Filed Pursuant to Rule 485(a)
As filed with the Securities and Exchange Commission on February 12, 1998
Registration No. 33-19229; 811-5430
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ( X )
Pre-Effective Amendment No. ( )
Post-Effective Amendment No. 46 ( X )
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 ( X )
Amendment No. 48 ( X )
(Check appropriate box or boxes)
SSgA FUNDS
(Exact Name of Registrant as Specified in Charter)
909 A Street
Tacoma, Washington 98402
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (253) 627-7001
Name and Address of Copies to:
Agent for Service:
Karl J. Ege Philip H. Newman, Esq.
Secretary and General Counsel Goodwin, Procter & Hoar
Frank Russell Investment Management Company Exchange Place
909 A Street Boston, Massachusetts 02109
Tacoma, Washington 98402
Approximate Date of Proposed Public Offering: As soon as
practicable after the effective date of this Registration Statement.
It is proposed that this filing will become effective under Rule 485:
(___) immediately upon filing pursuant to paragraph (b)
( ) on (date) pursuant to paragraph (b)
( ) 60 days after filing pursuant to paragraph (a)
( ) on (date) pursuant to paragraph (a)(1)
( X ) 75 days after filing pursuant to paragraph (a)(2)
( ) on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following:
(___) This post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
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SSgA FUNDS
Form N-1A Cross Reference Sheet
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PART A ITEM NUMBER AND CAPTION PROSPECTUS CAPTION
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1. Cover Page Cover Page
2. Synopsis Table of Contents; and Fund
Operating Expenses
3. Condensed Financial Information Fund Operating Expenses
4. General Description of Registrant
(a)(i) Summary (Classes B and C only); SSgA
Funds; Highlights (Life Solutions
Funds only); Additional
Information--Organization,
Capitalization and Voting
(a)(ii), (b) Summary (Classes B and C only);
Investment Objectives and Policies;
Investment Restrictions and
Policies; and Portfolio Maturity;
Investment Objectives and Asset
Allocation of the SSgA Life
Solutions Funds (Life Solutions
Funds only)
(c) Investment Restrictions and
Policies; Life Solutions Funds:
Special Risk Considerations (Life
Solutions Funds only)
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5. Management of the Fund Summary (Classes B and C only);
General Management; Fund Operating
Expenses; and Portfolio Maturity
6. Capital Stock and Other
Securities
(a) Additional Information--Organization,
Capitalization and Voting
(b) General Management
(c) Not Applicable
(d) Summary (Classes B and C only);
Additional Information--Organization,
Capitalization and Voting
(e) Additional Information--Reports to
Shareholders and Shareholder
Inquiries
(f) Dividends and Distributions
(g) Taxes
<PAGE>
7. Purchase of Securities Being
Offered
(a) Summary (Classes B and C only);
General Management--Distribution
Services and Shareholder Servicing
Arrangements
(b) Valuation of Fund Shares; Purchase
of Fund Shares
(c) Not Applicable
(d) Manner of Offering; Purchase of Fund
Shares
(e), (f) General management--Distribution
Services and Shareholder Servicing
Arrangements
8. Redemption or Purchase
(a) Summary (Classes B and C only);
Redemption of Fund Shares
(b) Not Applicable
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(c) Manner of Offering; Redemption of
Fund Shares
(d) Redemption of Fund Shares
9. Pending Legal Proceedings Not Applicable
PART B ITEM NUMBER AND CAPTION STATEMENT OF ADDITIONAL INFORMATION CAPTION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Not Applicable
13. Investment Objectives and
Policies
(a), (b), (c) Investments
(d) (Prospectus)--Portfolio Maturity
<PAGE>
14. Management of the Fund
(a), (b) Structure and Governance--Trustees
and Officers
(c) Not Applicable
15. Control Persons and Principal
Holders of Securities
(a), (b) Structure and Governance--Controlling
Shareholders; Additional
Information--Organization
Capitalization and Voting
(Prospectus)
(c) Structure and Governance--Controlling
Shareholders
16. Investment Advisory and Other
Services
(a), (b) Operation of Investment
Company--Advisor; General
Management--Advisory Agreement
(Prospectus)
(c) Not Applicable
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(d) Operation of Investment
Company--Administrator
(e) Not Applicable
(f) Operation of Investment
Company--Distribution Plan
(g) Not Applicable
(h), (i) Operation of Investment
Company--Custodian and Transfer
Agent; Additional
Information--Custodian, Transfer
Agent and Accountants (Prospectus)
17. Brokerage Allocation and Other
Policies
(a), (b), (c) Operation of Investment
Company--Brokerage Practices
(d) Not Applicable
(e) Operation of Investment
Company--Brokerage Practices
18. Capital Stock and Other
Securities
<PAGE>
(a) Structure and
Governance--Organization and Business
History
(b) Not Applicable
19. Purchase, Redemption and Pricing
of Securities Being Offered
(a), (b), (c) Operation of Investment
Company--Valuation of Fund Shares;
(Prospectus)--Valuation of Fund
Shares; Redemption of Fund Shares;
Purchase of Fund Shares
20. Tax Status Taxes
21. Underwriters
(a) Operation of Investment
Company--Distribution Plan
(b), (c) Not Applicable
22. Calculation of Performance Data Operation of Investment
Company--Yield and Total Return
Quotations
23. Financial Statements Financial Statements
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Part C
Information required to be included in Part C is set forth under the
appropriate item, so numbered in Part C of this Registration Statement.
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SSgA FUNDS
Contents of Registration Statement
This Registration Statement consists of the following papers and documents:
Cover Sheet
Form N-1A Cross Reference Sheet
Part A - Prospectus
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
Exhibits
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Filed pursuant to Rule 485(a)
File Nos. 33-19229; 811-5430
SSgA FUNDS
One International Place
Boston, Massachusetts 02110
(800) 647-7327
AGGRESSIVE EQUITY FUND
SSgA Funds is a registered, open-end management investment company with
multiple portfolios, each of which is commonly referred to as a mutual fund.
This Prospectus describes and offers shares of beneficial interest in one such
mutual fund, the SSgA Aggressive Equity Fund (the "Aggressive Equity Fund" or
the "Fund"). The Fund seeks to maximize total return through investing in US
equity securities that are fairly valued relative to their growth potential as
measured by SSgA's proprietary models. The Fund's shares are offered without
sales commissions. However, the Fund pays certain distribution expenses under
its Rule 12b-1 plan.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS ANY SUCH
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SHARES IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, STATE STREET BANK AND TRUST COMPANY, AND SHARES ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD,
OR ANY OTHER AGENCY, AND INVOLVE RISKS INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing. Please read and retain this
document for future reference. Additional information about the SSgA Funds has
been filed with the Securities and Exchange Commission ("SEC") in Statements of
Additional Information ("SAI") dated ________, 1998. The SAI is incorporated
herein by reference and is available without charge from Distributor at its
address noted below or by calling (800) 647-7327. The SEC also maintains a
website (www.sec.gov) that contains the SAI, material incorporated by reference
and other information regarding the SSgA Funds. You may also access the SSgA
Funds' website at www.ssgafunds.com
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Investment Advisor,
Custodian
and Transfer Agent: Distributor: Administrator:
State Street Bank and Frank Russell
Trust Russell Fund Investment
Company Distributors, Inc. Management Company
225 Franklin Street One International Place 909 A Street
Boston, Massachusetts Boston, Massachusetts Tacoma, Washington
02110 02110 98402
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PROSPECTUS DATED _________, 1998
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TABLE OF CONTENTS
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Page
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Fund Operating Expenses................................................. 3
SSgA Funds.............................................................. 4
Manner of Offering...................................................... 4
Investment Objectives, Policies and Restrictions........................ 4
Portfolio Turnover...................................................... 8
Dividends and Distributions............................................. 8
Taxes................................................................... 9
Valuation of Fund Shares................................................10
Purchase of Fund Shares.................................................10
Redemption of Fund Shares...............................................12
General Management......................................................14
Fund Expenses...........................................................17
Performance Calculations................................................17
Additional Information..................................................17
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FUND OPERATING EXPENSES (AFTER FEE REIMBURSEMENT)
SSgA AGGRESSIVE EQUITY FUND
The following table is intended to assist the investor in understanding the
various costs and expenses that an investor in the Aggressive Equity Fund will
incur directly or indirectly. THE EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN. For additional information, see "General Management."
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Shareholder Transaction Expenses:
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Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None
Exchange Fee None
Annual Fund Operating Expenses:
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(as a percentage of average daily net assets)
Advisory Fees (After Fee Reimbursement)(1) .57%
12b-1 Distribution and Shareholder
Servicing Fees(1, 2) .07
Other Expenses(1) .46
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Total Operating Expenses (After Fee
Reimbursement)(1, 3) 1.10%
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Examples: 1 year 3 years
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You would pay the following
expenses on a $1,000
investment, assuming: (i)
5% annual return; and (ii)
redemption at the end of
each time period: $12 $34
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1 The Advisor 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
operating expenses of the Fund absent reimbursement would be 1.28% of
average daily net assets on an annual basis. This agreement will remain in
effect for the current fiscal year. The gross annual Advisory expenses
before reimbursement would be .75% of average daily net assets.
2 The Fund's Rule 12b-1 Plan permits charges of up to .25% of the average
daily value of net assets on an annual basis. Shareholder servicing payments
shall not exceed .20% of the average daily value of net assets on an annual
basis. The Advisor currently limits certain shareholder servicing payments
to itself. Currently, the ratio includes .04% for 12b-1 Distribution and
.03% for 12b-1 Shareholder Servicing Fees.
3 Investors purchasing Fund shares through a financial intermediary, such as a
bank or an investment advisor, may also be required to pay additional fees
for services provided by the intermediary. Such investors should contact the
intermediary for information concerning what additional fees, if any, will
be charged.
Long-term shareholders of the Fund may pay more in Rule 12b-1 fees than the
economic equivalent of the maximum front-end sales charges permitted by the
National Association of Securities Dealers, Inc.
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SSgA FUNDS
SSgA Funds ("Investment Company") is an open-end management investment
company that is organized as a Massachusetts business trust. In addition, each
series of the Investment Company is diversified as defined in the Investment
Company Act of 1940, as amended ("1940 Act"). As a "series" company, the
Investment Company is authorized to issue an unlimited number of shares
evidencing beneficial interest in different investment portfolios. Through this
Prospectus, the Investment Company offers shares in one such portfolio, the
Aggressive Equity Fund. State Street Bank and Trust Company (the "Advisor" or
"State Street") serves as the investment advisor for the Fund.
MANNER OF OFFERING
Distribution and Eligible Investors. Shares of the Fund are offered without
a sales commission by Russell Fund Distributors, Inc. (the "Distributor"), the
Investment Company's distributor, to US and foreign institutional and retail
investors that invest for their own account or in a fiduciary or agency
capacity. The Fund will incur distribution expenses under its Rule 12b-1 plan.
See "General Management -- Distribution Services and Shareholder Servicing."
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
The Fund's nonfundamental investment objective is to maximize total return
through investing in US equity securities that are fairly valued relative to
their growth potential as measured by SSgA's proprietary models. This investment
objective may be changed by the Fund's Board of Trustees without shareholder
approval, although shareholders will receive prior notice of any change to the
Fund's investment objective. There can be no assurance that the Fund will meet
its investment objective.
The investable universe is constructed using the full constituents of the
Russell 1000(R) Index plus the top half of the Russell 2000(R) Index
constituents based on market capitalization. The universe is further restricted
by keeping in the universe only those securities that have above average 5-year
earnings growth projections. All current holdings are then added to this
universe to create an investable universe.
All securities comprising the investable universe are ranked using SSgA's
proprietary growth and value measures. The growth measure is the SSgA detailed
estimate revision model, and the value measure utilizes a price/earnings to
growth model. Each of these measures is combined to arrive at an overall
sentiment for each security.
Under normal market conditions, the Fund will invest at least 65% of its
total assets in equity securities. However, the Fund may invest temporarily for
defensive purposes, without limitation, in certain short-term fixed income
securities. Such securities may be used to invest uncommitted cash balances or
to maintain liquidity to meet shareholder redemptions. See "Investment Policies
- - Cash Reserves."
Investment Policies
The investment policies described below reflect the Fund's current
practices, are not fundamental and may be changed by the Board of Trustees of
Investment Company without shareholder approval. For more information on the
Fund's Investment Policies, see the Statement of Additional Information. To the
extent consistent with the Fund's investment objective and restrictions, the
Fund may invest in the following instruments and may use the following
investment techniques:
US Government Securities. US Government securities include US Treasury
bills, notes and bonds and other obligations issued or guaranteed as to interest
and principal by the US Government and its agencies or instrumentalities.
Obligations issued or guaranteed as to interest and principal by the US
Government, its agencies or instrumentalities include securities that are
supported by the full faith and credit of the United States Treasury, securities
that are supported by the right of the issuer to borrow from the United States
Treasury, discretionary authority of the US Government agency or
instrumentality, and securities supported solely by the creditworthiness of the
issuer.
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<PAGE>
Repurchase Agreements. The Fund may enter into repurchase agreements with
banks and other financial institutions, such as broker-dealers. In substance, a
repurchase agreement is a loan for which the Fund receives securities as
collateral. Under a repurchase agreement, a Fund purchases securities from a
financial institution that agrees to repurchase the securities at the Fund's
original purchase price plus interest within a specified time (normally one
business day). The Fund will limit repurchase transactions to those member banks
of the Federal Reserve System and broker-dealers whose creditworthiness Advisor
considers satisfactory. Should the counterparty to a transaction fail
financially, the Fund may encounter delay and incur costs before being able to
sell the securities. Further, the amount realized upon the sale of the
securities may be less than that necessary to fully compensate the Fund.
Reverse Repurchase Agreements. The Fund may enter into reverse repurchase
agreements under the circumstances described in "Investment Restrictions." In
substance, a reverse repurchase agreement is a borrowing for which the Fund
provides securities as collateral. Under a reverse repurchase agreement, the
Fund sells portfolio securities to a financial institution in return for cash in
an amount equal to a percentage of the portfolio securities' market value and
agrees to repurchase the securities at a future date at a prescribed repurchase
price equal to the amount of cash originally received plus interest on such
amount. The Fund retains the right to receive interest and principal payments
with respect to the securities while they are in the possession of the financial
institutions. Reverse repurchase agreements involve the risk of default by the
counterparty, which may adversely affect the Fund's ability to reacquire the
underlying securities.
Forward Commitments. The Fund may contract to purchase securities for a
fixed price at a future date beyond customary settlement time. When effecting
such transactions, cash or marketable securities held by the Fund of a dollar
amount sufficient to make payment for the portfolio securities to be purchased
will be segregated on the Fund's records at the trade date and maintained until
the transaction is settled. The failure of the other party to the transaction to
complete the transaction may cause the Fund to miss an advantageous price or
yield. The Fund bears the risk of price fluctuations during the period between
the trade and settlement dates.
When-Issued Transactions. The Fund may purchase securities on a when-issued
basis. In these transactions, a Fund purchases securities with payment and
delivery scheduled for a future time. Until settlement, the Fund segregates cash
and marketable securities equal in value to their when-issued commitments.
Between the trade and settlement dates, the Fund bears the risk of any
fluctuation in the value of the securities. These transactions involve the
additional risk that the other party may fail to complete the transaction and
cause the Fund to miss a price or yield considered advantageous. The Fund will
engage in when-issued transactions only for the purpose of acquiring portfolio
securities consistent with its investment objective and policies and not for
investment leverage. The Fund will not invest more than 25% of its net assets in
when-issued securities.
Illiquid Securities. The Fund will not invest more than 15% of its net
assets in illiquid securities or securities that are not readily marketable,
including repurchase agreements and time deposits of more than seven days'
duration. The absence of a regular trading market for illiquid securities
imposes additional risks on investments in these securities. Illiquid securities
may be difficult to value and may often be disposed of only after considerable
expense and delay.
Variable Amount Master Demand Notes. Variable amount master demand notes
are unsecured obligations that are redeemable upon demand and are typically
unrated. These instruments are issued pursuant to written agreements between
their issuers and holders. The agreements permit the holders to increase
(subject to an agreed maximum) and the holders and issuers to decrease the
principal amount of the notes, and specify that the rate of interest payable on
the principal fluctuates according to an agreed formula.
Futures Contracts and Options on Futures. For hedging purposes, including
protecting the price or interest rate of securities that the Fund intends to
buy, the Fund may enter into futures contracts that relate to securities in
which they may directly invest and indices comprised of such securities and may
purchase and write call and put options on such contracts.
A financial futures contract is a contract to buy or sell a specified
quantity of financial instruments such as US Treasury bills, notes and bonds,
commercial paper and bank certificates of deposit or the cash value of a
financial instrument index at a specified future date at a price agreed upon
when the contract is made. A stock index futures contract is a contract to buy
or sell specified units of a stock index at a specified future date at a price
agreed upon when the contract is made. The value of a unit is based on the
current value of the contract index. Under such contracts no delivery of the
actual stocks making up the index takes place. Rather, upon expiration of the
contract, settlement is made by exchanging
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<PAGE>
cash in an amount equal to the difference between the contract price and the
closing price of the index at expiration, net of variation margin previously
paid.
Substantially all futures contracts are closed out before settlement date
or called for cash settlement. A futures contract is closed out by buying or
selling an identical offsetting futures contract. Upon entering into a futures
contract, a Fund is required to deposit an initial margin with a custodian for
the benefit of the futures broker. The initial margin serves as a "good faith"
deposit that the Fund will honor their futures commitments. Subsequent payments
(called "variation margin") to and from the broker are made on a daily basis as
the price of the underlying investment fluctuates.
Options on futures contracts give the purchaser the right to assume a
position at a specified price in a futures contract at any time before
expiration of the option contract.
When trading futures contracts, the Fund will not commit more than 5% of
the market value of its total assets to initial margin deposits on futures and
premiums paid for options on futures.
Options on Securities and Securities Indices. The Fund may write and
purchase covered put and call options on securities in which it may directly
invest. Option transactions of the Fund will be conducted so that the total
amount paid on premiums for all put and call options outstanding will not exceed
5% of the value of the Fund's total assets. Further, the Fund will not write a
put or call option or combination thereof if, as a result, the aggregate value
of all securities or collateral used to cover its outstanding options would
exceed 25% of the value of the Fund's total assets.
The Fund may purchase or sell options on securities indices that are
comprised of securities in which it may directly invest, subject to the
limitations set forth above and provided such options are traded on a national
securities exchange or in the over-the-counter market. Options on securities
indices are similar to options on securities except there is no transfer of a
security and settlement is in cash. A call option on a securities index grants
the purchaser of the call, for a premium paid to the seller, the right to
receive in cash an amount equal to the difference between the closing value of
the index and the exercise price of the option times a multiplier established by
the exchange upon which the option is traded.
Lending Portfolio Securities. The Fund may lend portfolio securities with a
value of up to 33-1/3% of its total assets. Such loans may be terminated at any
time. The Fund will receive cash or US Treasury bills, notes and bonds in an
amount equal to at least 100% of the current market value (on a daily
marked-to-market basis) of the loaned securities plus accrued interest. In a
loan transaction, as compensation for lending it securities, the Fund will
receive a portion of the dividends or interest accrued on the securities held as
collateral or, in the case of cash collateral, a portion of the income from the
investment of such cash. In addition, the Fund will receive the amount of all
dividends, interest and other distributions on the loaned securities. However,
the borrower has the right to vote the loaned securities. The Fund will call
loans to vote proxies if a material issue affecting the investment is to be
voted upon. Should the borrower of the securities fail financially, the Fund may
experience delays in recovering the securities or exercising its rights in the
collateral. Loans are made only to borrowers that are deemed by Advisor to be of
good financial standing. In a loan transaction, the Fund will also bear the risk
of any decline in value of securities acquired with cash collateral. The Fund
will minimize this risk by limiting the investment of cash collateral to high
quality instruments of short maturity.
Equity Swaps. Equity swap agreements are contracts between parties in which
one party agrees to make payments to the other party based on the change in
market value of a specified index or asset. In return, the other party agrees to
make payments to the first party based on the return of a different specified
index or asset. Although swap agreements entail the risk that a party will
default on its payment obligations, the portfolios will minimize this risk by
entering into agreements only with counterparties that the Advisor deems
creditworthy. Swap agreements also bear the risk that the portfolios will not be
able to meet their obligation to the counterparty. This risk will be mitigated
by investing the portfolios in the specific asset for which it is obligated to
pay a return.
Cash Reserves. For the purpose of investing uncommitted cash balances or to
maintain liquidity to meet shareholder redemptions, the Fund may invest
temporarily and without limitation in high quality short-term fixed income
securities. These securities include obligations issued or guaranteed as to
principal and interest by the US Government, its agencies or instrumentalities
and repurchase agreements collateralized by these obligations, commercial paper,
bank certificates of deposit, bankers' acceptances and time deposits.
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<PAGE>
Warrants. The Fund may invest in warrants which entitle the holder to buy
equity securities at a specific price for a specific period of time. Warrants
may be considered more speculative than certain other types of investments in
that they do not entitle a holder to dividends or voting rights with respect to
the securities which may be purchased nor do they represent any rights in the
assets of the issuing company.
Convertible Securities. The Fund may invest in convertible securities of
foreign or domestic issues. A convertible security is a fixed-income security (a
bond or preferred stock) which may be converted at a stated price within a
specified period of time into a certain quantity of the common stock of the same
or a different issuer. Convertible securities are senior to common stocks in a
corporation's capital structure but are usually subordinated to similar
nonconvertible securities. Convertible securities provide, through their
conversion feature, an opportunity to participate in capital appreciation
resulting from a market price advance in a convertible security's underlying
common stock. The price of a convertible security is influenced by the market
value of the underlying common stock and tends to increase as the market value
of the underlying stock rises, whereas it tends to decrease as the market value
of the underlying stock declines.
American Depository Receipts (ADRs). The Fund may invest in ADRs under
certain circumstances as an alternative to directly investing in foreign
securities. Generally, ADRs, in registered form, are designed for use in the US
securities markets. ADRs are receipts typically issued by a US bank or trust
company evidencing ownership of the underlying securities. ADRs represent the
right to receive securities of foreign issuers deposited in a domestic bank or a
correspondent bank. ADRs do not eliminate the risk inherent in investing in the
securities of foreign issuers. However, by investing in ADRs rather than
directly in a foreign issuer's stock, the Fund can avoid currency risks during
the settlement period for either purchases or sales. In general, there is a
large liquid market in the US for many ADRs. The information available for ADRs
is subject to the accounting, auditing and financial reporting standards of the
domestic market or exchange on which they are traded, which standards are more
uniform and more exacting than those to which many foreign issuers are subject.
Debt Securities. The Fund may also invest temporarily in investment grade
debt securities for defensive purposes. The Fund may invest in convertible debt
securities. Please see the Statement of Additional Information for a description
of securities ratings.
Purchase of Other Investment Company Funds. To the extent permitted under
the 1940 Act and exemptive rules and orders thereunder, the Fund may seek to
achieve its investment objective by investing solely in the shares of another
investment company that has a substantially similar investment objective and
policies.
Investment Restrictions
The Fund has fundamental investment restrictions, which may be changed only
with the approval of a majority of the Fund's shareholders as defined in the
1940 Act. A more detailed discussion of the Fund's investment restrictions and
investment policies appears in the Statement of Additional Information. Unless
otherwise noted, the fundamental restrictions apply at the time an investment is
made. The Fund may not:
1. Invest 25% or more of the value of its total assets in securities of
companies primarily engaged in any one industry (other than the US
Government, its agencies or instrumentalities). Concentration may
occur as a result of changes in the market value of portfolio
securities, but may not result from investment.
2. Borrow money (including reverse repurchase agreements), except as a
temporary measure for extraordinary or emergency purposes or to
facilitate redemptions (not for leveraging or investment), provided
that borrowings do not exceed an amount equal to 33-1/3% of the
current value of the Fund's assets taken at market value, less
liabilities other than borrowings. If at any time a Fund's borrowings
exceed this limitation due to a decline in net assets, such borrowings
will within three days be reduced to the extent necessary to comply
with this limitation. The Fund will not purchase investments once
borrowed funds (including reverse repurchase agreements) exceed 5% of
its total assets.
3. Pledge, mortgage, or hypothecate its assets. However, the Fund may
pledge securities having a market value at the time of the pledge not
exceeding 33-1/3% of the value of the Fund's total assets to secure
permitted borrowings.
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CERTAIN RISK FACTORS
Futures and Options Contracts. There are certain investment risks in using
futures contracts and options as a hedging technique. Such risks may include:
(1) the inability to close out a futures contract or option caused by the
nonexistence of a liquid secondary market; and (2) an imperfect correlation
between price movements of the futures contracts or option with price movements
of the portfolio securities or securities index subject to the hedge.
PORTFOLIO TURNOVER
The portfolio turnover rate cannot be predicted, but it is anticipated that
the Fund's annual turnover rate generally will not exceed 200%. A high turnover
rate (over 100%) will: (1) increase transaction expenses which will adversely
affect a Fund's performance; and (2) result in increased brokerage commissions
and other transaction costs, and the possibility of realized capital gains.
The Fund may effect portfolio transactions through State Street Brokerage
Services, Inc., an affiliate of the Advisor, when the Advisor determines that
the Fund will receive competitive execution, price and commissions.
DIVIDENDS AND DISTRIBUTIONS
The Board of Trustees intends to declare and pay dividends on shares of
the Fund annually from net investment income. The Board of Trustees intends to
declare distributions annually from net short-term capital gains and from net
20% or 28% capital gains, if any, generally in mid-October. It is intended that
an additional distribution may be declared and paid in December if required for
the Fund to avoid the imposition of a 4% federal excise tax on undistributed
capital gains.
Dividends declared in October, November or December and payable to
shareholders of record in such months will be deemed for Federal income tax
purposes to have been paid by the Fund and received by shareholders on December
31 of that year if the dividend is paid prior to February 1 of the following
year.
Income dividends and capital gains distributions will be paid in
additional shares at their net asset value on the record date unless the
shareholder has elected to receive them in cash. Such election may be made by
giving 30 days' written notice to the Transfer Agent. If it is determined that
the US Postal Service cannot properly deliver Fund mailings to an investor, the
Fund will terminate the investor's election to receive dividends and other
distributions in cash. Thereafter, subsequent dividends and other distributions
will be automatically reinvested in additional shares of the relevant Fund until
the investor notifies the SSgA Funds in writing of the correct address and
request in writing that the election to receive dividends and other
distributions in cash be reinstated.
Any dividend or capital gain distribution paid by the Fund shortly after a
purchase of shares will reduce the per share net asset value of the Fund by the
amount of the dividend or distribution. In effect, the payment will represent a
return of capital to the shareholder. However, the shareholder will be subject
to taxes with respect to such dividend or distribution.
Distribution Option. Investors can choose from four different distribution
options as indicated on the account Application:
(bullet) Reinvestment Option--Income dividends and capital gains distributions
will be automatically reinvested in additional shares of the Fund. If
the investor does not indicate a choice on the Application, this option
will be automatically assigned.
(bullet) Income-Earned Option--Capital gain distributions will be automatically
reinvested, but a check or wire will be sent for each income dividend
distribution.
(bullet) Cash Option--A check or wire will be sent for each income dividend and
capital gain distribution.
-8-
<PAGE>
(bullet) Direct Dividends Option--Dividends and capital gain distribution will
be automatically invested in another identically registered SSgA Fund.
Distributions will be sent to a pre-designated bank by the Automatic Clearing
House ("ACH") on the payable date.
TAXES
The Fund intends to qualify as a regulated investment company ("RIC") under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). As a
RIC, the Fund will not be subject to federal income taxes to the extent it
distributes its net investment income and net capital gain (long term capital
gains in excess of short term capital losses) to its shareholders. The Board
intends to distribute each year substantially all of the Fund's net investment
income and net capital gain.
Dividends from net investment income and distributions of net short-term
capital gains are taxable to shareholders as ordinary income under federal
income tax laws whether paid in cash or in additional shares. Distributions from
net 20% gains and 28% gains are taxable as 20% gains or 28% gains regardless of
the length of time a shareholder has held such shares and whether paid in cash
or additional shares.
Dividends and distributions may also be subject to state or local taxes.
Depending on the state tax rules pertaining to a shareholder, a portion of the
dividends paid by a Fund attributable to direct obligations of the US Treasury
and certain agencies may be exempt from state and local taxes.
The sale of Fund shares by a shareholder is a taxable event and may result
in capital gain or loss. A capital gain or loss may be realized from an ordinary
redemption of shares or an exchange of shares between two mutual funds (or two
series of portfolios of a mutual fund). Any loss incurred on the sale or
exchange of Fund shares held for one year or more will be treated as a 20% loss
or a 28% loss to the extent of capital gain dividends received with respect to
such shares.
Shareholders will be notified after each calendar year of the amounts of
income dividends and net capital gains distributions and the percentage of a
Fund's income attributable to US Treasury and agency obligations. The Fund is
required to withhold a legally determined portion of all taxable dividends,
distributions, and redemption proceeds payable to any noncorporate shareholder
that does not provide the Fund with the shareholder's correct taxpayer
identification number or certification that the shareholder is not subject to
backup withholding.
The foregoing discussion is only a summary of certain federal income tax
issues generally affecting the Fund and its shareholders. Circumstances among
investors may vary and each investor is encouraged to discuss investment in the
Fund with the investor's tax advisor.
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<PAGE>
VALUATION OF FUND SHARES
Net Asset Value Per Share. The Fund determines net asset value once each
business day as of the close of the regular trading session of the New York
Stock Exchange (ordinarily 4 p.m. Eastern time). A business day is one on which
the New York Stock Exchange is open for business. Net asset value per share is
computed by dividing the current value of the Fund's assets, less its
liabilities, by the number of shares of the Fund outstanding and rounding to the
nearest cent.
Valuation of Fund Securities. With the exceptions noted below, the Fund
values portfolio securities at market value. This generally means that equity
and 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 sales, at the closing bid price, on the primary exchange on which the
security is traded. United States equity and fixed income securities traded
principally over-the-counter and options are valued on the basis of the last
reported bid price. Futures contracts are valued on the basis of the last
reported sell price.
Because many fixed income securities do not trade each day, last sale or bid
prices are frequently not available. Fixed income securities therefore may be
valued using prices provided by a pricing service when such prices are
determined by the Custodian to reflect the market value of such securities.
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 best bid or official bid, as
determined by the relevant securities exchange. In the absence of a last sale or
best or official bid price, 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.
Securities maturing within 60 days of the valuation date are valued at
amortized cost unless the Board determines that the amortized cost method does
not represent market value. The amortized cost valuation method initially prices
an instrument at its cost and thereafter assumes a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. While this method provides
certainty in valuation, it may result in periods during which value, as
determined by amortized cost, is higher or lower than the price a Fund would
receive if it sold the instrument.
The Fund values 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.
PURCHASE OF FUND SHARES
Minimum Initial and Subsequent Investments and Account Balance. The Fund
requires a minimum initial investment of $1,000, with the exception of IRA
accounts, for which the minimum initial investment is $250. Subsequent
investments must be at least $100. An investment in the Fund (other than IRA
accounts) may be subject to redemption at the Fund's discretion if the account
balance is less than $1,000 as a result of shareholder redemptions. The Transfer
Agent will give shareholders 60 days' notice that the account will be closed
unless an investment is made to increase the account balance to the $1,000
minimum. Failure to bring the account balance to $1,000 may result in the
Transfer Agent closing the account at the net asset value ("NAV") next
determined on the day the account is closed and mailing the proceeds to the
shareholder's address shown on the Transfer Agent's records. The Fund reserves
the right to reject any purchase order. Investors purchasing Fund assets through
a pension or other participation plan should contact their plan administrator
for further information on purchases.
Offering Dates and Times. Fund shares may be purchased on any business day
without a sales commission. All purchases must be made in US dollars. Purchase
orders in good form (described below) and payments for Fund shares in Federal
funds (or converted to Federal funds) must be received by the Transfer Agent
prior to 4:00 p.m. Eastern time to be effective on the date received. The Fund
reserves the right to reject any purchase order if payment for Fund shares has
not been received by the Transfer Agent prior to 4:00 p.m. Eastern time.
Order and Payment Procedures. There are several ways to invest in the
Fund. The Fund requires a purchase order in good form, which consists of a
completed and signed Application for each new account regardless of the
investment
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<PAGE>
method. For additional information, including the IRA package, additional
Applications or other forms, call the Customer Service Department at (800)
647-7327, or write: SSgA Funds, P.O. Box 8317, Boston, MA 02266-8317.
Mail. For new accounts, please mail the completed Application and check in
the return envelope provided. Additional investments should also be made by
check. Investors must include the Fund name and account number on their checks,
or use the remittance form attached to the confirmation statement (in the return
envelope provided). All checks should be made payable to the SSgA Funds (or in
the case of a retirement account, the check should be payable to the account's
custodian or trustee). All purchase requests should be mailed to one of the
following addresses:
<TABLE>
<CAPTION>
Regular Mail: Registered, Express or Certified Mail:
<S> <C>
SSgA Funds SSgA Funds
P.O. Box 8317 2 Heritage Drive
Boston, MA 02266-8317 North Quincy, MA 02171
</TABLE>
All purchases made by check should be in US dollars from a US bank. Third
party checks and checks drawn on credit card accounts will not be accepted.
Normally, checks are converted to Federal funds within two business days
following receipt of the check. A purchase cannot be effective until Federal
funds are received. When purchases are made by check or periodic account
investment, payment for redemptions may be withheld until the check or account
clears, which may take up to 15 calendar days from the date of purchase.
Telephone Exchange Privilege. Subject to the Fund's minimum investment
requirement, investors may exchange a minimum of $100 of their Fund shares
without charge for shares of any other SSgA Fund. To use this option, contact
the Customer Service Department at (800) 647-7327. Shares are exchanged on the
basis of relative net asset value per share on the business day on which the
call is placed or upon written receipt of instructions in good form by the
Transfer Agent. Exchanges may be made over the phone if the registrations of the
two accounts are identical. If the shares of the Fund were purchased by check,
the shares must have been present in an account for 15 days before the exchange
is made. The exchange privilege will only be available in states which permit
exchanges and may be modified or terminated by the Fund upon 60 days' written
notice to shareholders. For Federal income tax purposes, an exchange constitutes
a sale of shares, which may result in a capital gain or loss.
Federal Funds Wire. An investor may make initial or subsequent investments
by wiring federal funds to State Street, as Transfer Agent, by:
1. Telephoning the Customer Service Department at (800) 647-7327 between the
hours of 8 a.m. and 4 p.m. Eastern time, and stating: (a) the investor's
account registration number, address and social security or tax
identification number; (b) the name of the Fund in which the investment is
to be made and the account number; and (c) the amount being wired.
2. Instructing the wiring bank to wire federal funds to:
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
ABA #0110-0002-8
DDA #9904-631-0
SSgA Aggressive Equity Fund
Account Number and Registration
Failure to properly identify all wires, checks and transfers as indicated
above may cause the Transfer Agent to delay, reject and or incorrectly apply the
settlement of an investor's purchase.
Systematic Investment Plan. Investors can make regular investments in the
Fund with the Systematic Investment Plan by completing the appropriate section
of the Application and attaching a voided personal check. Investors may make
investments monthly, quarterly or annually by deducting $100 or more from their
bank checking accounts. An investor may change the amount or stop systematic
purchase at any time by calling the Customer Service Department at (800)
647-7327.
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<PAGE>
Investors must meet the Fund's minimum initial requirement before establishing
the Systematic Investment Plan. Shares will be purchased at the offering price
next determined following receipt of the order by the Transfer Agent.
Systematic Exchange. The Fund offers the option of having a set amount
exchanged within the SSgA Funds for accounts with identical registrations.
Investors can choose the date, the frequency (monthly, quarterly or annually)
and the amount. Exchanges may be done among the SSgA Funds once the initial
investment per Fund has been satisfied.
Third Party Transactions. Investors purchasing Fund shares through a
program of services offered by a financial intermediary, such as a bank,
broker-dealer, investment advisor or others, may be required by the intermediary
to pay additional fees. Investors should contact the intermediary for
information concerning what additional fees, if any, may be charged.
In Kind Exchange of Securities. The Transfer Agent may, at its discretion,
permit investors to purchase shares through the exchange of securities they
hold. Any securities exchanged must meet the investment objective, policies and
limitations of the Fund, must have a readily ascertainable market value, must be
liquid and must not be subject to restrictions on resale. The market value of
any securities exchanged, plus any cash, must be at least $10 million. Shares
purchased in exchange for securities generally may not be redeemed or exchanged
until the transfer has settled--usually within 15 days following the purchase
exchange.
The basis of the exchange will depend upon the relative net asset value of
the shares purchased and securities exchanged. Securities accepted by the Fund
will be valued in the same manner as the Fund values its assets. Any interest
earned on the securities following their delivery to the Transfer Agent and
prior to the exchange will be considered in valuing the securities. All
interest, dividends subscription or other rights attached to the securities
become the property of the Fund, along with the securities.
REDEMPTION OF FUND SHARES
Fund shares may be redeemed on any business day at the net asset value
next determined after the receipt of a redemption request by following one of
the methods described below. Payments will be made as soon as possible (but will
ordinarily not exceed seven days) and will be mailed to the shareholder's
address of record. Upon request, redemption proceeds will be wire transferred to
the shareholder's account at a domestic commercial bank that is a member of the
Federal Reserve System. Payment for redemption of shares by check may be
withheld for up to 15 days after the date or purchase to assure that the check
is honored.
Redemption requests must be received prior to 4:00 p.m. Eastern time in
order be effective on the date received. Shareholder servicing agents with
underlying shareholders in omnibus accounts who receive redemption requests by
4:00 p.m. Eastern time may transmit the request to the Transfer Agent by 9:00
a.m. Eastern time the next business day and receive the dividend as of the day
the redemption request was originally made by the underlying shareholder.
Telephone Redemption. Shareholders may normally redeem Fund shares by
telephoning the Customer Service Department at (800) 647-7327 between 8:00 a.m.
and 4:00 p.m. Eastern time. Shareholders must complete the appropriate section
of the application and attach a voided check (if applicable) before utilizing
this feature. The Fund and the Transfer Agent will employ reasonable procedures
to confirm that instructions communicated by telephone are properly authorized.
The Fund and the Transfer Agent will not be liable for executing instructions
that are deemed to be authorized after following reasonable procedures. These
procedures include recording telephonic instructions, mailing to the shareholder
a written confirmation of the transaction, performing a personal identity test
with private information not likely to be known by other individuals, and
restricting mailing of redemptions to the shareholder's address of record, if
the address has not been changed within 60 days of the redemption request.
By Wire. Proceeds exceeding $1,000 may be sent via wire transfer to the
investor's pre-designated bank. Proceeds may be sent, depending on the Fund, on
the same or the next day. Although the Fund does not charge a fee for this
feature, the investor's bank may charge a fee for receiving the wire. Investors
are advised to check with their bank before requesting this feature. Requests
must be received prior to 4:00 p.m. The shares will be redeemed using that day's
closing price, and the proceeds will be wired the following business day.
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<PAGE>
Check. Proceeds less than $50,000 may be mailed only to the address shown
on the Transfer Agent's registration record, provided that the address has not
been changed within 60 days of the redemption request. Shares will be redeemed
using that day's closing price (NAV). All proceeds by check will normally be
sent the following business day.
During periods of drastic economic or market changes, shareholders using
this method may encounter delays. In such event, shareholders should consider
using the mail redemption procedure described below.
Mail. In certain circumstances, a shareholder will need to make a request
to sell shares in writing (please use the addresses for purchases by mail listed
under "Purchase of Fund Shares"). The shareholder may need to include additional
items with the request, as shown in the table below. Shareholders may need to
include a signature guarantee, which protects them against fraudulent orders. A
signature guarantee will be required if:
1. The shareholder's address of record has changed within the past 60 days;
2. The shareholder is redeeming more than $50,000 worth of shares; or
3. The shareholder is requesting payment other than by a check mailed to the
address of record and payable to the registered owner(s).
Signature guarantees can usually be obtained from the following sources:
1. A broker or securities dealer, registered with a domestic stock exchange;
2. A federal savings, cooperative or other type of bank;
3. A savings and loan or other thrift institution;
4. A credit union; or
5. A securities exchange or clearing agency.
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<PAGE>
Please check with the institution prior to signing to ensure that they are
an acceptable signature guarantor. A NOTARY PUBLIC CANNOT PROVIDE A SIGNATURE
GUARANTEE.
<TABLE>
<CAPTION>
Seller Requirements for Written Requests
<S> <C>
Owner of (bullet) Letter of instruction, signed by all
individual, persons authorized to sign for the
joint, sole account stating general
proprietorship, titles/capacity, exactly as the account
UGMA/UTMA is registered; and
(custodial
accounts for (bullet) Signature guarantee, if applicable (see
minors) or general above).
partner accounts
Owners of (bullet) Letter of instruction signed by
corporate or authorized person(s), stating capacity
association accounts as indicated by the corporate
resolution;
(bullet) Corporate resolution, certified within
the past 90 days; and
(bullet) Signature guarantee, if applicable (see
above).
Owners or trustees (bullet) Letter of instruction, signed by all
of trust accounts trustees;
(bullet) If the trustees are not named in the
registration, please provide a copy of
the trust document certified within the
past 60 days; and
(bullet) Signature guarantee, if applicable (see
above).
Joint tenancy (bullet) Letter of instruction signed by
shareholders whose surviving tenant(s);
co-tenants are
deceased (bullet) Certified copy of the death
certificate; and
(bullet) Signature guarantee, if applicable (see
above).
</TABLE>
Please contact the Customer Service Department at (800) 647-7327 for
questions and further instructions.
The Fund may pay any portion of the redemption amount in excess of
$250,000 by a distribution in kind of readily marketable securities from the
portfolio of the Fund in lieu of cash. Investors will incur brokerage charges on
the sale of these portfolio securities. The Funds reserve the right to suspend
the right of redemption or postpone the date of payment if emergency conditions,
as specified in the 1940 Act or as determined by the Securities and Exchange
Commission, should exist.
GENERAL MANAGEMENT
The Board of Trustees supervises the management, activities and affairs of
the Fund and has approved contracts with various financial organizations to
provide, among other services, day-to-day management required by the Fund.
Advisory Agreement. The Investment Company employs State Street, through its
division State Street Global Advisors, to furnish investment services to the
Fund. State Street is one of the largest providers of securities processing and
recordkeeping services for US mutual funds and pension funds. State Street
Global Advisors is the investment management business of State Street, a 200
year old pioneer and leader in the world of financial services. State Street
Global Advisors is a wholly owned subsidiary of State Street Corporation a
publicly held bank holding company. State Street, with over $___ billion (US)
under management as of ____________, 1998, provides complete global investment
management services from offices in Atlanta; Boston; Brussels; Clearwater,
Florida; Dubai; Geneva; Hong Kong; London; Prague; Minneapolis; Montpellier;
Montreal; Munich; Paris; San Francisco; Santiago; Sydney; Tokyo; Toronto;
Vienna; and Zurich.
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<PAGE>
Advisor, subject to Board supervision, directs the investment of the Fund in
accordance with the Fund's investment objective, policies and restrictions. Mr.
Richard B. Weed, Assistant Vice President--US Active Equity--is the portfolio
manager primarily responsible for investment decisions regarding the Fund. Mr.
Weed joined SSgA in November 1995. His responsibilities include research,
product development, and portfolio management for the US Active strategy. Mr.
Weed joined State Street as a Credit Officer in March 1994 in the Credit and
Risk Policy Area, where he was responsible for quantifying market risk across
equity, bond, and foreign exchange positions. He holds an MS in Finance and
Accounting from the MIT Sloan School of Management, as MS in Chemical
Engineering from Northeastern University, and an BS in Chemical Engineering from
Worcester Polytechnic Institute. Mr. Weed is a member of the Boston Security
Analysts Society and is also a Level 3 CFA candidate. There are seven other
portfolio managers who assist in managing the Fund. For these services, the Fund
pays Advisor a fee, calculated daily and paid monthly, as described on the
Fund's operating expense table.
The Glass-Steagall Act prohibits a depository state chartered bank such as
Advisor from engaging in the business of issuing, underwriting, selling or
distributing certain securities. The activities of Advisor in informing its
customers of the Fund, performing investment and redemption services and
providing custodian, transfer, shareholder servicing, dividend disbursing and
investment advisory services may raise issues under these provisions. Advisor
has been advised by its counsel that its activities in connection with the Fund
are consistent with its statutory and regulatory obligations. The shares offered
by this Prospectus are not endorsed or guaranteed by State Street or its
affiliates, are not deposits or obligations of State Street or its affiliates,
and are not insured by the Federal Deposit Insurance Corporation or any other
governmental agency.
Changes in federal or state statutes and regulations relating to the
permissible activities of banks and their affiliates, as well as judicial or
administrative decisions or interpretations of such or future statutes and
regulations, could prevent Advisor from continuing to perform all or a part of
the above services for its customers and/or the Fund. If Advisor were prohibited
from serving the Fund in any of its present capacities, the Board of Trustees
would seek an alternative provider(s) of such services. In such event, changes
in the operation of the Fund may occur. It is not expected by Advisor that
existing shareholders would suffer any adverse financial consequences (if
another advisor with equivalent abilities is found) as a result of any of these
occurrences.
State Street may from time to time have discretionary authority over
accounts which invest in Investment Company shares. These accounts include
accounts maintained for securities lending clients and accounts which permit the
use of Investment Company portfolios as short-term cash sweep investments.
Shares purchased for all discretionary accounts are held of record by State
Street, who retains voting control of such shares. As of April 15, 1998, State
Street held of record less than 25% of the issued and outstanding shares of
Investment Company in connection with its discretionary accounts. Consequently,
State Street is not deemed to be a controlling person of Investment Company for
purposes of the 1940 Act.
Under State Street Global Advisors' Code of Ethics, State Street Global
Advisors' employees in Boston (where investment management operations are
conducted) who are deemed to have access to management information are only
permitted to engage in personal securities transactions which do not involve
securities which the Advisor had recommended for purchase or sale, or purchased
or sold, on behalf of its clients. Such employees must report their personal
securities transactions quarterly and supply broker confirmations to the
Advisor.
Administration Agreement. Frank Russell Investment Management Company
("Administrator") serves as administrator of the Fund. Administrator currently
serves as investment manager and administrator to 32 mutual funds with assets of
$____ billion as of ___________, 1998, and acts as administrator to 24 mutual
funds, including the Fund, with assets of $____ billion as of ___________, 1998.
Pursuant to the Administration Agreement with Investment Company,
Administrator will: (1) supervise all aspects of the Fund's operations; (2)
provide the Fund with administrative and clerical services, including the
maintenance of certain of the Fund's books and records; (3) arrange the periodic
updating of the Fund's prospectuses and any supplements thereto; (4) provide
proxy materials and reports to Fund shareholders and the Securities and Exchange
Commission; and (5) provide the Fund with adequate office space and all
necessary office equipment and services, including telephone service, heat,
utilities, stationery supplies and similar items. For these services, the Fund
and Investment Company's other domestic investment portfolios pay Administrator
a combined fee that on an annual basis is equal to the following percentages of
their average aggregate daily net assets: $0 to and including $500 million --
.06%; over $500 million to and including $1 billion -- .05%; and over $1 billion
- -- .03%. The percentage of the fee paid by a particular Fund is equal to the
percentage
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<PAGE>
of average aggregate daily net assets that are attributable to that Fund.
Administrator will also receive reimbursement of expenses it incurs in
connection with establishing new investment portfolios. Further, the
administration fee paid by the Investment Company will be reduced by the sum of
certain distribution related expenses, up to certain maximum percentages, as
follows: (1) 5% from January 1, 1998 to December 31, 1998; and (2) 0% from
January 1, 1999 thereafter.
Administrator also provides administrative services in connection with the
registration of shares of Investment Company with those states in which its
shares are offered or sold. Compensation for such services is on a "time spent"
basis. Investment Company will pay all registration, exemptive application,
renewal and related fees and reasonable out-of-pocket expenses.
Officers and employees of the Administrator and Distributor are permitted
to engage in personal securities transactions subject to restrictions and
procedures set forth in the Confidentiality Manual and Code of Ethics adopted by
the Investment Company, Administrator and Distributor. Such restrictions and
procedures include substantially all of the recommendations of the Advisory
Group of the Investment Company Institute and comply with Securities and
Exchange Commission rules and regulations.
Distribution Services and Shareholder Servicing Arrangements. Pursuant to
the Distribution Agreement with Investment Company, Russell Fund Distributors,
Inc., a wholly owned subsidiary of Administrator, serves as distributor for all
Fund shares.
The Fund has adopted a distribution plan pursuant to Rule 12b-1 (the "Plan")
under the 1940 Act. The purpose of the Plan is to provide for the payment of
certain Investment Company distribution and shareholder servicing expenses.
Under the Plan, Distributor will be reimbursed in an amount up to .25% of the
Fund's average annual net assets for distribution-related and shareholder
servicing expenses. Payments under the Plan will be made to Distributor to
finance activity which is intended to result in the sale and retention of Fund
shares including: (1) payments made to certain broker-dealers, investment
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 Fund shares, including
Distributor's overhead expenses for rent, office supplies, equipment, travel,
communication, compensation and benefits of sales personnel.
Under the Plan, the Fund may also enter into agreements ("Service
Agreements") with financial institutions, which may include Advisor ("Service
Organizations"), to provide shareholder servicing with respect to Fund shares
held by or for the customers of the Service Organizations. Under the Service
Agreements, the Service Organizations may provide various services for such
customers including: answering inquiries regarding the Fund; assisting customers
in changing dividend options, account designations and addresses; performing
subaccounting for such customers; establishing and maintaining customer accounts
and records; processing purchase and redemption transactions; providing periodic
statements showing customers' account balances and integrating such statements
with those of other transactions and balances in the customers' other accounts
serviced by the Service Organizations; arranging for bank wires transferring
customers' funds; and such other services as the customers may request in
connection with the Fund, to the extent permitted by applicable statute, rule or
regulation. Service Organizations may receive from the Fund, for shareholder
servicing, monthly fees at a rate that shall not exceed .20% per annum of the
average daily net asset value of the Fund's shares owned by or for shareholders
with whom the Service Organization has a servicing relationship. Banks and other
financial service firms may be subject to various state laws, and may be
required to register as dealers pursuant to state law.
The Investment Company has entered into Service Agreements with the Advisor
and the following entities related to the Advisor: State Street Brokerage
Services, Inc. ("SSBSI"), Metropolitan Division of Commercial Banking
("Commercial Banking"), Retirement Investment Services ("RIS") Division and
State Street Solutions ("Solutions"). The purpose of the Service Agreements is
to obtain shareholder services for Fund shares owned by clients of each of these
entities. In return for these services, the Investment Company pays each of the
entities a fee each year. These agreements are reviewed annually by the Board of
Trustees.
Payments to the Distributor, as well as payments to Service Organizations
from a Fund are not permitted by the Plan to exceed .25% of the 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
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<PAGE>
forward shall terminate at the end of two years following the year in which the
expenditure was incurred. Service Organizations will be responsible for prompt
transmission of purchase and redemption orders and may charge fees for their
services.
FUND EXPENSES
The Fund will pay all of its expenses other than those expressly assumed
by Advisor and Administrator. The principal expenses of the Fund is the annual
advisory fee payable to Advisor and distribution and shareholder servicing
expenses. Other expenses include: (1) amortization of deferred organizational
costs; (2) taxes, if any; (3) expenses for legal, auditing and financial
accounting services; (4) expense of preparing (including typesetting, printing
and mailing) reports, prospectuses and notices to existing shareholders; (5)
administrative fees; (6) custodian fees; (7) expense of issuing and redeeming
Fund shares; (8) the cost of registering Fund shares under federal and state
laws; (9) shareholder meetings and related proxy solicitation expenses; (10) the
fees, travel expenses and other out-of-pocket expenses of Trustees who are not
affiliated with Advisor or any of its affiliates; (11) insurance, interest,
brokerage and litigation costs; (12) extraordinary expenses as may arise,
including expenses incurred in connection with litigation proceedings and claims
and the legal obligations of Investment Company to indemnify its Trustees,
officers, employees, shareholders, distributors and agents; and (13) other
expenses properly payable by the Fund.
PERFORMANCE CALCULATIONS
From time to time the Fund may advertise its total return. The total return
of a Fund refers to the average annual compounded rates of return from a
hypothetical investment in the Fund over one-, five- and ten-year periods or for
the life of the Fund (as stated in the advertisement), assuming the reinvestment
of all dividend and capital gain distributions.
Comparative performance information may be used from time to time in
advertising or marketing Fund shares, including data from Lipper Analytical
Services, Inc., Wall Street Journal Score Card, Morningstar, or other industry
publications, business periodicals, rating services and market indices. The Fund
may also advertise nonstandardized performance information which is for periods
in addition to those required to be presented.
Total return and other performance figures are based on historical earnings
and are not indications of future performance.
ADDITIONAL INFORMATION
Custodian, Transfer Agent and Independent Accountants. State Street holds
all portfolio securities and cash assets of the Fund, provides portfolio
recordkeeping services and serves as the Fund's transfer agent ("Transfer
Agent") and custodian ("Custodian"). State Street is authorized to deposit
securities in securities depositories or to use the services of subcustodians.
State Street has no responsibility for the supervision and management of the
Fund except as investment advisor. Coopers & Lybrand L.L.P., Boston,
Massachusetts, is Investment Company's independent accountants.
Reports to Shareholders and Shareholder Inquiries. Shareholders will receive
unaudited semiannual financial statements and annual financial statements
audited by Investment Company's independent accountants. Shareholder inquiries
regarding the Prospectus, financial statements and shareholder balances may be
made by calling Distributor at (800) 647-7327.
Organization, Capitalization and Voting. Investment Company 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.
Investment Company issues shares divisible into an unlimited number of
series (or funds), each of which is a separate trust under Massachusetts law.
The Fund is one such series.
-17-
<PAGE>
The Fund share represents an equal proportionate interest in the Fund, has a
par value of $.001 per share and is entitled to such relative rights and
preferences and dividends and distributions earned on the assets belonging to
the Fund as may be declared by the Board of Trustees. Fund shares are fully paid
and nonassessable by Investment Company and have no preemptive rights.
Each Fund share has one vote. There are no cumulative voting rights. There
is no annual meeting of shareholders, but special meetings may be held. On any
matter that affects only a particular investment fund, only shareholders of that
fund vote unless otherwise required by the 1940 Act or the Master Trust
Agreement. The Trustees hold office for the life of the Trust. A Trustee may
resign or retire, and a Trustee may be removed at any time by a vote of
two-thirds of the Investment Company shares or by a vote of a majority of the
Trustees. The Trustees shall promptly call and give notice of a meeting of
shareholders for the purpose of voting upon removal of any Trustee when
requested to do so in writing by holders of not less than 10% of the shares then
outstanding. A vacancy on the Board of Trustees may be filled by the vote of a
majority of the remaining Trustees, provided that immediately thereafter at
least two-thirds of the Trustees have been elected by shareholders.
Investment Company does not issue share certificates for the Fund. Transfer
Agent sends shareholders of the Fund statements concurrent with any transaction
activity, confirming all investments in or redemptions from their accounts. Each
statement also sets forth the balance of shares held in the account.
-18-
<PAGE>
SSgA FUNDS
One International Place
Boston, Massachusetts 02110
INVESTMENT ADVISOR, CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
DISTRIBUTOR
Russell Fund Distributors, Inc.
One International Place
Boston, Massachusetts 02110
ADMINISTRATOR
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
LEGAL COUNSEL
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
-19-
<PAGE>
SSgA FUNDS
SSgA Money Market Fund
SSgA US Government Money Market Fund
SSgA Tax Free Money Market Fund
SSgA S&P 500 Index Fund
SSgA Small Cap Fund
SSgA Special Fund
SSgA Matrix Equity Fund
SSgA Yield Plus Fund
SSgA Growth and Income Fund
SSgA Intermediate Fund
SSgA Active International Fund
SSgA Emerging Markets Fund
SSgA Bond Market Fund
SSgA Life Solutions Growth Fund
SSgA Life Solutions Balanced Fund
SSgA Life Solutions Income and Growth Fund
SSgA International Growth Opportunities Fund
SSgA High Yield Bond Fund
SSgA Real Estate Equity Fund
SSgA Aggressive Equity Fund
-20-
<PAGE>
Filed pursuant to Rule 485(a)
File Nos. 33-19229; 811-5430
SSgA FUNDS
One International Place
Boston, Massachusetts 02110
(800) 647-7327
STATEMENT OF ADDITIONAL INFORMATION
AGGRESSIVE EQUITY FUND
____________________, 1998
SSgA Funds ("Investment Company") is a registered open-end investment
company organized as a Massachusetts business trust offering shares of
beneficial interest in separate investment portfolios. In addition, each series
of the Investment Company is diversified as defined under the Investment Company
Act of 1940, as amended (the "1940 Act").
This Statement of Additional Information supplements or describes in greater
detail the Investment Company and the SSgA Aggressive Equity Fund (the "Fund")
as contained in the Fund's Prospectus dated __________________, 1998. This
Statement is not a Prospectus and should be read in conjunction with the Fund's
Prospectus, which may be obtained by telephoning or writing Investment Company
at the number or address shown above.
-1-
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Structure and Governance............................................ 3
Organization and Business History............................. 3
Shareholder Meetings.......................................... 4
Controlling Shareholders...................................... 4
Principal Shareholders........................................ 4
Trustees and Officers......................................... 4
Operation of Investment Company..................................... 6
Service Providers............................................. 6
Advisor....................................................... 6
Administrator................................................. 7
Distributor................................................... 7
Custodian and Transfer Agent.................................. 7
Independent Accountants....................................... 7
Distribution Plan............................................. 7
Federal Law Affecting State Street............................ 8
Valuation of Fund Shares...................................... 8
Brokerage Practices........................................... 9
Portfolio Turnover Rate....................................... 10
Total Return Quotations....................................... 10
Investments......................................................... 10
Investment Restrictions....................................... 10
Investment Policies........................................... 12
Hedging Strategies and Related Investment Techniques.......... 14
Taxes .............................................................. 18
Financial Statements................................................ 20
Appendix: Description of Securities Ratings........................ 21
</TABLE>
-2-
<PAGE>
STRUCTURE AND GOVERNANCE
Organization and Business History. Investment Company 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.
Investment Company is authorized to issue shares of beneficial interest, par
value $.001 per share, which may be divided into one or more series, one of
which is the Fund. The Investment Company share evidences pro rata ownership
interest in a different investment portfolio, or "Fund." The Fund is one such
investment portfolio. The Trustees may create additional Funds at any time
without shareholder approval.
As of the date of this Statement of Additional Information, Investment
Company is comprised of the following investment portfolios, each of which
commenced operations on the date set forth below the portfolio's name:
<TABLE>
------------------------------------------------------------------
<S> <C>
SSgA Money Market Fund May 2, 1988
------------------------------------------------------------------
SSgA US Government Money Market Fund March 1, 1991
------------------------------------------------------------------
SSgA Matrix Equity Fund May 4, 1992
------------------------------------------------------------------
SSgA Small Cap Fund July 1, 1992
------------------------------------------------------------------
SSgA Yield Plus Fund November 9, 1992
------------------------------------------------------------------
SSgA S&P 500 Index Fund December 30, 1992
------------------------------------------------------------------
SSgA Growth and Income Fund September 1, 1993
------------------------------------------------------------------
SSgA Intermediate Fund September 1, 1993
------------------------------------------------------------------
SSgA US Treasury Money Market Fund December 1, 1993
------------------------------------------------------------------
SSgA Prime Money Market Fund February 22, 1994
------------------------------------------------------------------
SSgA Emerging Markets Fund March 1, 1994
------------------------------------------------------------------
SSgA Tax Free Money Market Fund December 1, 1994
------------------------------------------------------------------
SSgA Active International Fund March 7, 1995
------------------------------------------------------------------
SSgA Bond Market Fund February 7, 1996
------------------------------------------------------------------
SSgA Life Solutions Balanced Fund July 1, 1997
------------------------------------------------------------------
SSgA Life Solutions Growth Fund July 1, 1997
------------------------------------------------------------------
SSgA Life Solutions Income and Growth Fund July 1, 1997
------------------------------------------------------------------
SSgA Special Fund April 30, 1998
------------------------------------------------------------------
SSgA High Yield Bond Fund April 30, 1998
------------------------------------------------------------------
SSgA International Growth Opportunities Fund April 30, 1998
------------------------------------------------------------------
SSgA Real Estate Equity Fund April 30, 1998
------------------------------------------------------------------
SSgA US Treasury Obligations Fund *
------------------------------------------------------------------
SSgA International Pacific Index Fund *
------------------------------------------------------------------
SSgA Aggressive Equity Fund *
------------------------------------------------------------------
</TABLE>
---------------
*As of the date of this Statement of Additional Information, these
portfolios have not commenced operations.
Prospectuses for these investment portfolios may be obtained by calling
Investment Company's distributor, Russell Fund Distributors, Inc., at (800)
647-7327, or at its Internet Web Site at www.ssgafunds.com.
Investment Company is authorized to divide shares of any series into two or
more classes of shares. The shares of each Fund may have such rights and
preferences as the Trustees may establish from time to time, including the right
of redemption (including the price, manner and terms of redemption), special and
relative rights as to
-3-
<PAGE>
dividends and distributions, liquidation rights, sinking or purchase fund
provisions and conditions under which any Fund may have separate voting rights
or no voting rights. Each class of shares of a Fund is entitled to the same
rights and privileges as all other classes of the Fund, except that each class
bears the expenses associated with the distribution and shareholder servicing
arrangements of that class, as well as other expenses attributable to the class
and unrelated to the management of the Fund's portfolio securities. Shares of
the Money Market, US Government Money Market and Tax Free Money Market Funds are
divided into Classes A, B and C.
Any amendment to the Master Trust Agreement that would materially and
adversely affect shareholders of Investment Company as a whole, or shareholders
of a particular Fund, must be approved by the holders of a majority of the
shares of Investment Company or the Fund, respectively. All other amendments may
be effected by Investment Company's Board of Trustees.
Under certain unlikely circumstances, and as is the case with any
Massachusetts business trust, a shareholder of the Fund may be held personally
liable for the obligations of the Fund. The Master Trust Agreement provides that
shareholders shall not be subject to any personal liability for the acts or
obligations of the Fund and that every written agreement, obligation, or other
undertaking of the Fund shall contain a provision to the effect that the
shareholders are not personally liable thereunder. The Master Trust Agreement
also provides that the Fund shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the Fund and satisfy
any judgment thereon. Thus, the risk to shareholders of incurring financial loss
beyond their investments is limited to circumstances in which the Fund itself
would be unable to meet its obligations.
Shareholder Meetings. Investment Company will not have an annual meeting of
shareholders. Special meetings may be convened: (1) by the Board of Trustees;
(2) upon written request to the Board by the holders of at least 10% of the
outstanding shares; or (3) upon the Board's failure to honor the shareholders'
request described above, by holders of at least 10% of the outstanding shares
giving notice of the special meeting to the shareholders.
Controlling Shareholders. The Trustees have the authority and responsibility
to manage the business of Investment Company. Trustees hold office until they
resign or are removed by, in substance, a vote of two-thirds of Investment
Company shares outstanding. State Street may from time to time have
discretionary authority over accounts which invest in Investment Company shares.
These accounts include accounts maintained for securities lending clients and
accounts which permit the use of Investment Company portfolios as short-term
cash sweep investments. Shares purchased for all discretionary accounts are held
of record by State Street, who retains voting control of such shares. As of
April 15, 1998, State Street held of record less than 25% of the issued and
outstanding shares of Investment Company in connection with its discretionary
accounts. Consequently, State Street is not deemed to be a controlling person of
Investment Company for purposes of the 1940 Act.
The Trustees and officers of Investment Company, as a group, own less than
1% of Investment Company's voting securities.
Frank Russell Investment Management Company ("Administrator"), Investment
Company's administrator, will be the sole shareholder of the Fund until such
time as the Fund has public shareholders and therefore may be deemed a
controlling person.
Trustees and Officers. The Board of Trustees is responsible for overseeing
generally the operation of the Fund. The officers, all of whom are employed by,
and are officers of, Administrator or its affiliates, are responsible for the
day-to-day management and administration of the Fund's operations.
Trustees who are not officers or employees of State Street or its affiliates
are paid $55,500 each fiscal year and are reimbursed for travel and other
expenses they incur in attending Board meetings. As of the date of this SAI, the
Trustees were not paid pension or retirement benefits as part of Investment
Company expenses. Investment Company's officers and employees are paid by
Administrator or its affiliates.
-4-
<PAGE>
The following lists Investment Company's Trustees and officers, their
positions with Investment Company, their present and principal occupations
during the past five years and the mailing addresses of Trustees who are not
affiliated with Investment Company. The mailing address for all Trustees and
officers affiliated with Investment Company is the SSgA Funds, 909 A Street,
Tacoma, WA 98402.
An asterisk (*) indicates that a Trustee is an "interested person" of the
Investment Company, as defined in the 1940 Act.
*Lynn L. Anderson, Trustee, Chairman of the Board and President. Born
4/22/39. Trustee, President and Chief Executive Officer, Russell Insurance Funds
(investment company). Director, Chief Executive Officer and Chairman of the
Board, Russell Fund Distributors, Inc. Trustee, President and Chief Executive
Officer, Frank Russell Investment Company (investment company); Director, Chief
Executive Officer and Chairman of the Board, Frank Russell Investment Management
Company; Director, Chief Executive Officer and President, Frank Russell Trust
Company; Director and Chairman, Frank Russell Investment Company Public Limited
Company; November 1995 to February 1997, Director, Frank Russell Company;
Director and Chairman of the Board, Frank Russell Company (Delaware); Director,
Frank Russell Company; March 1989 to June 1993, Director, Frank Russell Company,
Director of Frank Russell Investments (Ireland) Limited; Director and Chairman,
Frank Russell Investment Company Public Limited Company. Until September 1994,
Director and President, The Laurel Funds, Inc. (investment company).
William L. Marshall, Trustee. Born 12/12/42. 33 West Court Street,
Doylestown, PA 18901. Chief Executive Officer and President, Wm. L. Marshall
Associates, Inc. (a registered investment advisor and provider of financial and
related consulting services); Certified Financial Planner; Member, Registry of
Financial Planning Practitioners; and Advisory Committee, International
Association for Financial Planning Broker-Dealer Program. Member, Institute of
Certified Financial Planners. Registered Representative for Securities with FSC
Securities Corp., Marietta, Georgia.
*Steven J. Mastrovich, Trustee. Born 11/3/56. 350 Park Avenue, 15th Floor,
New York, NY 10022. Partner, Squire, Sanders & Dempsey (law firm). From 1994 to
1997, Partner, Brown, Rudnick, Freed & Gesmer (law firm). From 1990 to 1994,
Partner, Warner & Stackpole (law firm).
Patrick J. Riley, Trustee. Born 11/30/48. 21 Custom House Street, Boston, MA
02110. Partner, Riley, Burke & Donahue (law firm).
Richard D. Shirk, Trustee. Born 10/31/45. 3350 Peachtree Road, N.E.,
Atlanta, GA 30326. President and Chief Executive Officer, Blue Cross/Blue Shield
of Georgia. 1990 to 1992, President, Champions Group Resources--Business
Management and Employee Benefits Consulting; 1990, Senior Vice President,
Employee Benefits Division, Cigna Corporation (providing and insuring group
life, health and disability employee benefit products and services); from 1986
to 1990, Senior Vice President, EQUICOR-Equitable HCA Corporation (providing and
insuring group life, health and disability employee benefit products and
services).
*Bruce D. Taber, Trustee. Born 4/25/43. 26 Round Top Road, Boxford, MA
01921. Consultant, Computer Simulation, General Electric Industrial Control
Systems. Prior to that, President, A.B. Reed, Inc. - Engineers, Architects,
Planners. Prior to that, Vice President, Instrumentation and Controls, A.B.
Reed., Inc.
Henry W. Todd, Trustee. Born 5/4/47. 111 Commerce Drive, Montgomeryville, PA
18936. President and Director, Zink & Triest Co., Inc. (dealer in vanilla flavor
materials); Director, A.M. Todd Co. and Flavorite Laboratories.
J. David Griswold, Vice President and Secretary. Born 8/24/57. Assistant
Secretary and Associate General Counsel, Frank Russell Investment Management
Company, Russell Fund Distributors, Inc., Frank Russell Capital
-5-
<PAGE>
Inc., Frank Russell Company and Russell Fiduciary Services Company; Director,
Secretary and Associate General Counsel, Frank Russell Securities, Inc.;
Secretary, Frank Russell Canada Limited/Limitee.
George W. Weber, Senior Vice President, Fund Treasurer and Principal
Accounting Officer. Born 6/3/51. Treasurer and Chief Accounting Officer, Russell
Insurance Funds (investment company); Director of Finance and Operations, Frank
Russell Trust Company; Director, Fund Administration and Operations of Frank
Russell Investment Management Company and Russell Fund Distributors, Inc.;
Treasurer and Chief Accounting Office, Frank Russell Investment Company
(investment company); March 1993 to January 1996, Vice President, Operations,
Funds Management, J.P. Morgan; December 1985 to March 1993, Senior Vice
President, Operations, Frank Russell Investment Company, The Laurel Funds, Inc.
and The Seven Seas Series Fund (investment companies); Director of Operations,
Frank Russell Investment Management Company and Frank Russell Trust Company;
Director, Russell Fund Distributors, Inc.
<TABLE>
<CAPTION>
=======================================
Total Annual
Compensation
from Investment
Company per Fiscal
Trustee Year*
---------------------------------------
<S> <C>
Lynn L. Anderson $0
---------------------------------------
William L. Marshall $55,500
---------------------------------------
Steven J. Mastrovich $55,500
---------------------------------------
Patrick J. Riley $55,500
---------------------------------------
Richard D. Shirk $55,500
---------------------------------------
Bruce D. Taber $55,500
---------------------------------------
Henry W. Todd $55,500
=======================================
</TABLE>
* The Aggressive Equity Fund will pay approximately $816 of the total
compensation amount based on the Fund's expected annual average net assets
of $25 million.
OPERATION OF INVESTMENT COMPANY
Service Providers. Most of the Fund's necessary day-to-day operations are
performed by separate business organizations under contract to Investment
Company. The principal service providers are:
Investment Advisor, Custodian
and Transfer Agent: State Street Bank and Trust Company
Administrator: Frank Russell Investment Management Company
Distributor: Russell Fund Distributors, Inc.
Independent Accountants: Coopers & Lybrand L.L.P.
Advisor. State Street Bank and Trust Company ("State Street" or "Advisor")
serves as the Fund's investment advisor pursuant to an Advisory Agreement dated
April 12, 1988 ("Advisory Agreement"). State Street is a wholly owned subsidiary
of State Street Corporation, a publicly held bank holding company. State
Street's address is 225 Franklin Street, Boston, MA 02110.
Under the Advisory Agreement, Advisor directs the Fund's investments in
accordance with its investment objectives, policies and limitations. For these
services, the Fund pays a fee to Advisor at the rates stated in the Prospectus.
-6-
<PAGE>
The Advisory Agreement will continue from year to year provided that a
majority of the Trustees who are not interested persons of the Fund and either a
majority of all Trustees or a majority of the shareholders of the Fund approve
its continuance. The Agreement may be terminated by Advisor or a Fund without
penalty upon sixty days' notice and will terminate automatically upon its
assignment.
Administrator. Frank Russell Investment Management Company ("Administrator")
serves as the Fund's administrator, pursuant to an Administration Agreement
dated April 12, 1988 ("Administration Agreement"). A description of the services
provided under the Administration Agreement and the basis for computing fees for
such services is provided in the Fund's Prospectus.
The Administration Agreement will continue from year to year provided that a
majority of the Trustees and a majority of the Trustees who are not interested
persons of the Fund and who have no direct or indirect financial interest in the
operation of the Distribution Plan described below or the Administration
Agreement approve its continuance. The Agreement may be terminated by
Administrator or any Fund without penalty upon sixty days' notice and will
terminate automatically upon its assignment.
Administrator is a wholly owned subsidiary of Frank Russell Company. Frank
Russell Company was founded in 1936 and has provided comprehensive asset
management consulting services since 1969 for institutional pools of investment
assets, principally those of large corporate employee benefit plans. Frank
Russell Company and its affiliates have offices in Tacoma, Winston-Salem, New
York City, Toronto, London, Tokyo, Sydney, Paris, Zurich and Auckland, and have
approximately 1,200 officers and employees. Administrator's and Frank Russell
Company's mailing address is 909 A Street, Tacoma, WA 98402.
Distributor. Russell Fund Distributors, Inc. ("Distributor") serves as the
distributor of Fund shares pursuant to a Distribution Agreement dated April 12,
1988 ("Distribution Agreement"). Distributor is a wholly owned subsidiary of
Administrator. Distributor's mailing address is One International Place, Boston,
MA 02110.
Custodian and Transfer Agent. State Street serves as the custodian
("Custodian") and transfer agent ("Transfer Agent") for Investment Company.
State Street also provides the basic portfolio recordkeeping required by
Investment Company for regulatory and financial reporting purposes. For
Custodian services, State Street is paid an annual fee in accordance with the
following: custody services--a fee payable monthly on a pro rata basis, based on
the following percentages of average daily net assets of each Fund: $0 up to
$1.5 billion--0.02%, over $1.5 billion--0.015% (for purposes of calculating the
break point, the assets of all domestic Funds are aggregated); securities
transaction charges from $6.00 to $25.00 per transaction; Eurodollar transaction
fees ranging from $110.00 to $125.00 per transaction; monthly pricing fees of
$375.00 per investment portfolio and from $4.00 to $16.00 per security,
depending on the type of instrument and the pricing service used; and a multiple
class fee of $18,000 per year for each additional class of shares; and yield
calculation fees of $350.00 per non-money market portfolio per year. For
Transfer and Dividend Disbursing Agent services, State Street is paid the
following annual account services fees: $9.00 open account fee; $1.50 closed
account fee; fund minimum per portfolio for one to four portfolios--$36,000,
five to six portfolios--$24,000, and over six portfolios $18,000. Portfolio fees
are allocated to each fund based on the average net asset value of each fund and
are billable on a monthly basis at the rate of 1/12 of the annual fee. State
Street will apply a $5.00 fee to each telephone transaction (purchase or
redemption), which is applied against the monthly billing. State Street is
reimbursed by each Fund for supplying certain out-of-pocket expenses including
postage, transfer fees, stamp duties, taxes, wire fees, telexes, and freight.
Independent Accountants. Coopers & Lybrand L.L.P. serves as the Investment
Company's independent accountants. Coopers & Lybrand L.L.P. is responsible for
performing annual audits of the financial statements and financial highlights in
accordance with generally accepted auditing standards, a review of federal tax
returns, and, pursuant to Rule 17f-2 of the 1940 Act, three security counts. The
mailing address of Coopers & Lybrand L.L.P. is One Post Office Square, Boston,
MA 02109.
-7-
<PAGE>
Distribution Plan. Under the 1940 Act, the Securities and Exchange
Commission has adopted Rule 12b-1, which regulates the circumstances under which
the Fund may, directly or indirectly, bear distribution and shareholder
servicing expenses. The Rule provides that the Fund may pay for such expenses
only pursuant to a plan adopted in accordance with the Rule. Accordingly, the
Fund has adopted an active distribution plan (the "Plan"), which is described in
the Fund's Prospectus.
The Plan provides that the Fund may spend annually, directly or indirectly,
up to 0.25% of the value of its average net assets for distribution and
shareholder servicing services. The Plan does not provide for the Fund to be
charged for interest, carrying or any other financing charges on any
distribution expenses carried forward to subsequent years. A quarterly report of
the amounts expended under the Plan, and the purposes for which such
expenditures were incurred, must be made to the Trustees for their review. The
Plan may not be amended without shareholder approval to increase materially the
distribution or shareholder servicing costs that the Fund may pay. The Plan and
material amendments to it must be approved annually by all of the Trustees and
by the Trustees who are neither "interested persons" (as defined in the 1940
Act) of the Fund nor have any direct or indirect financial interest in the
operation of the Plan or any related agreements.
Under the Plan, the Fund may also enter into agreements ("Service
Agreements") with financial institutions, which may include Advisor ("Service
Organizations"), to provide shareholder servicing with respect to Fund shares
held by or for the customers of the Service Organizations. Such arrangements are
more fully described in the Fund's Prospectus under "Distribution Services and
Shareholder Servicing."
Federal Law Affecting State Street. The Glass-Steagall Act of 1933 prohibits
state chartered banks such as State Street from engaging in the business of
underwriting, selling or distributing certain securities, and prohibits a member
bank of the Federal Reserve System from having certain affiliations with an
entity engaged principally in that business. The activities of State Street in
informing its customers of the Fund, performing investment and redemption
services, providing custodian, transfer, shareholder servicing, dividend
disbursing, agent servicing and investment advisory services, may raise issues
under these provisions. State Street has been advised by its counsel that its
activities in connection with the Fund contemplated under this arrangement are
consistent with its statutory and regulatory obligations.
Valuation of Fund Shares. Net asset value per share is calculated once each
business day for the Fund as of the close of the regular trading session on the
New York Stock Exchange (currently 4:00 p.m. Eastern time). A business day is
one on which the New York Stock Exchange is open for business. Currently, the
New York Stock Exchange is open for trading every weekday except New Year's Day,
Martin Luther King, Jr. Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
Trading may occur in debt securities and in foreign securities at times when
the New York Stock Exchange is closed (including weekends and holidays or after
4:00 p.m., Eastern time, on a regular business day). The trading of portfolio
securities at such times may significantly increase or decrease the net asset
value of the Fund's share when shareholders do not have the ability to purchase
or redeem shares. Therefore, events affecting the values of foreign securities
trading in foreign markets that occur between the time their prices are
determined and the close of the New York Stock Exchange will not be reflected in
the Fund's calculation of its net asset value unless the Board of Trustees
determines that the particular event would materially affect the Fund's net
asset value, in which case an adjustment would be made.
With the exceptions noted below, the Fund values portfolio securities at
fair market value. This generally means that equity securities and 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 sales, at the closing
bid price, on the primary exchange on which the security is traded. United
States equity and fixed-income securities traded principally over-the-counter
and options are valued on the basis of the last reported bid price. Futures
contracts are valued on the basis of the last reported sales price.
-8-
<PAGE>
Because many fixed income securities do not trade each day, last sale or bid
prices are frequently not available. Therefore, fixed income securities may be
valued using prices provided by a pricing service when such prices are
determined by Custodian to reflect the fair market value of such securities.
International equity 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 best bid or official bid, as
determined by the relevant securities exchange. In the absence of a last sale or
best or official bid price, such securities may be valued on the basis of prices
provided by a pricing service if those prices are believed to reflect the fair
value of such securities.
The Fund values securities maturing within 60 days of the valuation date at
amortized cost unless the Board determines that the amortized cost method does
not represent fair value. This method involves valuing an instrument at its cost
and thereafter assuming a constant amortization to maturity of any discount or
premium, even though the portfolio security may increase or decrease in market
value generally in response to changes in interest rates. While this method
provides certainty in valuation, it may result in periods during which value, as
determined by amortized cost, is higher or lower than the price a Fund would
receive if it sold the instrument.
For example, in periods of declining interest rates, the daily yield on Fund
shares computed by dividing the annualized daily income on the Fund's portfolio
by the net asset value based upon the amortized cost valuation technique may
tend to be higher than a similar computation made by using a method of valuation
based upon market prices and estimates. In periods of rising interest rates, the
daily yield on Fund shares computed the same way may tend to be lower than a
similar computation made by using a method of calculation based upon market
prices and estimates.
Brokerage Practices. All portfolio transactions are placed on behalf of the
Fund by Advisor. Advisor ordinarily pays commissions when it executes
transactions on a securities exchange. In contrast, there is generally no stated
commission on the purchase or sale of securities traded in the over-the-counter
markets, including most debt securities and money market instruments. Rather,
the price of such securities includes an undisclosed commission in the form of a
mark-up or mark-down. The cost of securities purchased from underwriters
includes an underwriting commission or concession.
Subject to the arrangements and provisions described below, the selection of
a broker or dealer to execute portfolio transactions is usually made by Advisor.
The Advisory Agreement provides, in substance and subject to specific directions
from officers of Investment Company, that in executing portfolio transactions
and selecting brokers or dealers, the principal objective is to seek the best
overall terms available to the Fund. Ordinarily, securities will be purchased
from primary markets, and Advisor shall consider all factors it deems relevant
in assessing the best overall terms available for any transaction, including the
breadth of the market in the security, the price of the security, the financial
condition and execution capability of the broker or dealer, and the
reasonableness of the commission, if any, for the specific transaction and other
transactions on a continuing basis.
The Advisory Agreement authorizes Advisor to select brokers or dealers to
execute a particular transaction, including principal transactions, and in
evaluating the best overall terms available, to consider the "brokerage and
research services" (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) provided to the Fund and/or Advisor (or its
affiliates). Advisor is authorized to cause the Fund to pay a commission to a
broker or dealer who provides such brokerage and research services for executing
a portfolio transaction which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction. The Fund or
Advisor, as appropriate, must determine in good faith that such commission was
reasonable in relation to the value of the brokerage and research services
provided--viewed in terms of that particular transaction or in terms of all the
accounts over which Advisor exercises investment discretion.
The Trustees periodically review Advisor's performance of its
responsibilities in connection with the placement of portfolio transactions on
behalf of the Fund and review the prices paid by the Fund over
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representative periods of time to determine if such prices are reasonable in
relation to the benefits provided to the Fund. Certain services received by
Advisor attributable to a particular Fund transaction may benefit one or more
other accounts for which Advisor exercises investment discretion, or an
investment portfolio other than that for which the transaction was effected.
Advisor's fees are not reduced by Advisor's receipt of such brokerage and
research services.
Portfolio Turnover Rate. The portfolio turnover rate for the Fund is
calculated by dividing the lesser of purchases or sales of portfolio securities
for the particular year, by the monthly average value of the portfolio
securities owned by the Fund during the year. For purposes of determining the
rate, all short-term securities, including options, futures, forward contracts
and repurchase agreements, are excluded.
Total Return Quotations. The Fund computes average annual total return by
using a standardized method of calculation required by the Securities and
Exchange Commission. Average annual total return is computed by finding the
average annual compounded rates of return on a hypothetical initial investment
of $1,000 over the one-year, five-year and ten-year periods (or life of the
funds as appropriate), that would equate the initial amount invested to the
ending redeemable value, according to the following formula:
P(1+T)((n)) = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a $1,000 payment made at the
beginning of the 1-year, 5-year and 10-year periods at the
end of the year or period
The calculation assumes that all dividends and distributions of the Fund are
reinvested at the price stated in the Prospectus on the dividend dates during
the period, and includes all recurring and nonrecurring fees that are charged to
all shareholder accounts.
Total returns and other performance figures are based on historical earnings
and are not indicative of future performance.
INVESTMENTS
The non-fundamental investment objective of the Fund is set forth in its
Prospectus. The investment objective may be changed with the approval of a
majority of the Fund's Board of Trustees, with at least 60 days' prior notice to
shareholders. In addition to that investment objective, the Fund also has
certain fundamental investment restrictions, which may be changed only with the
approval of a majority of the shareholders of the Fund, and certain
nonfundamental investment restrictions and policies, which may be changed by the
Fund without shareholder approval.
Investment Restrictions
The Fund is subject to the following investment restrictions. Restrictions 1
through 6 are fundamental and restrictions 7 through 9 are nonfundamental.
Unless otherwise noted, these restrictions apply at the time an investment is
made. The Fund will not:
(1) Invest 25% or more of the value of its total assets in securities of
companies primarily engaged in any one industry (other than the US Government,
its agencies and instrumentalities). Concentration may occur as a result of
changes in the market value of portfolio securities, but may not result from
investment.
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(2) Borrow money (including reverse repurchase agreements), except as a
temporary measure for extraordinary or emergency purposes or to facilitate
redemptions (not for leveraging or investment), provided that borrowings do not
exceed an amount equal to 33-1/3% of the current value of the Fund's assets
taken at market value, less liabilities other than borrowings. If at any time a
Fund's borrowings exceed this limitation due to a decline in net assets, such
borrowings will within three days be reduced to the extent necessary to comply
with this limitation. A Fund will not purchase investments once borrowed funds
(including reverse repurchase agreements) exceed 5% of its total assets.
(3) Pledge, mortgage or hypothecate its assets. However, a Fund may pledge
securities having a market value at the time of the pledge not exceeding 33-1/3%
of the value of the Fund's total assets to secure borrowings permitted by
paragraph (2) above.
(4) With respect to 75% of its total assets, invest in securities of any one
issuer (other than securities issued by the US Government, its agencies, and
instrumentalities), if immediately after and as a result of such investment the
current market value of the Fund's holdings in the securities of such issuer
exceeds 5% of the value of the Fund's assets and to not more than 10% of the
outstanding voting securities of such issuer.
(5) Make loans to any person or firm; provided, however, that the making of
a loan shall not include (i) the acquisition for investment of bonds,
debentures, notes or other evidences of indebtedness of any corporation or
government which are publicly distributed or of a type customarily purchased by
institutional investors, or (ii) the entry into repurchase agreements or reverse
repurchase agreements. A Fund may lend its portfolio securities to
broker-dealers or other institutional investors if the aggregate value of all
securities loaned does not exceed 33-1/3% of the value of the Fund's total
assets.
(6) Issue senior securities, except as permitted by its investment
objective, policies and restrictions, and except as permitted by the 1940 Act.
(7) Purchase from or sell portfolio securities to its officers or directors
or other interested persons (as defined in the 1940 Act) of the Fund, including
their investment advisors and affiliates, except as permitted by the 1940 Act
and exemptive rules or orders thereunder.
(8) Invest in securities issued by other investment companies except in
connection with a merger, consolidation, acquisition of assets, or other
reorganization approved by the Fund's shareholders, except that the Fund may
invest in such securities to the extent permitted by the 1940 Act.
(9) Invest more than 15% of its net assets in the aggregate, on an ongoing
basis, in illiquid securities or securities that are not readily marketable,
including repurchase agreements and time deposits of more than seven days'
duration.
With respect to the industry concentration outlined in the Prospectus, the
Advisor treats US domestic banks and foreign branches of US banks as a separate
industry from foreign banks.
Investment Policies
The Fund may invest in the following instruments:
US Government Obligations. The types of US Government obligations in which
the Fund may at times invest include: (1) A variety of US Treasury obligations,
which differ only in their interest rates, maturities and times of issuance; and
(2) obligations issued or guaranteed by US Government agencies and
instrumentalities which are supported by any of the following: (a) the full
faith and credit of the US Treasury, (b) the right of the issuer to borrow an
amount limited to a specific line of credit from the US Treasury, (c)
discretionary authority of
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the US Government agency or instrumentality or (d) the credit of the
instrumentality (examples of agencies and instrumentalities are: Federal Land
Banks, Federal Housing Administration, Farmers Home Administration,
Export--Import Bank of the United States, Central Bank for Cooperatives, Federal
Intermediate Credit Banks, Federal Home Loan Banks, General Services
Administration, Maritime Administration, Tennessee Development Bank,
Asian-American Development Bank, Student Loan Marketing Association,
International Bank for Reconstruction and Development and Federal National
Mortgage Association). No assurance can be given that in the future the US
Government will provide financial support to such US Government agencies or
instrumentalities described in (2)(b), (2)(c) and (2)(d), other than as set
forth above, since it is not obligated to do so by law. The Fund may purchase US
Government obligations on a forward commitment basis.
Repurchase Agreements. The Fund may enter into repurchase agreements with
financial institutions. Under repurchase agreements, these parties sell
securities to a Fund and agree to repurchase the securities at the Fund's cost
plus interest within a specified time (normally one day). The securities
purchased by each Fund have a total value in excess of the purchase price paid
by the Fund and are held by Custodian until repurchased. Repurchase agreements
assist the Fund in being invested fully while retaining "overnight" flexibility
in pursuit of investments of a longer-term nature. The Fund will limit
repurchase transactions to those member banks of the Federal Reserve System and
broker-dealers whose creditworthiness is continually monitored and found
satisfactory by Advisor.
Reverse Repurchase Agreements. The Fund may enter into reverse repurchase
agreements under the circumstances described in "Investment Restrictions". Under
reverse repurchase agreements, a Fund transfers possession of portfolio
securities to financial institutions in return for cash in an amount equal to a
percentage of the portfolio securities' market value and agrees to repurchase
the securities at a future date by repaying the cash with interest. The Fund
retains the right to receive interest and principal payments from the securities
while they are in the possession of the financial institutions. Cash or liquid
high quality debt obligations from a Fund's portfolio equal in value to the
repurchase price including any accrued interest will be segregated by Custodian
on the Fund's records while a reverse repurchase agreement is in effect. Reverse
repurchase agreements involve the risk that the market value of securities sold
by the Fund may decline below the price at which it is obligated to repurchase
the securities.
Forward Commitments. The Fund may contract to purchase securities for a
fixed price at a future date beyond customary settlement time consistent with
the Fund's ability to manage its investment portfolio, maintain a stable net
asset value and meet redemption requests. A Fund may dispose of a commitment
prior to settlement if it is appropriate to do so and realize short-term profits
or losses upon such sale. When effecting such transactions, cash or liquid high
quality debt obligations held by the Fund of a dollar amount sufficient to make
payment for the portfolio securities to be purchased will be segregated on the
Fund's records at the trade date and maintained until the transaction is
settled. Forward commitments involve a risk of loss if the value of the security
to be purchased declines prior to the settlement date, or if the other party
fails to complete the transaction.
When-Issued Transactions. New issues of securities are often offered on a
when-issued basis. This means that delivery and payment for the securities
normally will take place several days after the date the buyer commits to
purchase them. The payment obligation and the interest rate that will be
received on securities purchased on a when-issued basis are each fixed at the
time the buyer enters into the commitment.
The Fund will make commitments to purchase when-issued securities only with
the intention of actually acquiring the securities, but a Fund may sell these
securities or dispose of the commitment before the settlement date if it is
deemed advisable as a matter of investment strategy. Cash or marketable high
quality debt securities equal to the amount of the above commitments will be
segregated on the Fund's records. For the purpose of determining the adequacy of
these securities the segregated securities will be valued at market. If the
market value of such securities declines, additional cash or securities will be
segregated on the Fund's records on a daily basis so that the market value of
the account will equal the amount of such commitments by the Fund. The Fund will
not invest more than 25% of its net assets in when-issued securities.
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Securities purchased on a when-issued basis and held by the Fund are subject
to changes in market value based upon the public's perception of changes in the
level of interest rates. Generally, the value of such securities will fluctuate
inversely to changes in interest rates -- i.e., they will appreciate in value
when interest rates decline and decrease in value when interest rates rise.
Therefore, if in order to achieve higher interest income a Fund remains
substantially fully invested at the same time that it has purchased securities
on a "when-issued" basis, there will be a greater possibility of fluctuation in
the Fund's net asset value.
When payment for when-issued securities is due, the Fund will meet its
obligations from then-available cash flow, the sale of segregated securities,
the sale of other securities or, and although it would not normally expect to do
so, from the sale of the when-issued securities themselves (which may have a
market value greater or less than the Fund's payment obligation). The sale of
securities to meet such obligations carries with it a greater potential for the
realization of capital gains, which are subject to federal income taxes.
Section 4(2) Commercial Paper. The Fund may invest in commercial paper
issued in reliance on the so-called "private placement" exemption from
registration afforded by Section 4(2) of the Securities Act of 1933 ("Section
4(2) paper"). Section 4(2) paper is restricted as to disposition under the
federal securities laws, and generally is sold to investors who agree that they
are purchasing the paper for an investment and not with a view to public
distribution. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) paper is normally resold to other investors through or with the
assistance of the issuer or investment dealers who make a market in Section 4(2)
paper, thus providing liquidity. Pursuant to guidelines established by the Board
of Trustees, Advisor may determine that Section 4(2) paper is liquid for the
purposes of complying with the Fund's investment restriction relating to
investments in illiquid securities.
American Depository Receipts (ADRs). The Fund may invest in ADRs under
certain circumstances as an alternative to directly investing in foreign
securities. Generally, ADRs, in registered form, are designed for use in the US
securities markets. ADRs are receipts typically issued by a US bank or trust
company evidencing ownership of the underlying securities. ADRs represent the
right to receive securities of foreign issuers deposited in a domestic bank or a
correspondent bank. ADRs do not eliminate the risk inherent in investing in the
securities of foreign issuers. However, by investing in ADRs rather than
directly in a foreign issuer's stock, the Fund can avoid currency risks during
the settlement period for either purchases or sales. In general, there is a
large liquid market in the US for many ADRs. The information available for ADRs
is subject to the accounting, auditing and financial reporting standards of the
domestic market or exchange on which they are traded, which standards are more
uniform and more exacting than those to which many foreign issuers are subject.
Warrants. The Fund may invest in warrants which entitle the holder to buy
equity securities at a specific price for a specific period of time. Warrants
may be considered more speculative than certain other types of investments in
that they do not entitle a holder to dividends or voting rights with respect to
the securities which may be purchased nor do they represent any rights in the
assets of the issuing company. Also, the value of the warrant does not
necessarily change with the value of the underlying securities and a warrant
ceases to have value if it is not exercised prior to the expiration date. The
Fund will not invest more than 5% of the value of its net assets in warrants, or
more than 2% in warrants which are not listed on the New York or American Stock
Exchanges.
Hedging Strategies and Related Investment Techniques
The Fund may seek to hedge their portfolios against movements in the equity
markets, interest rates and currency exchange rates through the use of options,
futures transactions, options on futures and forward foreign currency exchange
transactions. The Fund has authority to write (sell) covered call and put
options on their portfolio securities, purchase put and call options on
securities and engage in transactions in stock index options, stock index
futures and financial futures and related options on such futures. The Fund may
enter into such options and futures transactions either on exchanges or in the
over-the-counter ("OTC") markets. Although certain
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risks are involved in options and futures transactions (as discussed in the
Prospectus and below), Advisor believes that, because the Fund will only engage
in these transactions for hedging purposes, the options and futures portfolio
strategies of the Fund will not subject the Fund to the risks frequently
associated with the speculative use of options and futures transactions.
Although the use of hedging strategies by the Fund is intended to reduce the
volatility of the net asset value of the Fund's shares, the Fund's net asset
value will nevertheless fluctuate. There can be no assurance that the Fund's
hedging transactions will be effective.
Writing Covered Call Options. The Fund is authorized to write (sell)
covered call options on the securities in which it may invest and to enter into
closing purchase transactions with respect to such options. Writing a call
option obligates a Fund to sell or deliver the option's underlying security, in
return for the strike price, upon exercise of the option. By writing a call
option, the Fund receives an option premium from the purchaser of the call
option. Writing covered call options is generally a profitable strategy if
prices remain the same or fall. Through receipt of the option premium, the Fund
would seek to mitigate the effects of a price decline. By writing covered call
options, however, the Fund gives up the opportunity, while the option is in
effect, to profit from any price increase in the underlying security above the
option exercise price. In addition, the Fund's ability to sell the underlying
security will be limited while the option is in effect unless the Fund effects a
closing purchase transaction.
Writing Covered Put Options. The Fund is authorized to write (sell) covered
put options on its portfolio securities and to enter into closing transactions
with respect to such options.
When a Fund writes a put option, it takes the opposite side of the
transaction from the option's purchaser. In return for receipt of the premium,
the Fund assumes the obligation to pay the strike price for the option's
underlying instrument if the other party to the option chooses to exercise it.
The Fund may seek to terminate its position in a put option it writes before
exercise by closing out the option in the secondary market at its current price.
If the secondary market is not liquid for an option the Fund has written,
however, the Fund must continue to be prepared to pay the strike price while the
option is outstanding, regardless of price changes, and must continue to set
aside assets to cover its position.
The Fund may write put options as an alternative to purchasing actual
securities. If security prices rise, the Fund would expect to profit from a
written put option, although its gain would be limited to the amount of the
premium it received. If security prices remain the same over time, it is likely
that the Fund will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the Fund would expect to
suffer a loss. This loss should be less than the loss the Fund would have
experienced from purchasing the underlying instrument directly, however, because
the premium received for writing the option should mitigate the effects of the
decline.
Purchasing Put Options. The Fund is authorized to purchase put options to
hedge against a decline in the market value of its portfolio securities. By
buying a put option a Fund has the right (but not the obligation) to sell the
underlying security at the exercise price, thus limiting the Fund's risk of loss
through a decline in the market value of the security until the put option
expires. The amount of any appreciation in the value of the underlying security
will be partially offset by the amount of the premium paid by the Fund for the
put option and any related transaction costs. Prior to its expiration, a put
option may be sold in a closing sale transaction and profit or loss from the
sale will depend on whether the amount received is more or less than the premium
paid for the put option plus the related transaction costs. A closing sale
transaction cancels out the Fund's position as the purchaser of an option by
means of an offsetting sale of an identical option prior to the expiration of
the option it has purchased. The Fund will not purchase put options on
securities (including stock index options discussed below) if as a result of
such purchase, the aggregate cost of all outstanding options on securities held
by the Fund would exceed 5% of the market value of the Fund's total assets.
Purchasing Call Options. The Fund is also authorized to purchase call
options. The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right
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to purchase, rather than sell, the underlying instrument at the option's strike
price (call options on futures contracts are settled by purchasing the
underlying futures contract). The Fund will purchase call options only in
connection with "closing purchase transactions."
Stock Index Options and Financial Futures. The Fund is authorized to engage
in transactions in stock index options and financial futures, and related
options. A Fund may purchase or write put and call options on stock indices to
hedge against the risks of market-wide stock price movements in the securities
in which the Fund invests. Options on indices are similar to options on
securities except that on exercise or assignment, the parties to the contract
pay or receive an amount of cash equal to the difference between the closing
value of the index and the exercise price of the option times a specified
multiple. The Fund may invest in stock index options based on a broad market
index, such as the S&P 500 Index, or on a narrow index representing an industry
or market segment. The Fund's investments in foreign stock index futures
contracts and foreign interest rate futures contracts, and related options, are
limited to only those contracts and related options that have been approved by
the Commodity Futures Trading Commission ("CFTC") for investment by United
States investors. Additionally, with respect to the Fund's investments in
foreign options, unless such options are specifically authorized for investment
by order of the CFTC, the Fund will not make such investments.
The Fund may also purchase and sell stock index futures contracts and other
financial futures contracts ("futures contracts") as a hedge against adverse
changes in the market value of its portfolio securities as described below. A
futures contract is an agreement between two parties which obligates the
purchaser of the futures contract to buy and the seller of a futures contract to
sell a security for a set price on a future date. Unlike most other futures
contracts, a stock index futures contract does not require actual delivery of
securities, but results in cash settlement based upon the difference in value of
the index between the time the contract was entered into and the time of its
settlement. The Fund may effect transactions in stock index futures contracts in
connection with equity securities in which it invests and in financial futures
contracts in connection with debt securities in which it invests, if any.
Transactions by the Fund in stock index futures and financial futures are
subject to limitations as described below under "Restrictions on the Use of
Futures Transactions."
The Fund may sell futures contracts in anticipation of or during a market
decline to attempt to offset the decrease in market value of the Fund's
securities portfolio that might otherwise result. When a Fund is not fully
invested in the securities markets and anticipates a significant market advance,
the Fund may purchase futures in order to gain rapid market exposure that may
partially or entirely offset increases in the cost of securities that the Fund
intends to purchase. As such purchases are made, an equivalent amount of futures
contracts will be terminated by offsetting sales. It is anticipated that, in a
substantial majority of these transactions, the Fund will purchase such
securities upon termination of the long futures position, whether the long
position results from the purchase of a futures contract or the purchase of a
call option, but under unusual circumstances (e.g., the Fund experiences a
significant amount of redemptions), a long futures position may be terminated
without the corresponding purchase of securities.
The Fund also is authorized to purchase and write call and put options on
futures contracts and stock indices in connection with its hedging activities.
Generally, these strategies would be utilized under the same market and market
sector conditions (i.e., conditions relating to specific types of investments)
during which the Fund enters into futures transactions. The Fund may purchase
put options or write call options on futures contracts and stock indices rather
than selling the underlying futures contract in anticipation of a decrease in
the market value of securities. Similarly, the Fund can purchase call options,
or write put options on futures contracts and stock indices, as a substitute for
the purchase of such futures to hedge against the increased cost resulting from
an increase in the market value of securities which the Fund intends to
purchase.
The Fund is also authorized to engage in options and futures transactions
on US and foreign exchanges and in options in the OTC markets ("OTC options").
In general, exchange traded contracts are third-party contracts (i.e.,
performance of the parties' obligations is guaranteed by an exchange or clearing
corporation) with standardized strike prices and expiration dates. OTC options
transactions are two-party contracts with price and
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terms negotiated by the buyer and seller. See "Restrictions on OTC Options"
below for information as to restrictions on the use of OTC options.
The Fund is authorized to purchase or sell listed or OTC foreign security
or currency options, foreign security or currency futures and related options as
a short or long hedge against possible variations in foreign exchange rates and
market movements. Such transactions could be effected with respect to hedges on
non-US dollar denominated securities owned by a Fund, sold by a Fund but not yet
delivered, or committed or anticipated to be purchased by a Fund. As an
illustration, a Fund may use such techniques to hedge the stated value in US
dollars of an investment in a yen-denominated security. In such circumstances,
for example, the Fund can purchase a foreign currency put option enabling it to
sell a specified amount of yen for US dollars at a specified price by a future
date. To the extent the hedge is successful, a loss in the value of the yen
relative to the US dollar will tend to be offset by an increase in the value of
the put option.
Restrictions on the Use of Futures Transactions. The purchase or sale of a
futures contract differs from the purchase or sale of a security in that no
price or premium is paid or received. Instead, an amount of cash or securities
acceptable to the broker and the relevant contract market, which varies, but is
generally about 5% of the contract amount, must be deposited with the broker.
This amount is known as "initial margin" and represents a "good faith" deposit
assuring the performance of both the purchaser and seller under the futures
contract. Subsequent payments to and from the broker, called "variation margin,"
are required to be made on a daily basis as the price of the futures contract
fluctuates making the long and short positions in the futures contracts more or
less valuable, a process known as "marking to market." At any time prior to the
settlement date of the futures contract, the position may be closed out by
taking an opposite position which will operate to terminate the position in the
futures contract. A final determination of variation margin is then made,
additional cash is required to be paid to or released by the broker and the
purchaser realizes a loss or gain. In addition, a nominal commission is paid on
each completed sale transaction.
Regulations of the CFTC applicable to the Fund require that all of the
Fund's futures and options on futures transactions constitute bona fide hedging
transactions and that the Fund not enter into such transactions if, immediately
thereafter, the sum of the amount of initial margin deposits on the Fund's
existing futures positions and premiums paid for related options would exceed 5%
of the market value of the Fund's total assets.
Restrictions on OTC Options. The Fund will engage in OTC options, including
OTC stock index options, OTC foreign security and currency options and options
on foreign security and currency futures, only with member banks of the Federal
Reserve System and primary dealers in US Government securities or with
affiliates of such banks or dealers which have capital of at least $50 million
or whose obligations are guaranteed by an entity having capital of at least $50
million. The Fund will acquire only those OTC options for which Advisor believes
the Fund can receive on each business day at least two independent bids or
offers (one of which will be from an entity other than a party to the option).
The Staff of the SEC has taken the position that purchased OTC options and
the assets used as cover for written OTC options are illiquid securities.
Therefore, the Fund has adopted an operating policy pursuant to which it will
not purchase or sell OTC options (including OTC options on futures contracts)
if, as a result of such transaction, the sum of: (1) the market value of
outstanding OTC options held by the Fund; (2) the market value of the underlying
securities covered by outstanding OTC call options sold by the Fund; (3) margin
deposits on the Fund's existing OTC options on futures contracts; and (4) the
market value of all other assets of the Fund that are illiquid or are not
otherwise readily marketable, would exceed 10% of the net assets of the Fund,
taken at market value. However, if an OTC option is sold by the Fund to a
primary US Government securities dealer recognized by the Federal Reserve Bank
of New York and the Fund has the unconditional contractual right to repurchase
such OTC option from the dealer at a predetermined price, then the Fund will
treat as illiquid such amount of the underlying securities as is equal to the
repurchase price less the amount by which the option is "in-the-money" (current
market value of the underlying security minus the option's strike price). The
repurchase price with
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primary dealers is typically a formula price which is generally based on a
multiple of the premium received for the option plus the amount by which the
option is "in-the-money."
Asset Coverage for Futures and Options Positions. The Fund will not use
leverage in its options and futures strategies. Such investments will be made
for hedging purposes only. The Fund will hold securities or other options or
futures positions whose values are expected to offset its obligations under the
hedge strategies. The Fund will not enter into an option or futures position
that exposes the Fund to an obligation to another party unless it owns either:
(1) an offsetting position in securities or other options or futures contracts;
or (2) cash, receivables and short-term debt securities with a value sufficient
to cover its potential obligations. The Fund will comply with guidelines
established by the SEC with respect to coverage of options and futures
strategies by mutual funds, and if the guidelines so require will set aside cash
and high grade liquid debt securities in a segregated account with its custodian
bank in the amount prescribed. The Fund's custodian shall maintain the value of
such segregated account equal to the prescribed amount by adding or removing
additional cash or liquid securities to account for fluctuations in the value of
securities held in such account. Securities held in a segregated account cannot
be sold while the futures or option strategy is outstanding, unless they are
replaced with similar securities. As a result, there is a possibility that
segregation of a large percentage of a Fund's assets could impede portfolio
management or the Fund's ability to meeting redemption requests or other current
obligations.
Risk Factors in Options, Futures, Forward and Currency Transactions.
Utilization of options and futures transactions to hedge the Fund's portfolios
involves the risk of imperfect correlation in movements in the price of options
and futures and movements in the price of securities or currencies which are the
subject of the hedge. If the price of the options or futures moves more or less
than the price of hedged securities or currencies, the Fund will experience a
gain or loss which will not be completely offset by movements in the price of
the subject of the hedge. The successful use of options and futures also depends
on Advisor's ability to correctly predict price movements in the market involved
in a particular options or futures transaction. To compensate for imperfect
correlations, the Fund may purchase or sell stock index options or futures
contracts in a greater dollar amount than the hedged securities if the
volatility of the hedged securities is historically greater than the volatility
of the stock index options or futures contracts. Conversely, the Fund may
purchase or sell fewer stock index options or futures contracts, if the
historical price volatility of the hedged securities is less than that of the
stock index options or futures contracts. The risk of imperfect correlation
generally tends to diminish as the maturity date of the stock index option or
futures contract approaches. Options are also subject to the risks of an
illiquid secondary market, particularly in strategies involving writing options,
which the Fund cannot terminate by exercise. In general, options whose strike
prices are close to their underlying instruments' current value will have the
highest trading volume, while options whose strike prices are further away may
be less liquid.
The Fund intends to enter into options and futures transactions, on an
exchange or in the OTC market, only if there appears to be a liquid secondary
market for such options or futures or, in the case of OTC transactions, the
Advisor believes the Fund can receive on each business day at least two
independent bids or offers. However, there can be no assurance that a liquid
secondary market will exist at any specific time. Thus, it may not be possible
to close an options or futures position. The inability to close options and
futures positions also could have an adverse impact on a Fund's ability to
effectively hedge its portfolio. There is also the risk of loss by a Fund of
margin deposits or collateral in the event of bankruptcy of a broker with whom
the Fund has an open position in an option, a futures contract or related
option.
The exchanges on which options on portfolio securities and currency options
are traded have generally established limitations governing the maximum number
of call or put options on the same underlying security or currency (whether or
not covered) which may be written by a single investor, whether acting alone or
in concert with others (regardless of whether such options are written on the
same or different exchanges or are held or written in one or more accounts or
through one or more brokers). "Trading limits" are imposed on the maximum number
of contracts which any person may trade on a particular trading day.
-17-
<PAGE>
TAXES
The Fund intends to qualify for treatment as a regulated investment company
("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended
("the Code"). As a RIC, the Fund will not be liable for federal income taxes on
taxable net investment income and net capital gain (long-term capital gains in
excess of short-term capital losses) that it distributes to its shareholders,
provided that the Fund distributes annually to its shareholders at least 90% of
its net investment income and net short-term capital gain for the taxable year
("Distribution Requirement"). For a Fund to qualify as a RIC it must abide by
all of the following requirements: (1) at least 90% of the Fund's gross income
each taxable year must be derived from dividends, interest, payments with
respect to securities loans, gains from the sale or other disposition of stock
or securities or foreign currencies, or other income (including gains from
options, futures or forward contracts) derived with respect to its business of
investing in such stock, securities or currencies ("Income Requirement"); (2) at
the close of each quarter of the Fund's taxable year, at least 50% of the value
of its total assets must be represented by cash and cash items, US Government
securities, securities of other RICs, and other securities, with such other
securities limited, in respect of any one issuer, to an amount that does not
exceed 5% of the total assets of the Fund and that does not represent more than
10% of the outstanding voting securities of such issuer; and (3) at the close of
each quarter of the Fund's taxable year, not more than 25% of the value of its
assets may be invested in securities (other than US Government securities or the
securities of other RICs) of any one issuer.
The Fund will be subject to a nondeductible 4% excise tax to the extent it
fails to distribute by the end of any calendar year an amount at least equal to
the sum of: (1) 98% of its ordinary income for that year; (2) 98% of its capital
gain net income for the one-year period ending on October 31 of that year; and
(3) certain undistributed amounts from the preceding calendar year. For this and
other purposes, dividends declared in October, November or December of any
calendar year and made payable to shareholders of record in such month will be
deemed to have been received on December 31 of such year if the dividends are
paid by the Fund subsequent to December 31 but prior to February 1 of the
following year.
If a shareholder receives a distribution taxable as a 20% gain or a 28% gain
with respect to shares of a Fund and redeems or exchanges the shares without
having held the shares for more than one year, then any loss on the redemption
or exchange will be treated as a 20% loss or a 28% loss to the extent of the
respective capital gain distribution.
Issues Related to Hedging and Option Investments. A Fund's ability to make
certain investments may be limited by provisions of the Code that require
inclusion of certain unrealized gains or losses in the Fund's income for
purposes of the Income Requirement and the Distribution Requirement, and by
provisions of the Code that characterize certain income or loss as ordinary
income or loss rather than capital gain or loss. Such recognition,
characterization and timing rules will affect investments in certain futures
contracts, options, foreign currency contracts and debt securities denominated
in foreign currencies.
Foreign Income Taxes. Investment income received by the Fund from sources
within foreign countries may be subject to foreign income taxes withheld at the
source. The United States has entered into tax treaties with many foreign
countries which would entitle the Fund to a reduced rate of such taxes or
exemption from taxes on such income. It is impossible to determine the effective
rate of foreign tax for a Fund in advance since the amount of the assets to be
invested within various countries is not known.
If the Fund invests in an entity that is classified as a passive foreign
investment company ("PFIC") for federal income tax purposes, the application of
certain provisions of the Code applying to PFICs could result in the imposition
of certain federal income taxes on the Fund. The Fund can elect to
mark-to-market its PFIC holdings in lieu of paying taxes on gains or
distributions therefrom.
Foreign shareholders should consult with their tax advisors as to if and how
the federal income tax and its withholding requirements applies to them.
-18-
<PAGE>
State and Local Taxes. Depending upon the extent of the Fund's activities in
states and localities in which its offices are maintained, its agents or
independent contractors are located or it is otherwise deemed to be conducting
business, the Fund may be subject to the tax laws of such states or localities.
The foregoing discussion is only a summary of certain federal income tax
issues generally affecting the Fund and its shareholders. Circumstances among
investors may vary and each investor is encouraged to discuss investment in the
Fund with the investor's tax advisor.
FINANCIAL STATEMENTS
Unaudited financial statements, including notes to the financial statements
and financial highlights, will be available within four to six months from the
later of the date of this Statement of Additional Information or the date on
which the Fund first accept a subscription from an unaffiliated shareholder.
Audited financial statements will be available within 60 days following the end
of the Fund's then current fiscal year. When available, copies of the financial
statements can be obtained without charge by calling Distributor at (800)
647-7327.
-19-
<PAGE>
APPENDIX
DESCRIPTION OF SECURITIES RATINGS
Ratings of Debt Instruments
Moody's Investors Service, Inc. ("Moody's") -- Long Term Debt Ratings.
Aaa -- Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risk appear somewhat larger than the Aaa securities.
A -- Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B. The modifier 1 indicates that the obligation
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of
that generic rating category.
Standard & Poor's Corporation ("S&P"). The ratings are based, in varying
degrees, on the following considerations: (1) The likelihood of default --
capacity and willingness of the obligator as to the timely payment of interest
and repayment of principal in accordance with the terms of the obligation; (2)
The nature of and provisions of the obligation; and (3) The protection afforded
by, and relative position of, the obligation in the event of bankruptcy,
reorganization, or other arrangement under the laws of bankruptcy and other laws
affecting creditors' rights.
AAA -- Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA -- Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A -- Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB -- Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
-20-
<PAGE>
Plus (+) or minus (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
Ratings of Commercial Paper
Moody's. Moody's short-term debt ratings are opinions of the ability of
issuers to repay punctually senior debt obligations. These obligations have an
original maturity not exceeding one year, unless explicitly noted. Moody's
employs the following three designations, all judged to be investment grade, to
indicate the relative repayment ability of rated issuers:
(bullet) Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations.
Prime-1 repayment ability will often be evidenced by many of the
following characteristics:
(bullet) Leading market positions in well-established industries.
(bullet) High rates of return on funds employed.
(bullet) Conservative capitalization structure with moderate
reliance on debt and ample asset protection.
(bullet) Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
(bullet) Well-established access to a range of financial markets
and assured sources of alternate liquidity.
(bullet) Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This
will normally be evidenced by many of the characteristics cited
above but to a lesser degree. Earnings trends and coverage ratios,
while sound, may be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by
external conditions. Ample alternative liquidity is maintained.
(bullet) Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term obligations.
The effect of industry characteristics and market compositions may
be more pronounced. Variability in earnings and profitability may
result in changes in the level of debt protection measurements and
may require relatively high financial leverage. Adequate alternate
liquidity is maintained.
(bullet) Issuers rated Not Prime do not fall within any of the Prime rating
categories.
S&P. An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt considered shot-term in the relevant
market. Ratings are graded into several categories, ranging from A-1 for the
highest quality obligations to D for the lowest. These categories are as
follows:
A-1 -- This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+) designation.
A-2 -- Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
Fitch's Investors Service, Inc. ("Fitch"). Commercial paper rated by
Fitch reflects Fitch's current appraisal of the degree of assurance of timely
payment of such debt. An appraisal results in the rating of an issuer's
paper as F-1, F-2, F-3, or F-4.
F-1 -- This designation indicates that the commercial paper is regarded as
having the strongest degree of assurance for timely payment.
-21-
<PAGE>
F-2 -- Commercial paper issues assigned this rating reflect an assurance of
timely payment only slightly less in degree than those issues rated F-1.
Duff and Phelps, Inc. Duff & Phelps' short-term ratings are consistent with
the rating criteria utilized by money market participants. The ratings apply to
all obligations with maturities of under one year, including commercial paper,
the uninsured portion of certificates of deposit, unsecured bank loans, master
notes, bankers acceptances, irrevocable letters of credit, and current
maturities of long-term debt. Asset-backed commercial paper is also rated
according to this scale.
Emphasis is placed on liquidity which is defined as not only cash from
operations, but also access to alternative sources of funds including trade
credit, bank lines, and the capital markets. An important consideration is the
level of an obligor's reliance on short-term funds on an ongoing basis.
The distinguishing feature of Duff & Phelps' short-term ratings is the
refinement of the traditional '1' category. The majority of short-term debt
issuers carry the highest rating, yet quality differences exist within that
tier. As a consequence, Duff & Phelps has incorporated gradations of '1+' (one
plus) and '1-' (one minus) to assist investors in recognizing those differences.
Duff 1+--Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative sources of
funds, is outstanding, and safety is just below risk-free U.S. Treasury
short-term obligations.
Duff 1--Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors. Risk factors are
minor.
Duff 1- -- High certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk factors are very
small.
Good Grade. Duff 2--Good certainty of timely payment. Liquidity factors
and company fundamentals are sound. Although ongoing funding needs may
enlarge total financing requirements, access to capital markets is good.
Risk factors are small.
Satisfactory Grade. Duff 3--Satisfactory liquidity and other protection
factors qualify issue as to investment grade. Risk factors are larger and
subject to more variation. Nevertheless, timely payment is expected.
Non-Investment Grade. Duff 4--Speculative investment characteristics.
Liquidity is not sufficient to ensure against disruption in debt service.
Operating factors and market access may be subject to a high degree of
variation.
Default. Duff 5--Issuer failed to meet scheduled principal and/or
interest payments.
IBCA, Inc. In addition to conducting a careful review of an institution's
reports and published figures, IBCA's analysts regularly visit the companies for
discussions with senior management. These meetings are fundamental to the
preparation of individual reports and ratings. To keep abreast of any changes
that may affect assessments, analysts maintain contact throughout the year with
the management of the companies they cover.
IBCA's analysts speak the languages of the countries they cover, which is
essential to maximize the value of their meetings with management and to
properly analyze a company's written materials. They also have a thorough
knowledge of the laws and accounting practices that govern the operations and
reporting of companies within the various countries.
-22-
<PAGE>
Often, in order to ensure a full understanding of their position, companies
entrust IBCA with confidential data. While these data cannot be disclosed in
reports, they are taken into account when assigning our ratings. Before dispatch
to subscribers, a draft of the report is submitted to each company to permit
correction of any factual errors and to enable clarification of issues raised.
IBCA's Rating Committees meet at regular intervals to review all ratings and
to ensure that individual ratings are assigned consistently for institutions in
all the countries covered. Following the Committee meetings, ratings are issued
directly to subscribers. At the same time, the company is informed of the
ratings as a matter of courtesy, but not for discussion.
A1+--Obligations supported by the highest capacity for timely repayment.
A1--Obligations supported by a very strong capacity for timely repayment.
A2--Obligations supported by a strong capacity for timely repayment,
although such capacity may be susceptible to adverse changes in business,
economic or financial conditions.
B1--Obligations supported by an adequate capacity for timely repayment. Such
capacity is more susceptible to adverse changes in business, economic, or
financial conditions than for obligations in higher categories.
B2--Obligations for which the capacity for timely repayment is susceptible
to adverse changes in business, economic or financial conditions.
C1--Obligations for which there is an inadequate capacity to ensure timely
repayment.
D1--Obligations which have a high risk of default or which are currently in
default.
-23-
<PAGE>
PART C: OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
Part A -- None.
Part B -- None.
(b) Exhibits
<TABLE>
<CAPTION>
INCORPORATED BY REFERENCE
NAME OF EXHIBIT OR EXHIBIT NUMBER
<S> <C> <C>
1. First Amended and Restated
Post-Effective Amendment #35
Master Trust Agreement Post-Effective Amendment #35
(a) Amendment No. 1 Post-Effective Amendment #35
(b) Amendment No. 2 Post-Effective Amendment #35
(c) Amendment No. 3 Post-Effective Amendment #35
(d) Amendment No. 4 Post-Effective Amendment #35
(e) Amendment No. 5 Post-Effective Amendment #35
(f) Amendment No. 6 Post-Effective Amendment #35
(g) Amendment No. 7 Post-Effective Amendment #35
(h) Amendment No. 8 Post-Effective Amendment #35
(i) Amendment No. 9 Post-Effective Amendment #40
(j) Amendment No. 10 Post-Effective Amendment #43
(k) Amendment No. 11 To be filed by Amendment
2. Bylaws Post-Effective Amendment #42
3. Voting Trust Amendment None
4. Specimen Security None
<PAGE>
5(a) Investment Advisory Agreement Post-Effective Amendment #35
(b) Letter agreement incorporating the
Yield Plus and Bond Market Funds within
the Investment Advisory Agreement Post-Effective Amendment #35
(c) Letter agreement incorporating the US
Treasury Money Market and US Treasury
Obligations Funds within the Investment
Advisory Agreement Post-Effective Amendment #35
(d) Letter agreement incorporating the
Growth and Income and Intermediate
Funds within the Investment Advisory
Agreement Post-Effective Amendment #35
(e) Letter agreement incorporating the
Emerging markets Fund and the Prime
Money Market Fund within the Investment
Advisory Agreement Post-Effective Amendment #35
(f) Letter agreement incorporating the Tax
Free Money Market Fund within the
Investment Advisory Agreement Post-Effective Amendment #35
(g) Letter agreement incorporating the
Small Cap, Active International and
Real Estate Equity Funds within the
Investment Advisory Agreement Post-Effective Amendment #35
(h) Letter agreement incorporating the Life
Solutions Growth, Balanced and Income
and Growth Funds within the Investment
Advisory Agreement Post-Effective Amendment #41
(i) Letter agreement incorporating the SSgA
Special, International Growth
Opportunities and High Yield Bond Funds
within the Investment Advisory Agreement Post-Effective Amendment #45
(j) Letter agreement incorporating the SSgA
Aggressive Equity Fund within the
Investment Advisory Agreement To be filed by Amendment
<PAGE>
6. Distribution Agreements
(a) Distribution Agreement (Class A Shares) Post-Effective Amendment #35
(a)(i) Letter agreement incorporating the
Yield Plus and Bond Market Funds within
the Distribution Agreement Post-Effective Amendment #35
(a)(ii) Letter agreement incorporating the
US Treasury Money Market and US Treasury
Obligations Funds within the
Distribution Agreement Post-Effective Amendment #35
(a)(iii) Letter agreement incorporating the
Growth and Income and Intermediate
Funds within the Distribution Agreement Post-Effective Amendment #35
(a)(iv) Letter agreement incorporating the
Emerging Markets and Prime Money Market
Funds within the Distribution Agreement Post-Effective Amendment #35
(a)(v) Letter agreement incorporating the
Class A shares of the Tax Free Money
Market Fund within the Distribution
Agreement Post-Effective Amendment #35
(a)(vi) Letter agreement incorporating the
Small Cap, Active International and
Real Estate Equity Funds within the
Distribution Agreement Post-Effective Amendment #35
(a)(vii) Letter agreement incorporating the Life
Solutions Growth, Balanced and Income
and Growth Funds within the
Distribution Agreement Post-Effective Amendment #41
(a)(viii) Letter agreement incorporating the
Special Small Cap, International Growth
Opportunities and High Yield Bond Funds
within the Distribution Agreement Post-Effective Amendment #45
<PAGE>
(a)(ix) Letter agreement incorporating the SSgA
Aggressive Equity Fund within the
Distribution Agreement To the filed by Amendment
(b) Distribution Agreement (regarding Class
B Shares of the Money Market and US
Government Money Market Funds) Post-Effective Amendment #42
(b)(i) Letter agreement incorporating the
Class B Shares of the Tax Free Money
Market Fund within the Distribution
Agreement To be filed by amendment
(c) Distribution Agreement (regarding Class
C Shares of the Money Market and US
Government Money Market Funds) Post-Effective Amendment #42
(c)(i) Letter Agreement incorporating the
Class C Shares of the Tax Free Money
Market Fund within the Distribution
Agreement To be filed by amendment
7. Bonus, profit sharing, or pension plans None
8.(a) Custodian Contract Post-Effective Amendment #35
(b) Letter agreement incorporating the
Yield Plus and Bond Market Fund into
the Custodian Contract Post-Effective Amendment #35
(c) Letter agreement incorporating the US
Treasury Money Market and Us Treasury
Obligations Funds into the Custodian
Contract Post-Effective Amendment #35
<PAGE>
(d) Letter agreement incorporating the
Growth and Income and Intermediate
Funds into the Custodian Contract Post-Effective Amendment #35
(e) Letter agreement incorporating the
Emerging Markets and Prime Money Market
Funds into the Custodian Contract Post-Effective Amendment #35
(f) Fee Schedule, dated February 17, 1994,
to Custodian Contract Post-Effective Amendment #35
(g) Letter agreement incorporating the Tax
Free Money Market Fund into the
Custodian Contract Post-Effective Amendment #35
(h) Letter agreement incorporating the
Small Cap, Active International and
Real Estate Equity Funds into the
Custodian Contract Post-Effective Amendment #35
(i) Letter agreement incorporating the Life
Solutions Growth, Balanced and Income
and Growth Funds into the Custodian
Contract Post-Effective Amendment #41
(j) Letter agreement incorporating the
Special, International Growth
Opportunities and High Yield Bond Funds
into the Custodian Contract Post-Effective Amendment #45
(k) Letter agreement incorporating the
Aggressive Equity Fund into the
Custodian Contract To be filed by Amendment
9(a)(i) Transfer Agency and Service Agreement Post-Effective Amendment #35
(a)(ii) Letter agreement incorporating the
Yield Plus and Bond Market Funds within
the Transfer Agency and Service
Agreement Post-Effective Amendment #35
<PAGE>
(a)(iii) Letter agreement incorporating the Us
Treasury Money Market and US Treasury
Obligations Funds within the Transfer
Agency and Service Agreement Post-Effective Amendment #35
(a)(iv) Letter agreement incorporating the
Growth and Income and Intermediate
Funds within the Transfer Agency and
Service Agreement Post-Effective Amendment #35
(a)(v) Letter agreement incorporating the
Emerging markets and Prime Money Market
Funds within the Transfer Agency and
Service Agreement Post-Effective Amendment #35
(a)(vi) Letter agreement incorporating the Tax
Free Money Market Fund within the
Transfer Agency and Service Agreement Post-Effective Amendment #35
(a)(vii) Letter agreement incorporating the
Small Cap, Active International and
Real Estate Equity Funds within the
Transfer Agency and Service Agreement Post-Effective Amendment #35
(a)(viii) Letter agreement incorporating the Life
Solutions Growth, Balanced and Income
and Growth Funds within the Transfer
Agency and Service Agreement Post-Effective Amendment #41
(a)(ix) Letter agreement incorporating the
Special, International Growth
Opportunities and High Yield Bond Funds
within the Transfer Agency and Service
Agreement Post-Effective Amendment #45
(a)(x) Letter agreement incorporating the
Aggressive Equity Fund within the
Transfer Agency and Service Agreement To be filed by Amendment
(b)(i) Administration Agreement Post-Effective Amendment #35
<PAGE>
(b)(ii) Letter agreement incorporating the
Yield Plus and Bond Market Funds within
the Administration Agreement Post-Effective Amendment #35
(b)(iii) Letter agreement incorporating the Us
Treasury Money Market and US Treasury
Obligations Funds within the
Administration Agreement Post-Effective Amendment #35
(b)(iv) Letter agreement incorporating the
Growth and Income and Intermediate
Funds within the Administration
Agreement Post-Effective Amendment #35
(b)(v) Letter agreement incorporating the
Emerging Markets and Prime Money Market
Funds within the Administration
Agreement Post-Effective Amendment #35
(b)(vi) Letter agreement incorporating the Tax
Free Money Market Fund within the
Administration Agreement Post-Effective Amendment #35
(b)(vii) Letter agreement incorporating the
Small Cap, Active International and
Real Estate Equity Funds within the
Administration Agreement Post-Effective Amendment #35
(b)(viii) Letter agreement incorporating the Life
Solutions Growth, Balanced and Income
and Growth Funds within the
Administration Agreement Post-Effective Amendment #35
(b)(ix) Amendment No. 4 to the Administration
Agreement between Frank Russell
Investment Management Company and SSgA
Funds Post-Effective Amendment #41
(b)(x) Letter agreement incorporating the
Special, International Growth
Opportunities and High Yield Bond Funds
within the Administration Agreement Post-Effective Amendment #45
<PAGE>
(b)(xi) Letter agreement incorporating the
Aggressive Equity Fund within the
Administration Agreement To be filed by Amendment
10. Opinion of Counsel
(a) Relating to The Seven Seas Series Money
Market Fund Post-Effective Amendment #42
(b) Relating to The Seven Seas Series US
Government Money Market Fund Post-Effective Amendment #42
(c) Relating to The Seven Seas Series S&P
500 Index, S&P Midcap Index, Matrix
Equity, International European Index,
International Pacific Index and Short
Term Government Securities Funds Post-Effective Amendment #42
(d) Relating to The Seven Seas Series Yield
Plus and Bond Market Funds Post-Effective Amendment #42
(e) Relating to The Seven Seas Series US
Treasury Money Market and Treasury
Obligations Funds Post-Effective Amendment #42
(f) Relating to The Seven Seas Series
Growth and Income and Intermediate Funds Post-Effective Amendment #42
(g) Relating to The Seven Seas Series
Emerging Markets and Prime Money Market
Funds Post-Effective Amendment #42
(h) Relating to Class A, Class B and Class
C Shares of The Seven Seas Series Money
Market and US Government Money Market
Funds Post-Effective Amendment #42
<PAGE>
(i) Relating to Class A, Class B and Class
C Shares of The Seven Seas Series Tax
Free Money Market Funds Post-Effective Amendment #42
(j) Relating to The Seven Seas Series Real
Estate Equity Fund Post-Effective Amendment #42
(k) Relating to the SSgA Life Solutions
Growth, Balanced and Income and Growth
Funds Post-Effective Amendment #41
(l) Relating to the Special, International
Growth Opportunities and High Yield
Bond Funds Post-Effective Amendment #45
(m) Relating to the Aggressive Equity Fund To be filed by Amendment
11. Other Opinions: Consent of Independent
Accountants None
12. Financial Statements Omitted from
Item 23 None
13. Letter of Investment Intent
(a) The Seven Seas Series Money Market Fund Post-Effective Amendment #42
(b) The Seven Seas Series US Government
Money Market Fund Post-Effective Amendment #42
<PAGE>
(c) The Seven Seas Series Government
Securities, Index, Midcap Index,
Matrix, European Index and Pacific
Index Funds Post-Effective Amendment #42
(d) The Seven Seas Series Yield Plus and
Bond Market Funds Post-Effective Amendment #42
(e) The Seven Seas Series US Treasury Money
Market and Treasury Obligations Funds Post-Effective Amendment #42
(f) The Seven Seas Series Growth and Income
and Intermediate Funds Post-Effective Amendment #42
(g) The Seven Seas Series Emerging Markets
and Prime Money Market Funds Post-Effective Amendment #42
(h) Class B and C Shares of The Seven Seas
Series Money Market and US Government
Money Market Funds Post-Effective Amendment #42
(i) The Seven Seas Series Tax Free Money
Market Fund (Class A, B and C Shares) Post-Effective Amendment #42
(j) The Seven Seas Series Active
International Fund Post-Effective Amendment #42
(k) SSgA Life Solutions Growth, Balanced
and Income and Growth Funds Post-Effective Amendment #41
(l) SSgA Special, International Growth
Opportunities and High Yield Bond Funds Post-Effective Amendment #45
(m) SSgA Aggressive Equity Fund To be filed by Amendment
<PAGE>
14. Prototype Retirement Plan None
15. Distribution Plans pursuant to Rule
12b-1
(a) Plan of Distribution for the government
Securities, Index, Midcap Index,
Matrix, European Index and Pacific
Index Funds as approved by the Board of
Trustees Post-Effective Amendment #35
(a)(i) Addendum to the Plan of Distribution
incorporating the Yield Plus and Bond
Market Funds into the Plan Post-Effective Amendment #35
(a)(ii) Addendum to the Plan of Distribution
incorporating the Money Market and US
Government Money Market Funds into the
Plan (Class A Shares) Post-Effective Amendment #35
(a)(iii) Addendum to the Plan of Distribution
incorporating the Us Treasury Money
Market and US Treasury Obligations
Funds into the Plan Post-Effective Amendment #35
(a)(iv) Addendum to the Plan of Distribution
incorporating the Growth and Income and
Intermediate Funds into the Plan Post-Effective Amendment #35
(a)(v) Addendum to the Plan of Distribution
incorporating the Emerging Markets and
Prime Money Market Funds into the Plan Post-Effective Amendment #35
(a)(vi) Addendum to the Plan of Distribution
incorporating the Class A Shares of the
Tax Free Money Market Fund into the Plan Post-Effective Amendment #35
<PAGE>
(a)(vii) Addendum to the Plan of Distribution
incorporating the Small Cap, Active
International and Real Estate Equity
Funds into the Plan Post-Effective Amendment #35
(a)(viii) Addendum to the Plan of Distribution
incorporating the Life Solutions
Growth, Balanced and Income and Growth
Funds into the Plan Post-Effective Amendment #41
(a)(ix) Addendum to the Plan of Distribution
incorporating the Special,
International Growth Opportunities and
High Yield Bond Funds into the Plan Post-Effective Amendment #45
(a)(x) Addendum to Plan of Distribution
incorporating the Aggressive Equity
Fund in the Plan To be filed by Amendment
(b) Plan of Distribution for the Money
Market and US Government Money Market
Funds (Class B Shares) as approved by
the Board of Trustees Post-Effective Amendment #42
(b)(i) Addendum to the Plan of Distribution
incorporating the Class B Shares of the
Tax Free Money Market Fund To be filed by amendment
(c) Plan of Distribution for the Money
Market and US Government Money Market
Funds (Class C Shares) as approved by
the Board of Trustees Post-Effective Amendment #42
(c)(i) Addendum to the Plan of Distribution
incorporating the Class C Shares of the
Tax Free Money Market Fund To be filed by amendment
(d) Shareholder Servicing Agreement, by and
between SSgA Funds and State Street
Bank and Trust Company Post-Effective Amendment #42
<PAGE>
(d)(i) Shareholder Servicing Agreement, by and
between SSgA Funds and State Street
Brokerage Services, Inc. Post-Effective Amendment #39
(d)(ii) Shareholder Servicing Agreement, by and
between SSgA Funds and State Street
Bank and Trust Company, Metropolitan
Division of Commercial Banking Services Post-Effective Amendment #39
(d)(iii) Shareholder Servicing Agreement, by and
between SSgA Funds and State Street
Bank and Trust Company Retirement
Investment Services Division Post-Effective Amendment #42
(d)(iv) Shareholder Servicing Agreement, by and
between SSgA Funds and State Street
Solutions Post-Effective Amendment #42
(e) Form of Agreement Pursuant to Rule
12b-1 Plan (relating to Class B Shares)
as approved by the Board of Trustees To be filed by amendment
(f) Form of Agreement Pursuant to Rule
12b-1 Plan (relating to Class C Shares)
as approved by the Board of Trustees To be filed by amendment
16. Computation of Fund Performance
Quotation Post-Effective Amendment #42
17. Financial Data Schedule Post-Effective Amendment #42
</TABLE>
<PAGE>
Item 25. Persons Controlled by or Under Common Control with Registrant
None
Item 26. Number of Holders of Securities
<TABLE>
<CAPTION>
NUMBER OF RECORD
HOLDERS AS OF
TITLE OF CLASS: MARCH 30, 1998
<S> <C>
Shares of beneficial interest
Par Value $0.001
SSgA Funds--
Money Market Fund
Class A Shares 2,276
Class B Shares 1
Class C Shares 1
US Government Money Market Fund 289
Class A Shares
Class B Shares 1
Class C Shares 1
Matrix Equity Fund 969
Small Cap Fund 4,274
S&P 500 Index Fund 3,779
Active International Fund 1,084
International Pacific Index Fund 1
Yield Plus Fund 373
Bond Market Fund 439
Growth and Income Fund 684
Intermediate Fund 225
US Treasury Money Market Fund 19
US Treasury Obligations Fund 1
Prime Money Market Fund 146
Emerging Markets Fund 3,057
Tax Free Money Market Fund
Class A Shares 54
Class B Shares 1
Class C Shares 1
Real Estate Equity Fund 1
</TABLE>
Item 27. Indemnification
Indemnification is provided to officers and Trustees of the Registrant
pursuant to Section 6.4 of Article VI of Registrant's First Amended and Restated
Master Trust Agreement, which reads as follows:
"Section 6.4 Indemnification of Trustees, Officers, etc. The Trust shall
indemnify (from the assets of the Sub-Trust or Sub-Trusts in question) each of
its Trustees and officers (including persons who serve at the Trust's request as
directors, officers or trustees of another organization in which the Trust has
any interest as a shareholder, creditor or otherwise [hereinafter referred to as
"Covered Person"]) against all liabilities, including but not limited to amounts
paid in satisfaction of judgments, in compromise or as fines and penalties, and
expenses, including reasonable accountants' and counsel fees, incurred by any
Covered Person in connection with the defense or disposition of any action, suit
or other proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which such Covered Person may be or may
have been involved as a party or otherwise with which such person may be or may
have been threatened, while in office or thereafter, or by reason of being or
having been such a Trustee or officer, director or trustee, except with respect
to any matter as to which it has been determined that such Covered Person had
acted with willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such Covered Person's office
(such conduct referred to hereafter as "Disabling Conduct"). A determination
that the Covered Person is entitled to indemnification may be made by (i) a
final decision on the merits by a court or other body before whom the proceeding
was brought that the
<PAGE>
person to be indemnified was not liable by reason of Disabling Conduct, (ii)
dismissal of a court action or an administrative proceeding against a Covered
Person for insufficiency of evidence of Disabling Conduct, or (iii) a reasonable
determination, based upon a review of the facts, that the indemnitee was not
liable by reason of Disabling Conduct by (a) a vote of a majority of a quorum of
Trustees who are neither "interested persons" of the Trust as defined in section
2(a)(19) of the 1940 Act nor parties to the proceeding, or (b) an independent
legal counsel in a written opinion. Expenses, including accountants' and counsel
fees so incurred by any such Covered Person (but excluding amounts paid in
satisfaction of judgments, in compromise or as fines or penalties), may be paid
from time to time by the Sub-Trust in question in advance of the final
disposition of any such action, suit or proceeding, provided that the Covered
Person shall have undertaken to repay the amounts so paid to the Sub-Trust in
question if it is ultimately determined that indemnification of such expenses is
not authorized under this Article VI and (i) the Covered Person shall have
provided security for such undertaking, (ii) the Trust shall be insured against
losses arising by reason of any lawful advances, or (iii) a majority of a quorum
of the disinterested Trustees who are not a party to the proceeding, or an
independent legal counsel in a written opinion, shall have determined, based on
a review of readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the Covered Person ultimately will be found
entitled to indemnification."
The Investment Advisory Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of obligations or
duties under the Investment Advisory Agreement or on the part of the Adviser, or
for a loss resulting from a breach of fiduciary duty with respect to the receipt
of compensation for services, the Adviser shall not be subject to liability to
the Registrant or to any shareholder of the Registrant for any error of
judgment, mistake of law or any other act or omission in the course of, or
connected with, rendering services under the Investment Advisory Agreement or
for any losses that may be sustained in the purchase, holding or sale of any
security.
The Distribution Agreements relating to Class A, Class B and Class C
Shares provide that in the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of obligations or duties under the
Distribution Agreement, the Distributor, its officers, directors and any
controlling person (within the meaning of Section 15 of the 1933 Act)
("Distributor") shall be indemnified by the Registrant from and against any and
all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which Distributor may incur under the
1933 Act or under common law or otherwise arising out of or based upon any
alleged untrue statement of a material fact contained in the Registration
Statement, Prospectus or Statement of Additional Information or arising out of
or based upon any alleged omission to state a material fact required to be
stated in said documents or necessary to make the statements not misleading.
Registrant provides the following undertaking:
<PAGE>
"Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to Trustees, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a Trustee, officer, or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such Trustee, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue."
Item 28. Business and Other Connections of Investment Adviser.
The Investment Management Division of State Street Bank and Trust Company
("State Street") serves as adviser to the Registrant. State Street, a
Massachusetts bank, currently manages large institutional accounts and
collective investment funds. The business, profession, vocation or employment of
a substantial nature which each director or officer of the investment adviser is
or has been, at any time during the past two fiscal years, engaged for his own
account or in the capacity of director, officer, employee, partner or trustee,
is as follows:
<TABLE>
<CAPTION>
NAME CAPACITY WITH ADVISOR BUSINESS NAME AND ADDRESS*
<S> <C> <C>
Tenley E. Albright, MD Director Chairman, Western
Resources, Inc.
Two Commonwealth Avenue
Boston, MA 02116-3134
Joseph A. Baute Director Former Chairman and CEO,
Markem Corporation
515 East Surry Road
Surry, NH 03431
I. MacAlister Booth Director Retired Chairman,
President and CEO,
Polaroid Corporation
P.O. Box 428 - 68 Barnes
Hill Road
Concord, MA 01742
<PAGE>
Marshall N. Carter Chairman and CEO State Street Bank and
Trust Company
225 Franklin Street - P.O.
Box 351
Boston, MA 02110
James I. Cash, Jr. Director The James E. Robison
Professor of Business
Administration, Harvard
Business School (on
sabbatical)
c/o Stanford Graduate
School of Business
518 Memorial Way
Stanford University
Stanford, CA 94305-5015
Truman S. Casner Director Partner, Ropes & Gray
One International Place -
37th Floor
Boston, MA 02110
Nader F. Darehshori Director Chairman, President and
CEO, Houghton Mifflin
Company
222 Berkeley - 5th Floor
Boston, MA 02116-3764
Arthur L. Goldstein Director Chairman and CEO, Ionics,
Inc.
65 Grove Street
P.O. Box 9131
Watertown, MA 02272-9131
<PAGE>
David P. Gruber Director President and CEO,
Wyman-Gordon Company
244 Worchester Street
N. Grafton, MA 01536-8001
Charles F. Kaye Director President, Transportation
Investments, Inc.
101 Federal Street - Suite
1900
Boston, MA 02110
John M. Kucharski Director Chairman and CEO, EG&G,
Inc.
45 William Street
Wellesley, MA 02181
Charles R. LaMantia Director President and CEO, Arthur
D. Little, Inc.
25 Acorn Park
Cambridge, MA 02140
David B. Perini Director Chairman and President,
Perini Corporation
73 Mt. Wayte Avenue
Framingham, MA 01701
Dennis J. Picard Director Chairman and CEO, Raytheon
Company
141 Spring Street
Lexington, MA 02173
Alfred Poe Director Former President, Meal
Enhancement Group,
Campbell Soup Company
Nine Hickory Drive
Chester, NJ 07930
<PAGE>
Bernard W. Reznicek Director President, Premier Group;
Retired Chairman and CEO,
Boston Edison Company
1212 N. 96th Street
Omaha, NE 68114-2274
David A. Spina President and Chief State Street Corporation
Operating Officer 225 Franklin Street - P.O.
Box 351
Boston, MA 02110
Diana Chapman Walsh Director President, Wellesley
College
106 Central Street
Wellesley, MA 02181
Robert E. Weissman Director Chairman and CEO,
Cognizant Corporation
200 Nyala Farms Road
Westport, CT 06880
</TABLE>
Item 29. Principal Underwriters
(a) Russell Fund Distributors, Inc., also acts as principal underwriter for
Frank Russell Investment Company.
(b) The directors and officers of Russell Fund Distributors, Inc., their
principal business address, and positions and offices with the Registrant and
Russell Fund Distributors, Inc. are set forth below:
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION AND OFFICES WITH POSITION WITH
BUSINESS ADDRESS* UNDERWRITER REGISTRANT
<S> <C> <C>
Lynn L. Anderson Director and CEO Trustee, Chairman of
the Board, and
President
Karl J. Ege Secretary and General None
Counsel
J. David Griswold Associate General Counsel Secretary
and Assistant Secretary
Mary E. Hughs Assistant Secretary None
John C. James Assistant Secretary None
Randall P. Lert Director None
Gregory J. Lyons Assistant Secretary None
Eric A. Russell Director and President None
George W. Weber Director, Fund Senior Vice President
Administration and and Fund Treasurer
Operations
</TABLE>
*Address of all individuals: 909 A Street, Tacoma, Washington 98402
Item 30. Location of Accounts and Records
The Registrant's Administrator, Frank Russell Investment Management Company,
909 A Street, Tacoma, Washington 98402, will maintain the physical possession of
the books and records required by subsection (b)(4) of Rule 31a-1 under the
Investment Company Act of 1940. All other accounts, books and documents required
by Rule 31a-1 are maintained in the physical possession of Registrant's
investment adviser, transfer agent, and custodian, State Street Bank and Trust
Company, 225 Franklin Street, Boston, Massachusetts, 02110 and 1776 Heritage
Drive, North Quincy, Massachusetts 02171.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, The Registrant, the SSgA Funds, has duly caused this
Post-Effective Amendment No. 46 to its Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized in the City of Boston,
and Commonwealth of Massachusetts, on the 12th day of June, 1998.
By: /s/ Lynn L. Anderson
Lynn L. Anderson, President, Treasurer and
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities as
indicated on June 12, 1998.
<TABLE>
<CAPTION>
Signature Title
<S> <C>
/s/ Lynn L. Anderson Trustee, President,
Lynn L. Anderson Treasurer and
Chairman of the Board
/s/ George W. Weber Senior Vice President and
George W. Weber Fund Treasurer
/s/ Steven J. Mastrovich Trustee
Steven J. Mastrovich
/s/ William L. Marshall Trustee
William L. Marshall
/s/ Patrick J. Riley Trustee
Patrick J. Riley
/s/ Richard D. Shirk Trustee
Richard D. Shirk
/s/ Bruce D. Taber Trustee
Bruce D. Taber
/s/ Henry W. Todd Trustee
Henry W. Todd
</TABLE>
