for shares redeemed ............... (611) (11,523) (115) (1,342)
-------- -------- -------- --------
Total net increase (decrease) .............. (146) $ (4,397) 564 $ 5,472
======== ======== ======== ========
</TABLE>
* For the period December 30, 1998 (commencement of operations) to
August 31, 1999.
6. Interfund Lending Program
The Fund and all other funds of the Investment Company received from the
Securities and Exchange Commission an exemptive order on December 23, 1999
to establish and operate an Interfund Credit Facility. This allows the
Funds to directly lend to and borrow money from the SSgA Money Market Fund
for temporary purposes in accordance with certain conditions. The
borrowing Funds are charged the average of the current Repo Rate and the
Bank Loan Rate. The Fund did not utilize the interfund lending program
during this year.
Annual Report 19
<PAGE>
SSgA Aggressive 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, Treasurer and CEO
Mark E. Swanson, Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Treasurer
Carla L. Anderson, Assistant 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
160 Federal Street
Boston, Massachusetts 02110
20 Annual Report
<PAGE>
[COVER GRAPHIC]
SSgA(R) funds
ANNUAL REPORT
IAM SHARES Fund
August 31, 2000
<PAGE>
SSgA(R) Funds
IAM SHARES Fund
Annual Report
August 31, 2000
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
Tax Information........................................................... 23
Fund Management and Service Providers..................................... 24
"SSgA(R)" 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 IAM Shares Fund
--------------------------------------------------------------------------------
Letter From the Chairman of State Street Global Advisors
--------------------------------------------------------------------------------
Dear Shareholders,
It is our pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 2000. The SSgA Fund Family has grown to include
twenty-four portfolios with over $21 billion in assets as of August 31, 2000.
The Fund Family provides a wide range of strategies covering the world's major
markets. The enclosed information provides an overview of the investment process
for the SSgA IAM SHARES Fund. This overview contains the portfolio management
discussion, performance updates and financial information for the Fund.
In an ongoing effort to develop competitive products and services that provide
investment solutions for our clients, we have added the SSgA Intermediate
Municipal Bond Fund to the SSgA Fund Family. This Fund's investment objective
seeks to provide federally tax-exempt current income by investing primarily in a
diversified portfolio of municipal debt securities with a dollar-weighted
average maturity between three and ten years.
We are also pleased with the success of our SSgA Emerging Markets and SSgA
Growth and Income Funds as they were included in Money(R) Magazine's June 2000
issue listing of the 'Top 100 Mutual Funds'. This is the second year in a row
that these funds have been selected.
Additionally, the SSgA Tax Free Money Market and the SSgA Active International
Funds have achieved five-year performance history during the 2000 fiscal year.
Currently, all of our SSgA Money Market Funds have at least a five-year
performance history. We strive to meet our clients' needs by providing funds
with long-term records and competitive performance.
We would like to thank you for choosing the SSgA Funds. Our reputation is based
on our tradition of designing and delivering exceptional financial services to
our clients. We look forward to continue sharing the benefit of our experience
with you.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
/s/ Timothy B. Harbert
Timothy B. Harbert
State Street Global Advisors
President and Chief Operating Officer, SSgA
4 Annual Report
<PAGE>
SSgA IAM Shares Fund
--------------------------------------------------------------------------------
Management of the Funds
--------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
[PHOTO]
Timothy B. Harbert
President and Chief Operating 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. Michael J. Feehily, CFA, Principal, is the portfolio manager primarily
responsible for investment decisions regarding the SSgA IAM SHARES Fund since
its inception in June 1999. Mr. Feehily joined State Street in August 1982 in
the Global Operations area before moving to the Performance and Analytics group.
He helped to develop and work with a proprietary application, which is used to
analyze venture capital, real estate, and other private investments. He holds a
BS in Finance, Investments and Economics from Babson College and an MBA in
Finance from Bentley College. There are four other portfolio managers working
with Mr. Feehily.
Annual Report 5
<PAGE>
SSgA IAM Shares Fund
--------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
--------------------------------------------------------------------------------
Objective: The Fund seeks to maximize total return primarily through investments
in equity securities of companies that have entered into collective bargaining
agreements with the International Association of Machinists & Aerospace Workers
(IAM) or affiliated labor unions.
Invests in: At least 65% of the total assets are invested in equity securities
of companies that have entered into collective bargaining agreements with the
IAM or its affiliated unions. The remainder of the Fund's assets are open to
either further investment in those companies with collective bargaining
agreements with the IAM or companies outside this universe which are
constituents of the S&P 500(R) Index.
Strategy: The Fund's investment strategy is driven by an investment process that
manages portfolio exposures to fundamental attributes within a multifactor risk
model environment. These attributes include industry allocations, size, style,
growth expectations, and valuation ratios.
--------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
Dates IAM Shares Fund S&P 500(R)Index**
Inception* $10,000 $10,000
1999 $10,140 $10,230
2000 $11,655 $11,906
================================================================================
Performance Review
For the fiscal year ended August 31, 2000, the Fund finished with a return of
14.94%, compared to the S&P 500(R) Index return of 16.33%. The Fund's
performance is net of operating expenses, whereas Index results do not include
expenses of any kind.
The SSgA IAM SHARES Fund seeks to meet or exceed the total return of the S&P
500(R) Index using an optimization approach designed to mitigate some of the
inherent sector/industry bets that stem from the "union friendly" universe.
Market and Portfolio Highlights
The US equity markets finished strongly in the final four calendar months of
1999, primarily as a result of the Technology sector, as the NASDAQ Composite
shot up an impressive 48.56% during this time period. Increases in worker
productivity with little resulting signs of inflationary pressures made the
--------------------------------------------------------------------------------
SSgA IAM Shares Fund
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
------------ ----------- -----------
1 Year $ 11,494 14.94%
Inception $ 11,655 13.10%+
--------------------------------------------------------------------------------
Standard & Poor's(R) 500
Composite Stock Price Index
--------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/00 $10,000 Return
------------ ----------- -----------
1 Year $ 11,633 16.33%
Inception $ 11,906 15.05%+
See related Notes on following page.
6 Annual Report
<PAGE>
SSgA IAM Shares Fund
--------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
--------------------------------------------------------------------------------
outlook attractive for investors. However, the Federal Reserve continued to
raise short-term rates in an effort to curb economic momentum, while at the same
time attempting to orchestrate a "soft-landing" for the economy. As a result,
the ride for the equity markets in 2000 was anything but smooth. After a strong
first quarter, technology stocks finally began to fall back to earth as
investors realized that the incredibly high valuations for some of these
companies could no longer be justified. With the economy continuing to grow and
unemployment hovering around a paltry 4%, fears of inflation lingered and
sustained periods of rapid earnings growth seemed to be in jeopardy. Investors
appear to be waiting on the sidelines to see when the Federal Reserve has
completed its tightening and if the tightening to date will negatively affect
the earnings of companies in the short term.
Most of the Fund's underperformance relative to the benchmark came during first
quarter 2000, as technology stocks continued to soar to record heights. Since
that time, the "old-economy" stocks have begun to grab some of the momentum back
from the "new-economy" issues. This is beneficial for the Fund, as many of the
companies that have machinist union affiliations are part of the "old-economy"
sectors such as Basic Materials, Capital Goods, Consumer Staples,
Transportation, and Utilities. The Fund's Index-relative overweighting in these
"union-friendly" sectors, which lost 14.85%, 14.80%, and 10.88% respectively,
drove down performance. However, stock selection within these sectors helped to
offset much of the negative results. The Fund maintained a benchmark-relative
underweighting in Technology, Finance, and Health Care, as these sectors are not
generally associated with machinist union affiliations. These three sectors
continued to lead the market during this fiscal year, returning 41.78%, 29.18%,
and 18.55% respectively.
One of the leading contributors to the Fund's performance over the period was PE
Corp - Celera Genomics(+/-) which posted an incredible gain of 654.35%. Stock
positions in Oracle, Nortel Networks(+/-), Amphenol Corp.(+/-), and Titan
Corp.(+/-) all boosted Fund results, with returns of 398.29%, 297.72%, 173.43%,
and 141.72%, respectively. Among the worst performing stocks were Anacomp(+/-),
losing 94.96%, and Owens Corning(+/-) which dropped 80.49% for the period.
Additionally, Rite Aid, Xerox Corporation(+/-), and Armstrong World Industries
all posted disappointing losses of 77.76%, 64.41%, and 63.23%, respectively.
At August 31, 2000, the SSgA IAM SHARES Fund held 247 securities with a market
value of nearly $133.7 million. Of these 247 securities, there were 164
securities of companies that have collective bargaining agreements with the IAM.
These investments in "union friendly" companies represented 66% of the Fund's
market value. In total, there are currently 340 publicly traded companies that
have agreements with the IAM and are eligible for investment by the Fund.
-------------------------------------------------------------
Top Ten Equity Holdings
(as a percent of Total Investments) August 31, 2000
-------------------------------------------------------------
General Electric Co. 6.2%
Citigroup, Inc. 4.7
Cisco Systems, Inc. 3.4
Intel Corp. 3.3
Nortel Networks Corp. 2.8
Microsoft Corp. 2.6
Merck & Co., Inc. 2.4
Exxon Mobil Corp. 2.3
Oracle Systems Corp. 1.9
Schlumberger, Ltd. 1.5
-------------------------------------------------------------
--------------------
Notes: The following notes relate to the Growth of $10,000 graph and table on
the preceding page.
* The Fund commenced operations on June 2, 1999. Index comparison also began
June 2, 1999.
** The Standard & Poor's(R) 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.
+/- Denotes IAM affiliated company.
"Standard & Poor's(R)", "S&P(R)", "S&P 500(R)", "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 IAM SHARES Fund (the "Fund") at August
31, 2000, the results of its operations for the fiscal year then ended, and the
changes in its net assets and the financial highlights for the fiscal year then
ended and for the period June 2, 1999 (commencement of operations) to August 31,
1999, in conformity with accounting principles generally accepted in the United
States of America. 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 auditing standards generally accepted in
the United States of America 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, 2000 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
Boston, Massachusetts
October 11, 2000
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
IAM Shares Fund
Statement of Net Assets
August 31, 2000
Market
Number Value
of (000)
Shares $
------ -----
Common Stocks - 98.7%
Basic Industries - 4.9%
Air Products & Chemicals, Inc. 3,900 142
Alcoa, Inc. 25,000 831
Bowater, Inc. 5,400 277
Brush Wellman, Inc. 9,000 210
Dexter Corp. 5,100 302
Dow Chemical Co. 10,200 267
Illinois Tool Works, Inc. 8,104 454
International Paper Co. 17,873 570
Kimberly-Clark Corp. 19,200 1,123
Minnesota Mining & Manufacturing Co. 13,600 1,265
Phelps Dodge Corp. 1,100 49
Rohm & Haas Co. 7,736 224
Sigma Aldrich Corp. 13,900 405
Temple-Inland, Inc. 2,800 119
Union Carbide Corp. 4,400 176
Willamette Industries, Inc. 3,900 119
--------
6,533
--------
Capital Goods - 11.1%
Applied Power, Inc. Class A 4,300 21
Caterpillar, Inc. 9,400 346
Crane Co. 1,900 48
Deere & Co. 3,100 102
Dover Corp. 15,600 762
Emerson Electric Co. 6,300 417
Fisher Scientific International, Inc. (a) 7,800 171
General Electric Co. 141,000 8,275
Ingersoll-Rand Co. 4,000 182
Johnson Controls, Inc. 3,000 160
Koninklijke (Royal) Philips Electronics (a) 32,689 1,612
Martin Marietta Materials, Inc. 3,200 128
Parker-Hannifin Corp. 4,000 139
Raytheon Co. Class B 2,700 75
SPX Corp. (a) 3,400 558
Tyco International, Ltd. 32,400 1,847
--------
14,843
--------
Consumer Basics - 16.6%
Abbott Laboratories 2,500 109
Allied Healthcare Products, Inc. (a) 16,900 48
American Home Products Corp. 2,100 114
Amgen, Inc. (a) 4,400 334
Archer-Daniels-Midland Co. 16,905 149
Baxter International, Inc. 16,600 1,382
Black & Decker Corp. 2,900 116
Bristol-Myers Squibb Co. 5,600 297
Campbell Soup Co. 11,900 302
Celera Genomics (a) 3,400 369
Coca-Cola Co. (The) 37,900 1,995
ConAgra, Inc. 17,500 321
Costco Wholesale Corp. (a) 1,400 48
Dial Corp. 8,200 84
Edwards Lifesciences Corp. (a) 10,200 268
Energizer Holdings, Inc. (a) 4,500 89
Fleming Cos., Inc. 2,400 37
Gillette Co. (The) 1,100 33
Interstate Bakeries Corp. 4,700 84
Johnson & Johnson 3,400 313
Koninklijke Ahold 3,300 94
Kroger Co. (a) 21,400 486
Lilly (Eli) & Co. 3,100 226
Medtronic, Inc. 2,000 103
Merck & Co., Inc. 46,400 3,242
Nabisco Group Holdings Corp. 11,100 312
New Brunswick Scientific Co., Inc. (a) 14,630 115
PE Corp. - PE Biosystems Group 9,000 885
PepsiCo, Inc. 35,500 1,513
Pfizer, Inc. 21,725 940
Philip Morris Cos., Inc. 41,900 1,241
Procter & Gamble Co. 26,300 1,626
Quaker Oats Co. (The) 6,000 408
Ralston-Purina Group 11,700 265
Annual Report 9
<PAGE>
SSgA
IAM Shares Fund
Statement of Net Assets, continued
August 31, 2000
Market
Number Value
of (000)
Shares $
------ -----
Safeway, Inc. (a) 12,600 621
Sara Lee Corp. 22,700 423
Schering-Plough Corp. 39,700 1,593
Suiza Foods Corp. (a) 2,600 130
SYSCO Corp. 17,600 745
Unilever 13,100 619
Whitman Corp. 5,700 75
Wild Oats Markets, Inc. (a) 6,900 74
--------
22,228
--------
Consumer Durables - 3.8%
Armstrong Holdings, Inc. 5,800 92
Best Buy Co. (a) 600 37
DaimlerChrysler AG 2,700 141
Danaher Corp. 10,500 590
Eaton Corp. 9,300 617
Ethan Allen Interiors, Inc. 6,000 162
Federal Signal Corp. 3,900 84
Ford Motor Co. (a) 27,621 668
General Motors Corp. 13,180 951
Goodyear Tire & Rubber Co. 1,900 44
Harley-Davidson, Inc. 15,000 747
HON Industries, Inc. 2,400 65
Katy Industries, Inc. 23,800 235
Leggett & Platt, Inc. 9,100 161
Maytag Corp. 6,000 229
PACCAR, Inc. 1,900 81
Visteon Corp. 2,068 32
Whirlpool Corp. 4,700 179
--------
5,115
--------
Consumer Non-Durables - 3.1%
99 Cents Only Stores (a) 7,100 319
Anheuser-Busch Cos., Inc. 17,900 1,411
Gap, Inc. 2,700 61
Home Depot, Inc. (The) 11,600 558
Kohl's Corp. (a) 800 45
Newell Rubbermaid, Inc. 10,200 265
Rite Aid Corp. 16,000 64
Seagram Co., Ltd. 13,300 800
Target Corp. 2,800 65
Tiffany & Co. 13,200 549
--------
4,137
--------
Consumer Services - 2.4%
Alaska Air Group, Inc. (a) 1,700 44
Continental Airlines, Inc. Class B (a) 3,100 149
Disney (Walt) Co. 48,700 1,896
Marriott International, Inc. Class A 4,800 190
Southwest Airlines Co. 28,750 650
Starwood Hotels & Resorts Worldwide, Inc. 5,400 173
USAirways Group, Inc. (a) 3,900 133
--------
3,235
--------
Energy - 6.6%
Baker Hughes, Inc. 2,800 102
BP Amoco PLC - ADR 9,468 523
Chevron Corp. 7,000 592
Exxon Mobil Corp. 37,584 3,068
Halliburton Co. 10,300 546
Pennzoil-Quaker State Co. 5,800 72
Royal Dutch Petroleum Co. 20,400 1,248
Schlumberger, Ltd. 23,700 2,022
Texaco, Inc. 5,100 263
Transocean Sedco Forex, Inc. 6,764 404
Unocal Corp. 900 30
--------
8,870
--------
Finance - 10.2%
AEGON 24,122 947
AFLAC, Inc. 800 43
Allstate Corp. 2,100 61
American Express Co. 5,100 302
American Financial Group, Inc. 3,900 97
American International Group, Inc. 9,374 835
Bank of America Corp. 8,500 455
10 Annual Report
<PAGE>
SSgA
IAM Shares Fund
Statement of Net Assets, continued
August 31, 2000
Market
Number Value
of (000)
Shares $
------ -----
Bank of New York Co., Inc. 2,800 147
Bank One Corp. 5,400 190
Chase Manhattan Corp. 6,750 377
CIGNA Corp. 500 49
Citigroup, Inc. 106,667 6,227
Fannie Mae 2,200 118
Federal Home Loan Mortgage Corp. 1,200 51
Fifth Third Bancorp 1,200 55
First Union Corp. 3,200 93
Firstar Corp. 3,909 93
FleetBoston Financial Corp. 1,355 58
Gilman & Ciocia, Inc. (a) 17,700 70
Golden West Financial Corp. 1,800 86
Household International, Inc. 17,600 845
MBNA Corp. 1,500 53
Mellon Financial Corp. 800 36
Merrill Lynch & Co., Inc. 1,600 232
Morgan (J.P.) & Co., Inc. 1,000 167
Morgan Stanley Dean Witter & Co. 5,600 602
National City Corp. 1,600 34
Northern Trust Corp. 1,000 84
Progressive Corp. 600 45
Providian Financial Corp. 400 46
Schwab (Charles) Corp. 6,000 229
Stilwell Financial, Inc. (a) 14,600 706
SunTrust Banks, Inc. 1,100 54
U.S. Bancorp 1,900 41
Wachovia Corp. 700 40
Washington Mutual, Inc. 2,700 95
--------
13,663
--------
General Business - 4.2%
Butler International, Inc. (a) 5,700 37
Computer Sciences Corp. (a) 10,200 806
Dispatch Management Services Corp. (a) 5,400 8
Ecolab, Inc. 1,700 66
Knight-Ridder, Inc. 3,400 186
Manpower, Inc. 10,000 362
Meredith Corp. 4,400 120
New York Times Co. Class A 12,000 470
SBC Communications, Inc. 9,853 411
Time Warner, Inc. 1,300 111
Tribune Co. 15,907 568
United Stationers, Inc. (a) 5,500 178
Viacom, Inc. Class B (a) 28,535 1,921
Washington Post Co (The), Class B 221 112
Waste Management, Inc. 10,900 206
--------
5,562
--------
Shelter - 0.8%
Georgia-Pacific Group 5,900 158
Masco Corp. 20,400 398
Owens Corning 5,300 27
Sherwin-Williams Co. 3,700 85
Vulcan Materials Co. 1,200 53
Weyerhaeuser Co. 7,600 352
--------
1,073
--------
Technology - 30.1%
Adobe Systems, Inc. 400 52
Agilent Technologies, Inc. (a) 2,212 133
Allen Telecom, Inc. (a) 11,800 235
America Online, Inc. (a) 23,300 1,366
Amphenol Corp. Class A (a) 7,700 493
Anacomp, Inc. (a) 20,900 16
Applied Materials, Inc. (a) 5,600 483
APW, Ltd. (a) 4,300 189
Avery Dennison Corp. 3,600 195
Cisco Systems, Inc. (a) 65,600 4,506
COMPAQ Computer Corp. 3,800 129
Computer Associates International, Inc. 1,800 57
Dell Computer Corp. (a) 20,200 881
EMC Corp. (a) 14,800 1,450
Energy Conversion Devices, Inc. (a) 10,200 284
Annual Report 11
<PAGE>
SSgA
IAM Shares Fund
Statement of Net Assets, continued
August 31, 2000
Market
Number Value
of (000)
Shares $
------ -----
General Dynamics Corp. 9,600 604
General Motors Corp. Class H (a) 1,980 66
Hewlett-Packard Co. 5,800 700
Honeywell International, Inc. 15,662 604
Intel Corp. 59,200 4,433
International Business Machines Corp. 10,700 1,412
JDS Uniphase Corp. (a) 4,500 560
Litton Industries, Inc. (a) 3,500 194
Lockheed Martin Corp. 4,900 139
Lucent Technologies, Inc. 19,595 819
Microsoft Corp. (a) 49,700 3,470
Motorola, Inc. 8,100 292
Nextel Communications, Inc. Class A (a) 4,000 222
Nortech Systems, Inc. (a) 12,800 115
Nortel Networks Corp. 45,600 3,719
Northrop Grumman Corp. 8,200 638
Oracle Systems Corp. (a) 28,600 2,599
PerkinElmer, Inc. 10,500 944
QUALCOMM, Inc. (a) 6,500 389
Quantum Corp. - DLT & Storage Systems (a) 26,700 362
Quantum Corp. - Hard Disk Drive (a) 21,100 206
Rockwell International Corp. 3,600 146
Scott Technologies, Inc. (a) 8,700 163
Sun Microsystems, Inc. (a) 12,800 1,625
Teledyne Technologies, Inc. (a) 10,100 203
Tellabs, Inc. (a) 600 34
Texas Instruments, Inc. 11,200 750
Textron, Inc. 1,500 84
Thomas & Betts Corp. 6,200 116
Titan Corp. (a) 12,300 303
United Technologies Corp. 9,000 562
Veritas Software Corp. (a) 3,900 470
Verizon Communications 38,172 1,665
Xerox Corp. 28,300 455
Yahoo!, Inc. (a) 5,700 693
--------
40,225
--------
Transportation - 1.7%
Airborne Freight Corp. 7,900 118
Boeing Co. (The) 16,900 906
CSX Corp. 2,200 53
Kansas City Southern Industries, Inc. (a) 3,650 34
Navistar International Corp. (a) 3,000 113
Norfolk Southern Corp. 8,300 133
Ryder System, Inc. 4,800 92
Trans World Airlines, Inc. New (a) 31,200 64
Union Pacific Corp. 6,100 242
United Parcel Service, Inc. Class B 8,814 489
--------
2,244
--------
Utilities - 3.2%
AES Corp. (a) 1,600 102
AT&T Corp. 57,626 1,815
AT&T Wireless Group New (a) 21,800 571
BellSouth Corp. 5,800 216
Enron Corp. 2,600 221
Montana Power Co. 9,700 350
Southern Co. 1,200 36
Sprint Corp. (Fon Group) 1,800 60
Sprint Corp. (PCS Group) (a) 7,100 356
WorldCom, Inc. (a) 14,300 522
--------
4,249
--------
Total Common Stocks
(cost $117,037) 131,977
--------
12 Annual Report
<PAGE>
SSgA
IAM Shares Fund
Statement of Net Assets, continued
August 31, 2000
Principal Market
Amount Value
(000) (000)
$ $
--------- -----
Short-Term Investments - 1.3%
AIM Short Term Investment Prime Portfolio
Class A (b) 1,407 1,407
Federated Investors Prime Cash Obligations
Fund (b) 82 82
United States Treasury Bills 5.650% due
09/14/00(b)(c)(d) 210 210
--------
Total Short-Term Investments
(cost $1,699) 1,699
--------
Total Investments - 100.0%
(identified cost $118,736) 133,676
Other Assets and Liabilities,
Net - 0.0% 14
--------
Net Assets - 100.0% 133,690
========
(a) Nonincome-producing security.
(b) At amortized cost, which approximates market.
(c) Rate noted is yield-to-maturity from date of acquisition.
(d) Held as collateral in connection with open futures contracts purchased by
the fund.
Abbreviations:
ADR - American Depositary Receipt
Unrealized
Number Appreciation
of (Depreciation)
Futures Contracts Contracts (000)
--------- -------------
S&P 500 Index
expiration date 09/00 4 $ 34
--------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased $ 34
========
See accompanying notes which are an integral part of the financial statements.
Annual Report 13
<PAGE>
SSgA
IAM Shares Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amount) August 31, 2000
<TABLE>
<S> <C> <C>
Assets
Investments at market (identified cost $118,736) ........................................... $133,676
Receivables:
Dividends ............................................................................... 193
Daily variation margin on futures contracts ............................................. 18
Prepaid expenses ........................................................................... 12
Short-term investments held as collateral for securities loaned, at market ................. 10,126
--------
Total assets ......................................................................... 144,025
Liabilities
Payables:
Investments purchased ........................................................ $ 8
Fund shares redeemed ......................................................... 140
Accrued fees to affiliates ................................................... 52
Other accrued expenses ....................................................... 9
Payable upon return of securities loaned, at market ............................. 10,126
--------
Total liabilities .................................................................... 10,335
--------
Net Assets ................................................................................. $133,690
========
Net Assets Consist of:
Undistributed net investment income ........................................................ $ 274
Accumulated net realized gain (loss) ....................................................... 161
Unrealized appreciation (depreciation) on:
Investments ............................................................................. 14,940
Futures contracts ....................................................................... 34
Shares of beneficial interest .............................................................. 12
Additional paid-in capital ................................................................. 118,269
--------
Net Assets ................................................................................. $133,690
========
Net Asset Value, offering and redemption price per share:
($133,690,033 divided by 11,576,819 shares of $.001 par value
shares of beneficial interest outstanding) ........................................... $ 11.55
========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
14 Annual Report
<PAGE>
SSgA
IAM Shares Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 2000
<TABLE>
<S> <C> <C>
Investment Income
Dividends ............................................................ $ 1,195
Interest ............................................................. 40
--------
Total investment income ........................................... 1,235
Expenses
Advisory fees ............................................ $ 229
Administrative fees ...................................... 41
Custodian fees ........................................... 42
Distribution fees ........................................ 74
Transfer agent fees ...................................... 28
Professional fees ........................................ 15
Registration fees ........................................ 41
Shareholder servicing fees ............................... 23
Trustees' fees ........................................... 6
Miscellaneous ............................................ 11
--------
Expenses before reductions ............................... 510
Expense reductions ....................................... (3)
--------
Total Expenses, net ............................................... 507
--------
Net investment income ................................................... 728
--------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments .............................................. 178
Futures contracts ........................................ 5 183
--------
Net change in unrealized appreciation (depreciation) on:
Investments .............................................. 14,953
Futures contracts ........................................ 69 15,022
-------- --------
Net realized and unrealized gain (loss) ................................. 15,205
--------
Net increase (decrease) in net assets from operations ................... $ 15,933
========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Annual Report 15
<PAGE>
SSgA
IAM Shares Fund
Statement of Changes in Net Assets
Amounts in thousands
<TABLE>
<CAPTION>
For the Period
For the June 2, 1999*
Fiscal Year Ended to August 31,
August 31, 2000 1999
----------------- --------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ............................................... $ 728 $ 102
Net realized gain (loss) ............................................ 183 75
Net change in unrealized appreciation (depreciation) ................ 15,022 (48)
--------- ---------
Net increase (decrease) in net assets from operations ............ 15,933 129
--------- ---------
Distributions
From net investment income .......................................... (589) --
From net realized gain .............................................. (97) --
--------- ---------
Net decrease in net assets from distributions .................... (686) --
--------- ---------
Share Transactions
Net increase (decrease) in net assets from share transactions ....... 58,127 60,187
--------- ---------
Total net increase (decrease) in net assets ............................ 73,374 60,316
Net Assets
Beginning of period ................................................. 60,316 --
--------- ---------
End of period (including undistributed net investment income of
$274 and $135, respectively) ..................................... $ 133,690 $ 60,316
========= =========
</TABLE>
* Commencement of Operations
See accompanying notes which are an integral part of the financial statements.
16 Annual Report
<PAGE>
SSgA
IAM Shares Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Fiscal Years Ended
August 31,
----------------------
2000 1999*
-------- --------
<S> <C> <C>
Net Asset Value, Beginning of Period ................ $ 10.14 $ 10.00
-------- --------
Income From Operations
Net investment income (a) ........................ .09 .02
Net realized and unrealized gain (loss) .......... 1.42 .12
-------- --------
Total income from operations .................. 1.51 .14
-------- --------
Distributions
From net investment income ....................... (.08) --
From net realized gain ........................... (.02) --
-------- --------
Total distributions ........................... (.10) --
-------- --------
Net Asset Value, End of Period ...................... $ 11.55 $ 10.14
======== ========
Total Return (%)(b) ................................. 14.94 1.40
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ......... 133,690 60,316
Ratios to average net assets (%)(c):
Operating expenses, net ....................... .55 .65
Operating expenses, gross ..................... .55 .67
Net investment income ......................... .79 .72
Portfolio turnover rate (%)(d) ................... 5.34 --
</TABLE>
* For the period June 2, 1999 (commencement of operations) to August 31,
1999.
(a) Average month-end shares were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for the period ended August 31, 1999 are annualized.
(d) The rate for the period ended August 31, 1999 is not meaningful due to the
Fund's short period of operation.
Annual Report 17
<PAGE>
SSgA
IAM Shares Fund
Notes to Financial Statements
August 31, 2000
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 24 investment portfolios which are in operation as
of August 31, 2000. These financial statements report on one portfolio,
the SSgA IAM SHARES Fund (the "Fund"). The Fund invests primarily in
equity securities of companies that have entered into collective
bargaining agreements with the International Association of Machinists and
Aerospace Workers or affiliated labor unions ("IAM companies"). 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 accounting
principles generally accepted in the United States 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.
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.
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.
18 Annual Report
<PAGE>
SSgA
IAM Shares Fund
Notes to Financial Statements, continued
August 31, 2000
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, 2000 are as follows:
Net Unrealized
Federal Tax Unrealized Unrealized Appreciation
Cost Appreciation (Depreciation) (Depreciation)
------------ ------------ -------------- --------------
$118,745,901 $24,728,903 $(9,798,611) $14,930,292
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 year may differ significantly from
distributions during such year. 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
of the investment company which cannot be directly attributed are
allocated among all funds based principally on their relative 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.
3. Securities Transactions
Investment transactions: For the year ended August 31, 2000, purchases and
sales of investment securities, excluding short-term investments and
futures contracts, aggregated to $62,921,942 and $5,024,800, respectively.
Annual Report 19
<PAGE>
SSgA
IAM Shares Fund
Notes to Financial Statements, continued
August 31, 2000
Securities lending: The Investment Company has a securities lending
program whereby each Fund can loan securities with a value up to 33 1/3%
of its total assets to certain brokers. The Fund receives cash (U.S.
currency), U.S. Government or U.S. Government agency obligations as
collateral against the loaned securities. To the extent that a loan is
secured by cash collateral, such collateral shall be invested by State
Street Bank and Trust Company in short-term instruments, money market
mutual funds, and such other short-term investments, provided the
investments meet certain quality and diversification requirements. Under
the securities lending arrangement, the collateral received is recorded on
the Fund's statement of assets and liabilities along with the related
obligation to return the collateral. In those situations where the Company
has relinquished control of securities transferred, it derecognizes the
securities and records a receivable from the counterparty.
Income generated from the investment of cash collateral, less negotiated
rebate fees paid to participating brokers and transaction costs, is
divided between the Fund and State Street Bank and Trust Company and is
recorded as interest income for the Fund. To the extent that a loan is
secured by non-cash collateral, brokers pay the Fund negotiated lenders'
fees, which are divided between the Fund and State Street Bank and Trust
Company and are recorded as interest income for the Fund. All collateral
received will be in an amount at least equal to 102% (for loans of U.S.
securities) or 105% (for non-U.S. securities) of the market value of the
loaned securities at the inception of each loan. Should the borrower of
the securities fail financially, there is a risk of delay in recovery of
the securities or loss of rights in the collateral. Consequently, loans
are made only to borrowers which are deemed to be of good financial
standing. As of August 31, 2000, the value of outstanding securities on
loan and the value of collateral amounted to $9,754,310 and $10,126,382,
respectively. Included in interest income is securities lending income of
$6,252 for the year ended August 31, 2000.
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, through State Street Global Advisors, the investment management
group of theAdviser, 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 .25% of its average daily net assets. The
Adviser voluntarily 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.
In addition, the Fund has entered into arrangements with its Adviser
whereby custody credits realized as a result of uninvested cash balances
were used to reduce a portion of the Fund's expenses. During the year, the
Fund's custodian fees were reduced by $2,658 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly-owned subsidiary of The Northwestern Mutual Life Insurance Company,
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 for services supplied by the
Administrator pursuant to the Administration Agreement, an annual fee,
payable monthly on a pro rata basis. For the period September 1, 1999 to
April 30, 2000, the following
20 Annual Report
<PAGE>
SSgA
IAM Shares Fund
Notes to Financial Statements, continued
August 31, 2000
percentages of the average daily net assets of all domestic funds: $0 up
to and including $500 million - .06%; over $500 million up to and
including $1 billion - .05%; over $1 billion - .03%. Effective May 1,
2000, the annual fee is based on the following percentages of the average
daily net assets of all U.S. Equity portfolios: $0 to $2 billion - .0315%;
over $2 billion - .029%. The Administrator will charge a flat fee of
$30,000 per year per Fund with less than $500 million in net assets and
$1,500 per year for monthly performance reports and use of Russell
Performance Universe software product. In addition, the Fund reimburses
the Administrator for out-of-pocket expenses and start-up costs for new
funds.
Distributor and Shareholder Servicing: The Investment Company has 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 enter 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 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 Shareholder 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, 2000, the Fund
was charged shareholder servicing expenses of $22,936, $13 and $44 by the
Adviser, SSBSI and Solutions. The Fund did not incur any expenses from RIS
and Commercial Banking during this year.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets of the Fund on an
annual basis. The shareholder servicing payments shall not exceed .20% of
the average daily value of net assets of the Fund on an annual basis.
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, 2000.
Annual Report 21
<PAGE>
SSgA
IAM Shares Fund
Notes to Financial Statements, continued
August 31, 2000
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 $25,900 for the year ended
August 31, 2000.
Board of Trustees: The Investment Company paid each Trustee not affiliated
with the Investment Company an annual retainer, plus specified amounts for
board and committee meetings attended. 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, 2000 were
as follows:
Advisory fees $28,131
Administration fees 6,291
Custodian fees 7,634
Distribution fees 12
Shareholder servicing fees 2,082
Transfer agent fees 6,788
Trustees' fees 825
-------
$51,763
=======
Beneficial Interest: As of August 31, 2000, one shareholder was a record
owner of approximately 83% of the total outstanding shares of the Fund.
5. Fund Share Transactions (amounts in thousands)
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
------------------------------------------
2000 1999*
------------------ ------------------
Shares Dollars Shares Dollars
------ -------- ------ --------
<S> <C> <C> <C> <C>
Proceeds from shares sold ........................ 5,732 $ 59,276 5,952 $ 60,232
Proceeds from reinvestment of distributions ...... 65 686 -- --
Payments for shares redeemed ..................... (168) (1,835) (4) (45)
------ -------- ------ --------
Total net increase (decrease) .................... 5,629 $ 58,127 5,948 $ 60,187
====== ======== ====== ========
</TABLE>
* For the period June 2, 1999 (commencement of operations) to August
31, 1999.
6. Interfund Lending Program
The Fund and all other funds of the Investment Company received from the
Securities and Exchange Commission an exemptive order on December 23, 1999
to establish and operate an Interfund Credit Facility. This allows the
Funds to directly lend to and borrow money from the SSgA Money Market Fund
for temporary purposes in accordance with certain conditions. The
borrowing Funds are charged the average of the current Repo Rate and the
Bank Loan Rate. The Fund did not utilize the interfund lending program
during this year.
7. Dividend
On September 1, 2000, the Board of Trustees declared a dividend of $.0236
from net investment income, payable on September 8, 2000 to shareholders
of record on September 5, 2000.
22 Annual Report
<PAGE>
SSgA
IAM Shares Fund
Tax Information
August 31, 2000 (Unaudited)
The Fund paid a distribution of $4,190 from net long-term capital gains
during its taxable year ended August 31, 2000.
Please consult a tax advisor for questions about federal or state income
tax laws.
Annual Report 23
<PAGE>
SSgA IAM Shares 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, Treasurer and CEO
Mark E. Swanson, Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Treasurer
Carla L. Anderson, Assistant 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
160 Federal Street
Boston, Massachusetts 02110
24 Annual Report
