Filed Pursuant to Rule 497(c)
File Nos. 33-19229; 811-5430
SSgA FUNDS
One International Place
Boston, Massachusetts 02110
(800) 647-7327
SSgA Funds is a registered, open-end management investment company with multiple
portfolios, each of which is commonly referred to as a mutual fund. The Funds'
shares are offered without sales commissions. However, the Funds pay certain
distribution expenses under the Rule 12b-1 plan. This Prospectus describes and
offers shares of beneficial interest in the Funds listed below:
<TABLE>
<S> <C> <C>
Money Market Growth and Income Emerging Markets
Yield Plus S&P 500 Index Active International
Intermediate Matrix Equity International Growth Opportunities
Bond Market Small Cap (Closed to new investors) Life Solutions Income and Growth
High Yield Bond Special Equity Life Solutions Balanced
Tuckerman Active REIT Life Solutions Growth
Aggressive Equity
</TABLE>
Each Life Solutions Fund attempts to meet its investment objective by investing
in a different combination of the Investment Company's portfolios (the
"Underlying Funds"). The Life Solutions Funds do not invest in a portfolio of
securities but invest in shares of the Underlying Funds. The Investment Company
believes that these combinations offer varying degrees of potential risk and
reward.
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.
INVESTMENTS IN THE FUNDS ARE NEITHER INSURED NOR GUARANTEED BY THE US
GOVERNMENT. THERE IS NO ASSURANCE THAT A MONEY MARKET FUND WILL MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
SHARES IN THE FUNDS 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 INVESTMENT 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 December 29, 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
-1-
<PAGE>
<TABLE>
<CAPTION>
Investment Advisor, Custodian and Distributor: Administrator:
Transfer Agent:
<S> <C> <C>
State Street Bank and Trust Company Russell Fund Distributors, Frank Russell Investment
225 Franklin Street Inc. Management Company
Boston, Massachusetts 02110 One International Place 909 A Street
Boston, Massachusetts 02110 Tacoma, Washington 98402
</TABLE>
PROSPECTUS DATED DECEMBER 29, 1998
(AS SUPPLEMENTED THROUGH APRIL 23, 1999)
-2-
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
HIGHLIGHTS ............................................................................................ 4
INVESTMENT OBJECTIVES ................................................................................. 5
FUND OPERATING EXPENSES ............................................................................... 6
SSGA MONEY MARKET FUND ............................................................................. 6
SSGA YIELD PLUS FUND ............................................................................... 7
SSGA INTERMEDIATE FUND ............................................................................. 8
SSGA BOND MARKET FUND .............................................................................. 9
SSGA HIGH YIELD BOND FUND .......................................................................... 10
SSGA GROWTH AND INCOME FUND ........................................................................ 11
SSGA S&P 500 INDEX FUND ............................................................................ 12
SSGA MATRIX EQUITY FUND ............................................................................ 13
SSGA SMALL CAP FUND ................................................................................ 14
SSGA SPECIAL EQUITY FUND ........................................................................... 15
SSGA TUCKERMAN ACTIVE REIT FUND .................................................................... 16
SSGA AGGRESSIVE EQUITY FUND ........................................................................ 17
SSGA EMERGING MARKETS FUND ......................................................................... 18
SSGA ACTIVE INTERNATIONAL FUND ..................................................................... 19
SSGA INTERNATIONAL GROWTH OPPORTUNITIES FUND ....................................................... 20
SSGA LIFE SOLUTIONS INCOME AND GROWTH FUND ......................................................... 21
SSGA LIFE SOLUTIONS BALANCED FUND .................................................................. 21
SSGA LIFE SOLUTIONS GROWTH FUND .................................................................... 21
FINANCIAL HIGHLIGHTS................................................................................... 24
SSGA MONEY MARKET FUND.............................................................................. 24
SSGA YIELD PLUS FUND................................................................................ 26
SSGA INTERMEDIATE FUND.............................................................................. 27
SSGA BOND MARKET FUND............................................................................... 28
SSGA HIGH YIELD BOND FUND........................................................................... 29
SSGA GROWTH AND INCOME FUND......................................................................... 30
SSGA S&P 500 INDEX FUND............................................................................. 31
SSGA MATRIX EQUITY FUND............................................................................. 32
SSGA SMALL CAP FUND................................................................................. 33
SSGA SPECIAL EQUITY FUND............................................................................ 34
SSGA TUCKERMAN ACTIVE REIT FUND..................................................................... 35
SSGA EMERGING MARKETS FUND.......................................................................... 36
SSGA ACTIVE INTERNATIONAL FUND...................................................................... 37
SSGA INTERNATIONAL GROWTH OPPORTUNITIES FUND........................................................ 38
SSGA LIFE SOLUTIONS INCOME AND GROWTH FUND.......................................................... 39
SSGA LIFE SOLUTIONS BALANCED FUND................................................................... 40
SSGA LIFE SOLUTIONS GROWTH FUND..................................................................... 41
SSgA FUNDS............................................................................................. 42
MANNER OF OFFERING..................................................................................... 42
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS....................................................... 43
INVESTMENT OBJECTIVES AND POLICIES (ALL FUNDS EXCEPT LIFE SOLUTIONS FUNDS).......................... 43
Investment Objectives and Asset Allocation of the SSgA Life Solutions Funds....................... 48
Investment Restrictions........................................................................... 50
-3-
<PAGE>
<S> <C>
RISK FACTORS........................................................................................... 58
LIFE SOLUTIONS FUNDS: SPECIAL RISK FACTORS.......................................................... 60
PORTFOLIO MATURITY AND TURNOVER........................................................................ 60
DIVIDENDS AND DISTRIBUTIONS............................................................................ 62
TAXES.................................................................................................. 63
VALUATION OF FUND SHARES............................................................................... 64
PURCHASE OF FUND SHARES................................................................................ 65
REDEMPTION OF FUND SHARES.............................................................................. 67
GENERAL MANAGEMENT..................................................................................... 70
PORTFOLIO MANAGEMENT................................................................................ 72
FUND EXPENSES.......................................................................................... 75
PERFORMANCE CALCULATIONS............................................................................... 75
YIELD............................................................................................... 75
TOTAL RETURN........................................................................................ 76
ADDITIONAL INFORMATION................................................................................. 76
INFORMATION REGARDING STANDARD & POOR'S CORPORATION.................................................... 78
</TABLE>
-4-
<PAGE>
HIGHLIGHTS
Fund Operating Expenses summarize the fees paid by shareholders in each Fund and
the effect of these fees on a $1,000 investment. Pages 7 through 23.
Financial Highlights tables include selected data for a share outstanding
throughout each fiscal year or period ended August 31, and other performance
information derived from the financial statements. Pages 24 through 41.
Per Share Income and Capital Changes summarize significant financial information
of each Fund from the commencement of operations through the period shown. Pages
24 through 41.
Eligible Investors are principally those US or foreign institutional and retail
investors which invest for their own accounts or in a fiduciary or agency
capacity. The minimum initial investment is $1,000 (except IRA accounts, which
is $250 and the S&P 500 Index Fund, which is $10,000), minimum subsequent
investments are $100, and the minimum account size is $1,000 for all Funds
except the S&P 500 Index Fund, which is $10,000. Page 65.
Investment Objectives, Policies and Restrictions describe how what each Fund
attempts to achieve, what methods will be used to accomplish its objective, and
the restrictions imposed on various types of investment. Pages 43 through 58.
Risk Factors apply to each Fund. There are investment risks in using futures
contracts and options as a hedging technique. Investments in foreign securities,
foreign currency and emerging markets countries also pose special risk that
investors should be aware of. Page 58.
Dividends and Distributions will be reinvested in additional shares unless a
shareholder elects to receive them in cash. Dividends from net investment income
and net short-term capital gains are declared and paid according to a schedule
set forth in this section. Distributions from net realized short- and long-term
capital gains (if any) are declared at least annually. Page 62.
Taxes on the Funds should be none. Taxable US shareholders of the Funds will be
subject to federal taxes on dividends and capital gains distributions, and may
be subject to state or local taxes. Page 63.
Valuation of Fund Shares occurs once a day for the Money Market Fund as of the
close of the New York Stock Exchange on the basis of fair market value on days
that the Exchange or Boston Federal Reserve are open for business. The Money
Market Fund uses the amortized cost pricing method to attempt to maintain a
stable $1.00 per share net asset value. All other Funds value shares on each
business day at the close of business of the New York Stock Exchange on the
basis of fair market value. Page 64.
Purchase of Fund Shares includes no sales commission. The purchase price is the
next computed net asset value. Shares are offered and orders to purchase are
accepted on each business day. However, certain distribution expenses may be
reimbursed to Russell Fund Distributors, Inc., the Funds' distributor, under an
existing 12b-1 plan. Page 65.
Redemption of Fund Shares may be requested on any business day. There is no
redemption charge. The redemption price is the next computed net asset value.
The Funds reserve the right to redeem in kind any redemption request of more
than $250,000 for each Fund. Page 67.
General Management is provided by Frank Russell Investment Management Company,
as the administrator, which is responsible for supervising the Funds'
operations; State Street Bank and Trust Company provides investment advisory
services. Page 70.
Fund Expenses are borne by each Fund, with the primary expense being an
investment advisory fee paid to the Advisor. Page 73.
Additional Information is also included in this Prospectus concerning the
custodian, transfer agent and independent accountants; and organization,
capitalization and voting. Page 75.
-5-
<PAGE>
INVESTMENT OBJECTIVES
Each Fund seeks to achieve a specific investment objective by using distinct
investment strategies:
The Money Market Fund seeks to maximize current income, to the extent consistent
with the preservation of capital and liquidity and the maintenance of a stable
$1.00 per share net asset value, by investing in dollar denominated securities
with remaining maturities of one year or less.
The Yield Plus Fund seeks high current income and liquidity by investing
primarily in a diversified portfolio of high-quality debt securities and by
maintaining a portfolio duration of one year or less.
The Intermediate Fund seeks a high level of current income while preserving
principal by investing primarily in a diversified portfolio of debt securities
with a dollar-weighted average maturity between three and ten years.
The Bond Market Fund seeks to maximize total return by investing in fixed income
securities, including, but not limited to, those represented by the Lehman
Brothers Aggregate Bond Index.
The High Yield Bond Fund seeks to maximize total return by investing in fixed
income securities, including, but not limited to, those represented by the
Lehman Brothers High Yield Bond Index.
The Growth and Income Fund seeks long-term capital growth, current income and
growth of income primarily through investments in equity securities.
The S&P 500 Index Fund seeks to replicate the total return of the Standard &
Poor's 500 Composite Stock Price Index.
The Matrix Equity Fund seeks to provide total returns that exceed over time the
S&P 500 Index through investment in equity securities.
The Small Cap Fund seeks to maximize total return through investment in equity
securities; at least 65% of total assets will be invested in securities issued
by smaller capitalized issuers.
The Special Equity Fund seeks to maximize total return through investment in
mid- and small capitalization US equity securities.
The Tuckerman Active REIT Fund seeks to provide income and capital growth by
investing primarily in publicly traded securities of real estate companies.
The Aggressive Equity Fund seeks to maximize total return through investing in
US equity securities that are under valued relative to their growth potential as
measured by SSgA's proprietary models.
The Active International Fund seeks to provide long-term capital growth by
investing primarily in securities of foreign issuers.
The Emerging Markets Fund seeks to provide maximum total return, primarily
through capital appreciation, by investing primarily in securities of foreign
issuers.
The International Growth Opportunities Fund seeks to provide long-term capital
growth by investing primarily in securities of foreign issuers.
The Life Solutions Income and Growth Fund seeks income and, secondarily,
long-term growth of capital.
The Life Solutions Balanced Fund seeks a balance of growth of capital and
income.
The Life Solutions Growth Fund seeks long-term growth of capital.
-6-
<PAGE>
FUND OPERATING EXPENSES
SSGA MONEY MARKET FUND
The following table is intended to assist the investor in understanding the
various costs and expenses that an investor in shares of the 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."
<TABLE>
<S> <C>
Shareholder Transaction Expenses:
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: (as a percentage of average
daily net assets)
Advisory Fees .25%
Fees for 12b-1 Distribution and Shareholder Servicing1 .09
Other Expenses .07
---
Total Operating Expenses(2) .41%
===
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Examples: 1 year 3 years 5 years 10 years
You would pay the following expenses on a $4 $13 $23 $52
$1,000 investment, assuming: (i) 5% annual === === === ===
return; and (ii) redemption at the end of each
time period:
</TABLE>
- -----------------------
(1) The ratio includes .05% for 12b-1 Distribution and .04% for 12b-1
Shareholder Servicing Fees.
(2) Investors purchasing Fund shares through a financial intermeditary, 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.
-7-
<PAGE>
FUND OPERATING EXPENSES
SSGA YIELD PLUS FUND
The following table is intended to assist the investor in understanding the
various costs and expenses that an investor in shares of the 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."
<TABLE>
<S> <C>
Shareholder Transaction Expenses:
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: (as a percentage of
average daily net assets)
Advisory Fees .25%
Fees for 12b-1 Distribution and Shareholder Servicing(1) .08
Other Expenses .08
---
Total Operating Expense(2) .41%
===
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Examples: 1 year 3 years 5 years 10 years
You would pay the following expenses on a $4 $13 $23 $52
$1,000 investment, assuming: (i) 5% annual == === === ===
return; and (ii) redemption at the end of
each time period:
</TABLE>
Long-term shareholders of the Fund may pay more in Rule 12b-1 fees than the
economic equivalent of the maximum front-end sales charge permitted by the
National Association of Securities Dealers, Inc.
- ---------------------
(1) The ratio includes .04% for 12b-1 Distribution and .04% for 12b-1
Shareholder Servicing Fees.
(2) 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.
-8-
<PAGE>
FUND OPERATING EXPENSES AFTER FEE REIMBURSEMENT
SSGA INTERMEDIATE FUND
The following table is intended to assist the investor in understanding the
various costs and expenses that an investor in shares of the 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."
<TABLE>
<S> <C>
Shareholder Transaction Expenses:
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: (as a percentage of average daily
net assets)
Advisory Fees (After Fee Reimbursement)(1) .27%
Fees for 12b-1 Distribution and Shareholder Servicing(1,2) .09
Other Expenses1 .24
---
Total Operating Expenses (After Fee Reimbursement)(1,3) .60%
====
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Examples: 1 year 3 years 5 years 10 years
You would pay the following expenses on a
$1,000 investment, assuming: (i) 5% annual $ 6 $19 $33 $75
return; and (ii) redemption at the end of === === === ===
each time period:
</TABLE>
Long-term shareholders of the Fund may pay more in Rule 12b-1 fees than the
economic equivalent of the maximum front-end sales charge permitted by the
National Association of Securities Dealers, Inc.
- -------------------------
(1) The advisor has agreed to reimburse the Fund for all expenses in excess of
.60% of average daily net assets on an annual basis. The gross annual
Advisory fee expense before reimbursement would be .80% of average daily net
assets. The total operating expense of the Fund absent reimbursement would
be 1.13% of average daily net assets on an annual basis. The reimbursement
will continue until such time as the Board of Trustees of the Fund agrees to
its modification or elimination but will remain in effect for the current
fiscal year.
(2) The ratio includes .03% for 12b-1 Distribution and .06% 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.
-9-
<PAGE>
FUND OPERATING EXPENSES AFTER FEE REIMBURSEMENT
SSGA BOND MARKET FUND
The following table is intended to assist the investor in understanding the
various costs and expenses that an investor in shares of the 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."
<TABLE>
<S> <C>
Shareholder Transaction Expenses:
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: (as a percentage of average
daily net assets)
Advisory Fees (After Fee Reimbursement)(1) .28%
Fees for 12b-1 Distribution and Shareholder Servicing(1,2) .05
Other Expenses(1) .17
---
Total Operating Expense (After Fee Reimbursement)(1,3) .50%
====
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Examples: 1 year 3 years 5 years 10 years
You would pay the following expenses on a $5 $16 $28 $63
$1,000 investment, assuming: (i) 5% annual == === === ===
return; and (ii) redemption at the end of
each time period:
</TABLE>
Long-term shareholders of the Fund may pay more in Rule 12b-1 fees than the
economic equivalent of the maximum front-end sales charge permitted by the
National Association of Securities Dealers, Inc.
- -----------------------------
(1) The Advisor has agreed to reimburse the Fund for all expenses in excess of
.50% of average daily net assets on an annual basis. The gross annual
Advisory fee expense before reimbursement would be .30% of average daily net
assets. The total operating expense of the Fund absent reimbursement would
be .52% of average daily net assets on an annual basis. The reimbursement
agreement will remain in effect for the current fiscal year.
(2) The ratio includes .03% for 12b-1 Distribution and .02% for 12b-1
Shareholder Servicing Fees
(3) The expense information the table has been restated to reflect current fees.
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. These fees would be in addition to any amounts received by the
financial intermediary under its Shareholder Servicing Agreement with the
Investment Company or Distributor. The Agreement requires each financial
intermediary to disclose to its clients any compensation payable to it by
the Investment Company or Distributor and any other compensation payable by
the client for various services provided in connection with their accounts.
-10-
<PAGE>
FUND OPERATING EXPENSES AFTER FEE REIMBURSEMENT
SSGA HIGH YIELD BOND FUND
The following table is intended to assist the investor in understanding the
various costs and expenses that an investor in shares of the 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."
<TABLE>
<S> <C>
Shareholder Transaction Expenses:
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: (as a percentage of average
daily net assets)
Advisory Fees (After Fee Reimbursement)11 .00%
Fees for 12b-1 Distribution and Shareholder Servicing1, 12 .06
Other Expenses1 .59
---
Total Operating Expenses (After Fee Reimbursement)1, 13 .65%
====
</TABLE>
<TABLE>
<S> <C> <C>
Examples: 1 year 3 years
You would pay the following expenses on a $1,000 investment, $7 $21
assuming: (i) 5% annual return; and (ii) redemption at the == ===
end of each time period:
</TABLE>
Long-term shareholders of the Fund may pay more in Rule 12b-1 fees than the
economic equivalent of the maximum front-end sales charge permitted by the
National Association of Securities Dealers, Inc.
- ----------------------
(1) The Advisor has agreed to reimburse the Fund for all expenses in excess of
.65% of average daily net assets on an annual basis. The total operating
expense of the Fund absent reimbursement would be 1.66% of average daily net
assets on an annual basis. The reimbursement agreement will remain in effect
for the current fiscal year. The gross annual Advisory fee expense before
reimbursement would be .30% of average daily net assets.
(2) The ratio includes .03% 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.
-11-
<PAGE>
FUND OPERATING EXPENSES AFTER FEE REIMBURSEMENT
SSGA GROWTH AND INCOME FUND
The following table is intended to assist the investor in understanding the
various costs and expenses that an investor in shares of the 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."
<TABLE>
<S> <C>
Shareholder Transaction Expenses:
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: (as a percentage of average
daily net assets)
Advisory Fees (After Fee Reimbursement)(1) .81%
Fees for 12b-1 Distribution and Shareholder Servicing(1,2) .12
Other Expenses(1) .17
---
Total Operating Expenses (After Fee Reimbursement)1, 16 1.10%
=====
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Examples: 1 year 3 years 5 years 10 years
You would pay the following expenses on a $11 $35 $61 $134
$1,000 investment, assuming: (i) 5% annual === === === ====
return; and (ii) redemption at the end of
each time period:
</TABLE>
Long-term shareholders of the Fund may pay more in Rule 12b-1 fees than the
economic equivalent of the maximum front-end sales charge permitted by the
National Association of Securities Dealers, Inc.
- -----------------------
(1) The Advisor has 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 1.14% of average daily
net assets on an annual basis. This reimbursement will continue until such
time as the Board of Trustees agrees to its modification or elimination but
will remain in effect for the current fiscal year. The gross annual Advisory
fee expense before reimbursement would be .85% of average daily net assets.
(2) The ratio includes .05% for 12b-1 Distribution and .07% for 12b-1
Shareholder Servicing Fees
(3) The expense information in the table has been restated to reflect current
fees. 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.
-12-
<PAGE>
FUND OPERATING EXPENSES AFTER FEE WAIVER
SSGA S&P 500 INDEX FUND
The following table is intended to assist the investor in understanding the
various costs and expenses that an investor in shares of the 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."
<TABLE>
<S> <C>
Shareholder Transaction Expenses:
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: (as a percentage of average
daily net assets)
Advisory Fees (After Fee Waiver)(1) .01%
Fees for 12b-1 Distribution and Shareholder Servicing(1,2) .08
Other Expenses(1) .09
---
Total Operating Expenses (After Fee Waiver)(1,3) .18%
====
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Examples: 1 year 3 years 5 years 10 years
You would pay the following expenses on a $2 $ 6 $10 $23
$1,000 investment, assuming: (i) 5% annual == === === ===
return; and (ii) redemption at the end of
each time period:
</TABLE>
Long-term shareholders of the Fund may pay more in Rule 12b-1 fees than the
economic equivalent of the maximum front-end sales charge permitted by the
National Association of Securities Dealers, Inc.
- ------------------------
(1) The Advisor voluntarily agrees to waive up to the full amount of its
Advisory fee of .10% of average daily net assets to the extent that total
expenses exceed .18% of average daily net assets on an annual basis. The
total operating expenses of the Fund absent the fee waiver would be .27% of
average daily net assets on an annual basis. The gross annual Advisory
expense before the fee waiver would be .10% of average daily net assets. The
Advisory fee waiver agreement will remain in effect for the current fiscal
year.
(2) The ratio includes .04% for 12b-1 Distribution and .04% for 12b-1
Shareholder Servicing Fees
(3) The expense information in the table has been restated to reflect current
fees. 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.
-13-
<PAGE>
FUND OPERATING EXPENSES AFTER FEE WAIVER
SSGA MATRIX EQUITY FUND
The following table is intended to assist the investor in understanding the
various costs and expenses that an investor in shares of the 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."
<TABLE>
<S> <C>
Shareholder Transaction Expenses:
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: (as a percentage of average
daily net assets)
Advisory Fees (After Fee Waiver)(1) .63%
Fees for 12b-1 Distribution and Shareholder Servicing(1,2) .13
Other Expenses(1) .09
---
Total Operating Expenses (After Fee Waiver)1, 22 .85%
===
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Examples: 1 year 3 years 5 years 10 years
You would pay the following expenses on a $9 $27 $47 $105
$1,000 investment, assuming: (i) 5% annual == === === ====
return; and (ii) redemption at the end of
each time period:
</TABLE>
Long-term shareholders of the Fund may pay more in Rule 12b-1 fees than the
economic equivalent of the maximum front-end sales charge permitted by the
National Association of Securities Dealers, Inc.
- ----------------------
(1) The Advisor has voluntarily agreed to waive .125% of its advisory fee. The
gross annual Advisory expense before the waiver would be .75% of average
daily net assets. The total operating expense of the Fund absent the fee
waiver would be .98% of average daily net assets on an annual basis. The
Advisory fee waiver agreement will remain in effect for the current fiscal
year.
(2) The ratio includes .04% for 12b-1 Distribution and .09% for 12b-1
Shareholder Servicing Fees
(3) The expense information in the table has been restated to reflect current
fees. 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.
-14-
<PAGE>
FUND OPERATING EXPENSES
SSGA SMALL CAP FUND
The following table is intended to assist the investor in understanding the
various costs and expenses that an investor in shares of the 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."
<TABLE>
<S> <C>
Shareholder Transaction Expenses:
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: (as a percentage of average
daily net assets)
Advisory Fees .75%
Fees for 12b-1 Distribution and Shareholder Servicing23 .16
Other Expenses .13
---
Total Operating Expenses24 1.04%
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Examples: 1 year 3 years 5 years 10 years
You would pay the following expenses on a $11 $33 $57 $127
$1,000 investment, assuming: (i) 5% annual === === === ====
return; and (ii) redemption at the end of each
time period:
</TABLE>
Long-term shareholders of the Fund may pay more in Rule 12b-1 fees than the
economic equivalent of the maximum front-end sales charge permitted by the
National Association of Securities Dealers, Inc.
- -------------------------
(1) The ratio includes .07% for 12b-1 Distribution and .09% for 12b-1
Shareholder Servicing Fees
(2) The expense information has been restated to reflect current fees. 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.
-15-
<PAGE>
FUND OPERATING EXPENSES AFTER FEE REIMBURSEMENT
SSGA SPECIAL EQUITY FUND
The following table is intended to assist the investor in understanding the
various costs and expenses that an investor in shares of the 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."
<TABLE>
<S> <C>
Shareholder Transaction Expenses:
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: (as a percentage of
average daily net assets)
Advisory Fees (After Fee Reimbursement)(1) .30%
Fees for 12b-1 Distribution and Shareholder Servicing(1,2) .05
Other Expenses(1) .75
Total Operating Expenses (After Fee Reimbursement)(1,3) 1.10%
=====
</TABLE>
<TABLE>
<S> <C> <C>
Examples: 1 year 3 years
You would pay the following expenses on a $11 $35
$1,000 investment, assuming: (i) 5% annual === ===
return; and (ii) redemption at the end of
each time period:
</TABLE>
Long-term shareholders of the Fund may pay more in Rule 12b-1 fees than the
economic equivalent of the maximum front-end sales charge permitted by the
National Association of Securities Dealers, Inc.
- --------------------
(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 1.55% 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 ratio includes .02% 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.
-16-
<PAGE>
FUND OPERATING EXPENSES AFTER FEE WAIVER
SSGA TUCKERMAN ACTIVE REIT FUND
The following table is intended to assist the investor in understanding the
various costs and expenses that an investor in shares of the 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."
<TABLE>
<S> <C>
Shareholder Transaction Expenses:
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: (as a percentage of average
daily net assets)
Advisory Fees (After Fee Waiver)(1) .27%
Fees for 12b-1 Distribution and Shareholder Servicing(1,2) .06
Other Expenses(1) .67
---
Total Operating Expenses (After Fee Waiver)(1,3) 1.00%
=====
</TABLE>
<TABLE>
<S> <C> <C>
Examples: 1 year 3 years
You would pay the following expenses on a $10 $32
$1,000 investment, assuming: (i) 5% annual === ===
return; and (ii) redemption at the end of
each time period:
</TABLE>
Long-term shareholders of the Fund may pay more in Rule 12b-1 fees than the
economic equivalent of the maximum front-end sales charge permitted by the
National Association of Securities Dealers, Inc.
- -----------------------
(1) The Advisor voluntarily agrees to waive up to the full amount of its
Advisory fee of .65% to the extent that total expenses exceed 1.00% on an
annual basis. The total operating expenses of the Fund absent fee waiver
would be 1.38% of average daily net assets on an annual basis. The Advisory
fee waiver will be in effect for the current fiscal year.
(2) The ratio includes .03% 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.
-17-
<PAGE>
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 shares of the 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."
<TABLE>
<S> <C>
Shareholder Transaction Expenses:
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: (as a percentage of
average daily net assets)
Advisory Fees (After Fee Reimbursement)31 .57%
12b-1 Distribution and Shareholder Servicing Fees1, 32 .07
Other Expenses1
.46
---
Total Operating Expenses (After Fee Reimbursement)(1,3) 1.10%
</TABLE>
<TABLE>
<S> <C> <C>
Examples: 1 year 3 years
You would pay the following expenses on a $11 $35
$1,000 investment, assuming: (i) 5% === ===
annual return; and (ii) redemption at the
end of each time period:
</TABLE>
Long-term shareholders of the Fund may pay more in Rule 12b-1 fees than the
economic equivalent of the maximum front-end sales charge permitted by the
National Association of Securities Dealers, Inc.
- -----------------------
(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. 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.
-18-
<PAGE>
FUND OPERATING EXPENSES AFTER FEE REIMBURSEMENT
SSGA EMERGING MARKETS FUND
The following table is intended to assist the investor in understanding the
various costs and expenses that an investor in shares of the 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."
<TABLE>
<S> <C>
Shareholder Transaction Expenses:
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: (as a percentage of average
daily net assets)
Advisory Fees (After Fee Reimbursement)(1) .62%
Fees for 12b-1 Distribution and Shareholder Servicing(1,2) .12
Other Expenses(1) .51
---
Total Operating Expenses (After Fee Reimbursement)1, 36 1.25%
=====
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Examples: 1 year 3 years 5 years 10 years
You would pay the following expenses on a $13 $40 $69 $151
$1,000 investment, assuming: (i) 5% annual === === === ====
return; and (ii) redemption at the end of
each time period:
</TABLE>
Long-term shareholders of the Fund may pay more in Rule 12b-1 fees than the
economic equivalent of the maximum front-end sales charge permitted by the
National Association of Securities Dealers, Inc.
- ---------------------
(1) The Advisor has voluntarily agreed to reimburse the Fund for all expenses in
excess of 1.25% of average daily net assets on an annual basis. The gross
annual Advisory fee expense before reimbursement would be .75% of average
daily net assets. The total operating expenses of the Fund absent
reimbursement would be 1.38% of average daily net assets on an annual basis.
This agreement will remain in effect for the current fiscal year.
(2) The ratio includes .09% 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.
-19-
<PAGE>
FUND OPERATING EXPENSES AFTER FEE WAIVER
SSGA ACTIVE INTERNATIONAL FUND
The following table is intended to assist the investor in understanding the
various costs and expenses that an investor in shares of the 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."
<TABLE>
<S> <C>
Shareholder Transaction Expenses:
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: (as a percentage of average
daily net assets)
Advisory Fees (After Fee Waiver)(1) .46%
Fees for 12b-1 Distribution and Shareholder Servicing(1,2) .07
Other Expenses(1) .47
Total Operating Expenses (After Fee Waiver)1, 39 1.00%
=====
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Examples: 1 year 3 years 5 years 10 years
You would pay the following expenses on a $10 $32 $55 $122
$1,000 investment, assuming: (i) 5% annual === === === ====
return; and (ii) redemption at the end of
each time period:
</TABLE>
Long-term shareholders of the Fund may pay more in Rule 12b-1 fees than the
economic equivalent of the maximum front-end sales charge permitted by the
National Association of Securities Dealers, Inc.
- ------------------------
(1) The Advisor voluntarily agrees to waive up to the full amount of its
Advisory fee of .75% of average daily net assets to the extent that total
expenses exceed 1.00% on an annual basis. The total operating expenses of
the Fund absent the fee waiver would be 1.29% of average daily net assets on
an annual basis. This agreement will remain in effect for the current fiscal
year.
(2) 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.
-20-
<PAGE>
FUND OPERATING EXPENSES AFTER FEE REIMBURSEMENT
SSGA INTERNATIONAL GROWTH OPPORTUNITIES FUND
The following table is intended to assist the investor in understanding the
various costs and expenses that an investor in shares of the 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."
<TABLE>
<S> <C>
Shareholder Transaction Expenses:
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: (as a percentage of
average daily net assets)
Advisory Fees (After Fee Reimbursement)(1) .19%
Fees for 12b-1 Distribution and Shareholder Servicing(1,2) .05
Other Expenses(1) .86
Total Operating Expenses (After Fee Reimbursement)(1,3) 1.10%
====
</TABLE>
<TABLE>
<S> <C> <C>
Examples: 1 year 3 years
You would pay the following expenses on a $10 $32
$1,000 investment, assuming: (i) 5% annual === ===
return; and (ii) redemption at the end of
each time period:
</TABLE>
Long-term shareholders of the Fund may pay more in Rule 12b-1 fees than the
economic equivalent of the maximum front-end sales charge permitted by the
National Association of Securities Dealers, Inc.
- --------------------
(1) The Advisor has 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 1.66% of average daily
net assets on an annual basis. The reimbursement agreement will remain in
effect for the current fiscal year. The gross annual Advisory fee expense
before reimbursement would be .75% of average daily net assets.
(2) The ratio includes .02% 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.
-21-
<PAGE>
FUND OPERATING EXPENSES AFTER FEE REIMBURSEMENT
SSGA LIFE SOLUTIONS INCOME AND GROWTH FUND
SSGA LIFE SOLUTIONS BALANCED FUND
SSGA LIFE SOLUTIONS GROWTH FUND
The following expense table lists the various costs and expenses that an
investor in the Life Solutions Funds will incur directly or indirectly. In
addition to the expenses identified below, each Life Solutions Fund will
indirectly bear its pro rata share of the expense of the Underlying Funds in
which the Life Solutions Fund invests. The amounts shown are based on estimates
of each Life Solutions Fund's operating expenses for its first full year of
operation. THE EXAMPLES SHOULD NOT BE CONSIDERED A STATEMENT OF ACTUAL PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. For
additional information, see "General Management."
<TABLE>
<CAPTION>
Shareholder Transaction Expenses: Income and Balanced Growth
Growth
<S> <C> <C> <C>
Sales Charge Imposed on Purchases None None None
Sales Charge Imposed on Reinvested Dividends None None None
Deferred Sales Charge None None None
Redemption Fees None None None
Exchange Fee None None None
Annual Life Solutions Fund Operating Expenses: (as a
percentage of average daily net assets)
Advisory Fees None None None
Fees for 12b-1 Distribution and Shareholder Servicing(1,2) .15% .15% .15%
Other Expenses (After Fee Reimbursement)(2) .30 .21 .26
Total Operating Expenses (After Fee Reimbursement)(1,3) .45% .36% .41%
==== ==== ====
</TABLE>
Long-term shareholders of the Fund may pay more in Rule 12b-1 fees than the
economic equivalent of the maximum front-end sales charge permitted by the
National Association of Securities Dealers, Inc.
- ------------------------
(1) The Advisor has voluntarily agreed to reimburse Life Solutions Funds'
expenses (except for 12b-1 expenses) at .30%. The Other Expenses and Total
Operating Expenses of the Life Solutions Income and Growth, Balanced and
Growth Funds absent the reimbursement would be .57%, .21%, and .26%; and
.72%, .36% and .41%, respectively, of average daily net assets on an annual
basis. The fee reimbursement agreement will remain in effect for the current
fiscal year.
(2) The ratio includes .02% for 12b-1 Distribution and .13% for 12b-1
Shareholder Servicing Fees
(3) Investors purchasing Life Solutions 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.
-22-
<PAGE>
While the Life Solutions Funds are expected to operate at a .30% expense level
after payment of 12b-1 fees, shareholders in a Life Solutions Fund will bear
indirectly the proportionate expenses of the Underlying Funds in which the Life
Solutions Fund invests. The following table provides the expense ratios for each
of the Underlying Funds in which the Life Solutions Funds may invest (based on
information as of August 31, 1998). Where applicable, expense ratios are
restated to reflect current fees and give effect to all waiver and reimbursement
arrangements. As explained in this Prospectus, each Life Solutions Fund intends
to invest in some, but not all, of the Underlying Funds.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
Underlying Fund Expense Ratio Before and After Fee Waivers and/or
Expense Reimbursements (%)
----------------------------------------------------------------------- --------------------
Before After
--------------------------------------------------------------------------------------------
<S> <C> <C>
S&P 500 Index .27 .18
--------------------------------------------------------------------------------------------
Matrix Equity .98 .85
--------------------------------------------------------------------------------------------
Small Cap 1.04 1.04
--------------------------------------------------------------------------------------------
Special Equity 1.55 1.10
--------------------------------------------------------------------------------------------
Active REIT 1.38 1.00
--------------------------------------------------------------------------------------------
Aggressive Equity Fund 1.28 1.10
--------------------------------------------------------------------------------------------
Growth and Income 1.14 1.10
--------------------------------------------------------------------------------------------
Active International 1.29 1.00
--------------------------------------------------------------------------------------------
Emerging Markets 1.38 1.25
--------------------------------------------------------------------------------------------
International Growth Opportunities 1.66 1.10
--------------------------------------------------------------------------------------------
Bond Market 0.52 0.50
--------------------------------------------------------------------------------------------
Intermediate 1.13 0.60
--------------------------------------------------------------------------------------------
High Yield Bond 1.66 0.65
--------------------------------------------------------------------------------------------
Yield Plus 0.41 0.41
--------------------------------------------------------------------------------------------
Money Market 0.41 0.41
--------------------------------------------------------------------------------------------
US Gov't Money Market 0.42 0.42
--------------------------------------------------------------------------------------------
</TABLE>
Each Life Solutions Fund will indirectly bear the expenses of its shares of the
Underlying Funds. Based on current expectations and the weighted exposure to the
Underlying Funds, the following is the indirect expense ratio (before and after
fee waivers and or expense reimbursements) of each Life Solutions Fund:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
Life Solutions Fund Average Indirect Expense Ratios Before and After
Fee Waiver and/or Expense Reimbursement (%)
--------------------------------------------------------------------------------------------
Before After
--------------------------------------------------------------------------------------------
<S> <C> <C>
Income and Growth Fund 0.73 0.57
--------------------------------------------------------------------------------------------
Balanced Fund 0.82 0.64
--------------------------------------------------------------------------------------------
Growth Fund 0.87 0.68
--------------------------------------------------------------------------------------------
</TABLE>
- ----------------------
(1) Information about the SSgA US Government Money Market Fund is contained in
its prospectus, which may be obtained by calling (800) 647-7327.
-23-
<PAGE>
Examples:
Using the above indirect and direct expense ratios for the Life Solutions Funds,
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:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
1 year 3 years 5 years 10 years
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Life Solutions Income and Growth Fund $10 $32 $56 $125
=== === === ====
-----------------------------------------------------------------------------------------
Life Solutions Balanced Fund 10 32 55 122
==== ==== ==== =====
-----------------------------------------------------------------------------------------
Life Solutions Growth Fund 11 35 60 133
==== ==== ==== =====
-----------------------------------------------------------------------------------------
</TABLE>
The examples should not be considered a statement of actual past or future
expenses. Actual expenses may be greater or less than those shown.
-24-
<PAGE>
FINANCIAL HIGHLIGHTS
SSGA MONEY MARKET FUND
The following table contains important financial information relating to the
Fund and has been audited by PricewaterhouseCoopers LLP, the Fund's independent
accountants. The table includes selected data for a share outstanding throughout
each fiscal year or period ended August 31, and other performance information
derived from the financial statements. The table appears in the Fund's Annual
Report and should be read in conjunction with the Fund's financial statements
and related notes, which are incorporated by reference in the Statement of
Additional Information and which appear, along with the report of
PricewaterhouseCoopers LLP, in the Fund's Annual Report to Shareholders. More
detailed information concerning the Fund's performance, including a complete
portfolio listing and audited financial statements, is available in the Fund's
Annual Report, which may be obtained without charge by writing or calling the
Distributor at (800) 647-7327.
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .0528 .0516 .0524 .0538 .0330 .0320
LESS DISTRIBUTIONS:
Net investment income (.0528) (.0516) (.0524) (.0538) (.0330) (.0320)
------- -------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
======= ======= ======= ======= ======= =======
TOTAL RETURN (%) 5.41 5.28 5.36 5.52 3.35 3.24
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ($000 omitted) 5,477,326 4,278,165 3,475,409 2,752,895 3,020,796 2,502,483
Ratios to average net assets (%):
Operating expenses .41 .39 .39 .39 .36 .33
Net investment income 5.28 5.17 5.20 5.37 3.33 3.20
</TABLE>
FINANCIAL HIGHLIGHTS ARE CONTINUED ON THE FOLLOWING PAGE
-25-
<PAGE>
FINANCIAL HIGHLIGHTS, SSgA MONEY MARKET FUND, CONTINUED:
<TABLE>
<CAPTION>
1992 1991 1990 1989
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.0000 $1.0000 $1.0000 $1.0000
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .0458 .0686 .0817 .0883
LESS DISTRIBUTIONS:
Net investment income (.0458) (.0686) (.0817) (.0883)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $1.0000 $1.0000 $1.0000 $1.0000
======= ======= ======= =======
TOTAL RETURN (%) 4.68 7.08 8.48 9.19
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ($000 omitted) 4,263,057 1,645,428 650,598 442,614
Ratios to average net assets (%):
Operating expenses .35 .37 .37 .43
Net investment income 4.40 6.59 8.13 8.97
</TABLE>
-26-
<PAGE>
FINANCIAL HIGHLIGHTS
SSGA YIELD PLUS FUND
The following table contains important financial information relating to the
Fund and has been audited by PricewaterhouseCoopers LLP, the Fund's independent
accountants. The table includes selected data for a share outstanding throughout
each fiscal year or period ended August 31, and other performance information
derived from the financial statements. The table appears in the Fund's Annual
Report and should be read in conjunction with the Fund's financial statements
and related notes, which are incorporated by reference in the Statement of
Additional Information and which appear, along with the report of
PricewaterhouseCoopers LLP, in the Fund's Annual Report to Shareholders. More
detailed information concerning the Fund's performance, including a complete
portfolio listing and audited financial statements, is available in the Fund's
Annual Report, which may be obtained without charge by writing or calling the
Distributor at (800) 647-7327.
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994 1993++
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.01 $10.00 $10.00 $9.99 $10.01 $10.00
------ ------ ------ ----- ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .57 .54 .56 .56 .38 .27
Net realized and unrealized gain on
investment (.04) .01 .00 .02 (.02) .01
----- ------ ------ ------ ----- ------
Total From Investment Operations .53 .55 .56 .58 .36 .28
----- ------ ------ ------ ----- ------
LESS DISTRIBUTIONS:
Net investment income (.57) (.54) (.56) (.56) (.38) (.27)
In excess of net realized gain on
investments -- -- -- (.01) -- --
----- ------ ------ ------ ----- ------
Total Distributions (.57) (.54) (.56) (.57) (.38) (.27)
----- ------ ------ ------ ----- ------
NET ASSET VALUE, END OF PERIOD $9.97 $10.01 $10.00 $10.00 $9.99 $10.01
===== ====== ====== ====== ===== ======
TOTAL RETURN(%)(1)
RATIOS/SUPPLEMENTAL DATA 5.40 5.67 5.73 6.01 3.65 2.85
Net assets, end of period ($omitted) 672,465 840,055 933,485 1,447,097 1,358,464 589,594
Ratios to average net assets (%)(2):
Operating expenses .41 .38 .36 .38 .35 .38
Net investment income 5.66 5.42 5.59 5.64 3.82 3.54
Portfolio turnover rate (%)(2) 249.10 92.38 97.05 199.69 142.68 137.86
</TABLE>
- ---------------------
++ For the period November 9, 1992 (commencement of operations) to August 31,
1993.
(1) Periods less than one year are not annualized.
(2) The ratios for the period ended August 31, 1993 are annualized.
-27-
<PAGE>
FINANCIAL HIGHLIGHTS
SSGA INTERMEDIATE FUND
The following table contains important financial information relating to the
Fund and has been audited by PricewaterhouseCoopers LLP, the Fund's independent
accountants. The table includes selected data for a share outstanding throughout
each fiscal year or period ended August 31, and other performance information
derived from the financial statements. The table appears in the Fund's Annual
Report and should be read in conjunction with the Fund's financial statements
and related notes, which are incorporated by reference in the Statement of
Additional Information and which appear, along with the report of
PricewaterhouseCoopers LLP, in the Fund's Annual Report to Shareholders. More
detailed information concerning the Fund's performance, including a complete
portfolio listing and audited financial statements, is available in the Fund's
Annual Report, which may be obtained without charge by writing or calling the
Distributor at (800) 647-7327.
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994++
<S> <C> <C> <C> <C>> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.76 $9.57 $9.72 $9.37 $10.00
----- ----- ----- ----- ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .53 .54 .53 .56 .42
Net realized and unrealized gain (loss) on .28 .20 (.14) .34 (.76)
investments --- ----- ----- ----- -----
Total From Investment Operations .81 .74 .39 .90 (.34)
--- ----- ----- ----- -----
LESS DISTRIBUTIONS:
Net investment income (.53) (.55) (.54) (.55) (.29)
------ ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $10.04 $9.76 $9.57 $9.72 $9.37
====== ===== ===== ===== =====
TOTAL RETURN (%)(1) 8.64 8.00 4.12 10.05 (3.42)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ($000 omitted) 76,691 53,834 41,518 33,893 19,963
Ratios to average net assets (%)(2):
Operating expenses, net(3) .60 .60 .60 .60 .60
Operating expenses, gross(3) 1.13 1.30 1.38 1.67 1.51
Net investment income 5.51 5.78 5.57 6.29 5.11
Portfolio turnover (%)(2) 251.17 242.76 221.73 26.31 15.70
</TABLE>
- -----------------------
++ For the period September 1, 1993 (commencement of operations) to
August 31, 1994.
(1) Periods less than one year are not annualized.
(2) The ratios for the period August 31, 1994 are annualized.
(3) See Note 4 of the Annual Report for current period amounts.
-28-
<PAGE>
FINANCIAL HIGHLIGHTS
SSGA BOND MARKET FUND
The following table contains important financial information relating to the
Fund and has been audited by PricewaterhouseCoopers LLP, the Fund's independent
accountants. The table includes selected data for a share outstanding throughout
each fiscal year or period ended August 31, and other performance information
derived from the financial statements. The table appears in the Fund's Annual
Report and should be read in conjunction with the Fund's financial statements
and related notes, which are incorporated by reference in the Statement of
Additional Information and which appear, along with the report of
PricewaterhouseCoopers LLP, in the Fund's Annual Report to Shareholders. More
detailed information concerning the Fund's performance, including a complete
portfolio listing and audited financial statements, is available in the Fund's
Annual Report, which may be obtained without charge by writing or calling the
Distributor at (800) 647-7327.
<TABLE>
<CAPTION>
1998 1997 1996++
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.97 $9.63 $10.00
----- ----- ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .55 .53 .27
Net realized and unrealized gain (loss) on .40 .35 (.49)
investments --- --- -----
Total From Investment Operations .95 .88 (.22)
--- --- -----
LESS DISTRIBUTIONS:
Net investment income (.54) (.54) (.15)
Net realized gain on investments (.03) -- --
----- ----- -----
Total Distributions (.57) (.54) (.15)
----- ----- -----
NET ASSET VALUE, END OF PERIOD $10.35 $9.97 $9.63
====== ===== =====
TOTAL RETURN (%)52 9.86 9.47 (2.19)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ($000 omitted) 190,151 87,670 29,015
Ratios to average net assets (%)(2)
Operating expenses, net(3) .48 .50 .63
Operating expenses, gross(3) .52 .74 .93
Net investment income 5.74 6.05 5.66
Portfolio turnover (%(2) 565.75 453.14 313.85
</TABLE>
- -----------------------
++ For the period February 7, 1996 (commencement of operations) to
August 31, 1996.
(1) Periods less than one year are not annualized.
(2) Annualized.
(3) See Note 4 of the Annual Report for current period amounts.
-29-
<PAGE>
FINANCIAL HIGHLIGHTS
SSGA HIGH YIELD BOND FUND
The following table contains important financial information relating to the
Fund and has been audited by PricewaterhouseCoopers LLP, the Fund's independent
accountants. The table includes selected data for a share outstanding throughout
the fiscal period ended August 31, and other performance information derived
from the financial statements. The table appears in the Fund's Annual Report and
should be read in conjunction with the Fund's financial statements and related
notes, which are incorporated by reference in the Statement of Additional
Information and which appear, along with the report of PricewaterhouseCoopers
LLP, in the Fund's Annual Report to Shareholders. More detailed information
concerning the Fund's performance, including a complete portfolio listing and
audited financial statements, is available in the Fund's Annual Report, which
may be obtained without charge by writing or calling the Distributor at (800)
647-7327.
<TABLE>
<CAPTION>
1998++
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .18
Net realized and unrealized gain (loss) on (.24)
investment -----
Total From Investment Operations (.06)
LESS DISTRIBUTIONS:
Net investment income (.04)
-----
NET ASSET VALUE, END OF PERIOD $9.90
=====
TOTAL RETURN (%)(1) (.59)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ($000 omitted) 11,908
Ratios to average net assets (%)(2):
Operating expenses, net(3) .65
Operating expenses, grossz(3) 1.66
Net investment income 6.38
Portfolio turnover (%)(4) 173.64
</TABLE>
- ----------------------
++ For the period May 5, 1998 (commencement of operations) to August 31, 1998.
(1) Periods less than one year are not annualized.
(2) The ratios for the period ended August 31, 1998 are annualized.
(3) See Note 4 of the Annual Report for current period amounts.
(4) The ratio has not been annualized due to the Fund's short period of
operation.
-30-
<PAGE>
FINANCIAL HIGHLIGHTS
SSGA GROWTH AND INCOME FUND
The following table contains important financial information relating to the
Fund and has been audited by PricewaterhouseCoopers LLP, the Fund's independent
accountants. The table includes selected data for a share outstanding throughout
each fiscal year or period ended August 31, and other performance information
derived from the financial statements. The table appears in the Fund's Annual
Report and should be read in conjunction with the Fund's financial statements
and related notes, which are incorporated by reference in the Statement of
Additional Information and which appear, along with the report of
PricewaterhouseCoopers LLP, in the Fund's Annual Report to Shareholders. More
detailed information concerning the Fund's performance, including a complete
portfolio listing and audited financial statements, is available in the Fund's
Annual Report, which may be obtained without charge by writing or calling the
Distributor at (800) 647-7327.
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994++
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 18.08 $ 13.36 $ 11.95 $ 10.51 $10.00
------- ------- ------- ------- ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .11 .12 .15 .18 .15
Net realized and unrealized gain (loss) on 1.83 5.18 1.46 1.44 .47
investments ---- ---- ---- ---- ---
Total From Investment Operations 1.94 5.30 1.61 1.62 .62
---- ---- ---- ---- ---
LESS DISTRIBUTIONS:
Net investment income (.11) (.14) (.16) (.18) (.11)
Net realized gain on investment (1.81) (.44) (.04) -- --
----- ---- ----- ---- -----
Total Distributions (1.92) (.58) (.20) (.18) (.11)
----- ---- ----- -------- -----
NET ASSET VALUE, END OF PERIOD $ 18.10 $ 18.08 $ 13.36 $ 11.95 $ 10.51
======= ======= ======== ======== ========
TOTAL RETURN (%)(1) 10.93 40.95 13.57 15.66 6.23
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ($000 omitted) 111,626 71,736 55,823 43,884 26,747
Ratios to average net assets (%)(2):
Operating expenses, net(3) .95 .95 .95 .95 .95
Operating expenses, gross(3) 1.14 1.21 1.40 1.61 1.44
Net investment income .57 .82 1.15 1.72 1.75
Portfolio turnover (%)(2) 66.44 29.88 38.34 39.32 36.48
</TABLE>
- ---------------------------
++ For the period September 1, 1993 (commencement of operations) to
August 31, 1994.
(1) Periods less than one year are not annualized.
(2) The ratios for the period ended August 31, 1994 are annualized.
(3) See Note 4 of the Annual Report for current period amounts.
-31-
<PAGE>
FINANCIAL HIGHLIGHTS
SSGA S&P 500 INDEX FUND
The following table contains important financial information relating to the
Fund and has been audited by PricewaterhouseCoopers LLP, the Fund's independent
accountants. The table includes selected data for a share outstanding throughout
each fiscal year or period ended August 31, and other performance information
derived from the financial statements. The table appears in the Fund's Annual
Report and should be read in conjunction with the Fund's financial statements
and related notes, which are incorporated by reference in the Statement of
Additional Information and which appear, along with the report of
PricewaterhouseCoopers LLP, in the Fund's Annual Report to Shareholders. More
detailed information concerning the Fund's performance, including a complete
portfolio listing and audited financial statements, is available in the Fund's
Annual Report, which may be obtained without charge by writing or calling the
Distributor at (800) 647-7327.
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994 1993++
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $18.96 $14.41 $12.81 $10.89 $10.72 $10.00
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .31 .32 .32 .29 .26 .15
Net realized and unrealized gain (loss) on 1.18 5.22 1.98 1.95 .29 .65
investments ---- ---- ---- ---- --- ----
Total From Investment Operations 1.49 5.54 2.30 2.24 .55 .80
---- ---- ---- ---- --- ----
LESS DISTRIBUTIONS:
Net investment income (.32) (.32) (.31) (.29) (.26) (.08)
Net realized gain on investment (.71) (.67) (.39) (.03) (.07) --
In excess of net realized gain on investments -- -- -- -- (.05) --
----- ----- ----- ----- ----- ----
Total Distributions (1.03) (.99) (.70) (.32) (.38) (.08)
NET ASSET VALUE, END OF PERIOD $19.42 $18.96 $14.41 $12.81 $10.89 $10.72
====== ====== ====== ====== ====== ======
TOTAL RETURN (%)(1) 7.91 40.30 18.46 21.11 5.29 8.06
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ($000 omitted) 1,615,913 1,299,571 704,683 545,200 361,712 238,666
Ratios to average net assets (%)(2):
Operating expenses, net(3) .17 .16 .18 .19 .15 .15
Operating expenses, gross(3) .27 .26 .28 .29 .25 .35
Net investment income 1.50 2.00 2.32 2.76 2.69 3.02
Portfolio turnover (%)(2) 26.17 7.54 28.72 38.56 7.97 48.10
</TABLE>
- -----------------------
++ For the period December 30, 1992 (commencement of operations) to
August 31, 1993.
(1) Periods less than one year are not annualized.
(2) The ratios for the period ended August 31, 1993 are annualized.
(3) See Note 4 of the Annual Report for current period amounts.
-32-
<PAGE>
FINANCIAL HIGHLIGHTS
SSGA MATRIX EQUITY FUND
The following table contains important financial information relating to the
Fund and has been audited by PricewaterhouseCoopers LLP, the Fund's independent
accountants. The table includes selected data for a share outstanding throughout
each fiscal year or period ended August 31, and other performance information
derived from the financial statements. The table appears in the Fund's Annual
Report and should be read in conjunction with the Fund's financial statements
and related notes, which are incorporated by reference in the Statement of
Additional Information and which appear, along with the report of
PricewaterhouseCoopers LLP, in the Fund's Annual Report to Shareholders. More
detailed information concerning the Fund's performance, including a complete
portfolio listing and audited financial statements, is available in the Fund's
Annual Report, which may be obtained without charge by writing or calling the
Distributor at (800) 647-7327.
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994 1993 1992++
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 18.41 $ 14.13 $13.93 $12.06 $11.95 $9.78 $10.00
------- ------- ------- ------ ------ ----- ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .17 .21 .24 .28 .24 .18 .05
Net realized and unrealized gain (loss) on .29 5.43 1.64 1.93 .28 2.17 (.27)
investments --- ---- ---- ---- ---- ---- -----
Total From Investment Operations .46 5.64 1.88 2.21 .52 2.35 (.22)
--- ---- ----- ---- ---- ---- -----
LESS DISTRIBUTIONS:
Net investment income (.19) (.22) (.24) (.28) (.23) (.18) --
Net realized gain on investment (3.00) (1.14) (1.44) (.06) (.09) -- --
In excess of net realized gain on investments -- -- -- -- (.09) --
----- ----- ----- ---- ----- ----- -----
Total Distributions (3.19) (1.36) (1.68) (.34) (.41) (.18) --
----- ----- ----- ---- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $15.68 $18.41 $14.13 $13.93 $ 12.06 $ 11.95 $9.78
====== ====== ====== ====== ======= ======= =====
TOTAL RETURN (%)(1) 2.09 42.75 14.67 18.81 4.41 24.24 (2.20)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ($000 omitted) 445,077 429,397 261,888 198,341 130,764 62,549 12,408
Ratios to average net assets (%)(2):
Operating expenses, net(3) .69 .58 .66 .68 .58 .60 .18
Operating expenses, gross(3) .97 .96 1.04 1.06 .96 1.25 1.90
Net investment income .97 1.33 1.76 2.25 2.16 2.13 2.69
Portfolio turnover (%)(2) 133.63 117.27 150.68 129.98 127.20 57.65 None
</TABLE>
- --------------------------
++ For the period May 4, 1992 (commencement of operations) to
August 31, 1992.
(1) Periods less than one year are not annualized.
(2) The ratios for the period ended August 31, 1992 are annualized.
(3) See Note 4 of the Annual Report for current period amounts.
-33-
<PAGE>
FINANCIAL HIGHLIGHTS
SSGA SMALL CAP FUND
The following table contains important financial information relating to the
Fund and has been audited by PricewaterhouseCoopers LLP, the Fund's independent
accountants. The table includes selected data for a share outstanding throughout
each fiscal year or period ended August 31, and other performance information
derived from the financial statements. The table appears in the Fund's Annual
Report and should be read in conjunction with the Fund's financial statements
and related notes, which are incorporated by reference in the Statement of
Additional Information and which appear, along with the report of
PricewaterhouseCoopers LLP, in the Fund's Annual Report to Shareholders. More
detailed information concerning the Fund's performance, including a complete
portfolio listing and audited financial statements, is available in the Fund's
Annual Report, which may be obtained without charge by writing or calling the
Distributor at (800) 647-7327.
<TABLE>
<CAPTION>
1998 1997 1996 1995+ 1994 1993 1992++
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD
$22.11 $17.44 $14.42 $11.88 $12.24 $10.09 $10.00
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .02 .03 .04 .13 .21 .22 .04
Net realized and unrealized gain (loss) (4.54) 5.87 3.25 3.19 .24 2.14 .05
on investments ------ ---- ------ ------ ------ ----- ---
Total From Investment Operations (4.52) 5.90 3.29 3.32 .45 2.36 .09
------ ---- ---- ---- --- ----- ---
LESS DISTRIBUTIONS:
Net investment income (.04) (.01) (.07) (.15) (.21) (.21) --
Net realized gain on investment (1.10) (1.22) (.20) (.58) (.60) -- --
In excess of net realized gain on (.49) -- -- (.05) -- -- --
investments ---- -- ----- ----- ----- ----- -----
Total Distributions (1.63) (1.23) (.27) (.78) (.81) (.21) --
----- ----- ----- ------ ----- ----- ------
$15.96 $22.11 $17.44 $14.42 $11.88 $12.24 $10.09
====== ====== ====== ====== ====== ====== ======
NET ASSET VALUE, END OF PERIOD
TOTAL RETURN (%)(1) (22.32) 35.85 23.14 30.04 3.90 23.66 .90
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ($000 omitted) 344,630 149,808 55,208 23,301 25,716 34,815 9,392
Ratios to average net assets (%)(2):
Operating expenses, net 1.04 1.00 1.00 .97 .30 .25 .25
Operating expenses, gross 1.04 1.09 1.18 1.58 .81 1.18 1.71
Net investment income .10 .18 .26 .81 1.73 1.85 2.55
Portfolio turnover (%)(2) 86.13 143.79 76.85 192.88 44.86 81.14 4.59
</TABLE>
- -------------------------
+ Prior to November 22, 1994, the Fund was passively managed as the S&P Midcap
Index Fund. Effective November 23, 1994, the Fund increased the Advisory fee
from .20% to .75% of its average daily net assets.
++ For the period July 1, 1992 (commencement of operations) to
August 31, 1992.
(1) Periods less than one year not annuzalized.
(2) The ratios for the period ended August 31, 1992.
-34-
<PAGE>
FINANCIAL HIGHLIGHTS
SSGA SPECIAL EQUITY FUND
The following table contains important financial information relating to the
Fund and has been audited by PricewaterhouseCoopers LLP, the Fund's independent
accountants. The table includes selected data for a share outstanding throughout
the fiscal period ended August 31, and other performance information derived
from the financial statements. The table appears in the Fund's Annual Report and
should be read in conjunction with the Fund's financial statements and related
notes, which are incorporated by reference in the Statement of Additional
Information and which appear, along with the report of PricewaterhouseCoopers
LLP, in the Fund's Annual Report to Shareholders. More detailed information
concerning the Fund's performance, including a complete portfolio listing and
audited financial statements, is available in the Fund's Annual Report, which
may be obtained without charge by writing or calling the Distributor at (800)
647-7327.
<TABLE>
<CAPTION>
1998++
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .01
Net realized and unrealized gain (loss) on (2.84)
investment -----
Total From Investment Operations (2.83)
-----
NET ASSET VALUE, END OF PERIOD $7.17
=====
TOTAL RETURN (%)(1) (28.30)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ($000 omitted) 13,146
Ratios to average net assets (%)(2):
Operating expenses, net(3) 1.10
Operating expenses, gross(3) 1.55
Net investment income .24
Portfolio turnover (%)(2) 88.36
</TABLE>
- ------------------------
++ For the period July 1, 1992 (commencement of operations) to
August 31, 1998.
(1) Periods less than one year not annuzalized.
(2) The ratios for the period ended August 31, 1998.
(3) See Note 4 of the Annual Report for current period amounts.
-35-
<PAGE>
FINANCIAL HIGHLIGHTS
SSGA TUCKERMAN ACTIVE REIT FUND
The following table contains important financial information relating to the
Fund and has been audited by PricewaterhouseCoopers LLP, the Fund's independent
accountants. The table includes selected data for a share outstanding throughout
the fiscal period ended August 31, and other performance information derived
from the financial statements. The table appears in the Fund's Annual Report and
should be read in conjunction with the Fund's financial statements and related
notes, which are incorporated by reference in the Statement of Additional
Information and which appear, along with the report of PricewaterhouseCoopers
LLP, in the Fund's Annual Report to Shareholders. More detailed information
concerning the Fund's performance, including a complete portfolio listing and
audited financial statements, is available in the Fund's Annual Report, which
may be obtained without charge by writing or calling the Distributor at (800)
647-7327.
<TABLE>
<CAPTION>
1998++
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .15
Net realized and unrealized gain (loss) on (1.94)
investments -----
Total From Investment Operations (1.79)
LESS DISTRIBUTIONS:
Net investment income (.04)
----
NET ASSET VALUE, END OF PERIOD $8.17
=====
TOTAL RETURN (%)(1) (17.99)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ($000 omitted) 18,458
Ratios to average net assets (%)(2):
Operating expenses, net(3) 1.00
Operating expenses, gross(3) 1.38
Net investment income 5.21
Portfolio turnover (%)(2) 17.36
</TABLE>
- ----------------------------
++ For the period May 1, 1998 (commencement of operations) to
August 31, 1998.
(1) Periods less than one year not annuzalized.
(2) The ratios for the period ended August 31, 1998 are annualized.
(3) See Note 4 of the Annual Report for current period amounts.
-36-
<PAGE>
FINANCIAL HIGHLIGHTS
SSGA EMERGING MARKETS FUND
The following table contains important financial information relating to the
Fund and has been audited by PricewaterhouseCoopers LLP, the Fund's independent
accountants. The table includes selected data for a share outstanding throughout
each fiscal year or period ended August 31, and other performance information
derived from the financial statements. The table appears in the Fund's Annual
Report and should be read in conjunction with the Fund's financial statements
and related notes, which are incorporated by reference in the Statement of
Additional Information and which appear, along with the report of
PricewaterhouseCoopers LLP, in the Fund's Annual Report to Shareholders. More
detailed information concerning the Fund's performance, including a complete
portfolio listing and audited financial statements, is available in the Fund's
Annual Report, which may be obtained without charge by writing or calling the
Distributor at (800) 647-7327.
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994++
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.33 $10.87 $10.30 $11.45 $10.00
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .18 .12 .11 .14 .05
Net realized and unrealized gain (loss) on (5.58) 1.51 .68 (1.19) 1.40
investments ----- ---- --- ------ ----
Total From Investment Operations (5.40) 1.63 .79 (1.05) 1.45
----- ---- --- ------ ----
LESS DISTRIBUTIONS:
Net investment income (.15) (.11) (.12) (.10) --
Net realized gain on investment -- (.06) (.10) -- --
-- ---- ----- -- --
In excess of net realized gain on investments (.26) -- -- -- --
---- ---- ----- ---- ------
Total Distributions (.41) (.17) (.22) (.10) --
---- ----- ----- ---- ------
NET ASSET VALUE, END OF PERIOD $6.52 $12.33 $10.87 $10.30 $11.45
===== ====== ====== ====== ======
TOTAL RETURN (%)(1) (45.36) 15.12 7.83 (9.28) 14.50
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ($000 omitted) 206,370 252,708 120,216 68,385 27,479
Ratios to average net assets (%)(2):
Operating expenses, net(3) 1.25 1.25 1.28 1.50 1.50
Operating expenses, gross(3) 1.38 1.51 1.67 1.90 2.45
Net investment income 1.85 1.07 1.10 1.74 1.31
Portfolio turnover (%) 38.94 15.00 4.36 19.77 --
</TABLE>
- ------------------------
++ For the period March 1, 1994 (commencement of operations) to
August 31, 1994.
(1) Periods less than one year not annuzalized.
(2) The ratios for the period ended August 31, 1994 are annualized.
(3) See Note 4 of the Annual Report for current period amounts.
-37-
<PAGE>
FINANCIAL HIGHLIGHTS
SSGA ACTIVE INTERNATIONAL FUND
The following table contains important financial information relating to the
Fund and has been audited by PricewaterhouseCoopers LLP, the Fund's independent
accountants. The table includes selected data for a share outstanding throughout
each fiscal year or period ended August 31, and other performance information
derived from the financial statements. The table appears in the Fund's Annual
Report and should be read in conjunction with the Fund's financial statements
and related notes, which are incorporated by reference in the Statement of
Additional Information and which appear, along with the report of
PricewaterhouseCoopers LLP, in the Fund's Annual Report to Shareholders. More
detailed information concerning the Fund's performance, including a complete
portfolio listing and audited financial statements, is available in the Fund's
Annual Report, which may be obtained without charge by writing or calling the
Distributor at (800) 647-7327.
<TABLE>
<CAPTION>
1998 1997 1996 1995++
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.85 $10.96 $10.89 $10.00
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .16 .10 .36 .03
Net realized and unrealized gain (loss) on (1.13) .03 .28 .86
investments ----- --- --- ----
Total From Investment Operations (.97) .13 .64 .89
----- --- --- -----
LESS DISTRIBUTIONS:
Net investment income (.15) (.18) (.57) --
Net realized gain on investment (.49) (.06) -- --
----- ----- ----- -----
Total Distributions (.64) (.24) (.57) ---
-----
NET ASSET VALUE, END OF PERIOD $9.24 $10.85 $10.96 $10.89
===== ====== ====== ======
TOTAL RETURN (%)(1) (9.50) 1.17 6.22 8.90
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ($000 omitted) 76,565 83,930 54,595 25,186
Ratios to average net assets (%)(2)
Operating expenses, net(3) 1.00 1.00 1.00 1.79
Operating expenses, gross(3) 1.29 1.40 1.47 2.56
Net investment income 1.23 1.12 1.16 1.11
Portfolio turnover (%)(2) 74.79 48.29 22.02 7.17
</TABLE>
- -------------------
++ For the period March 7, 1995 (commencement of operations) to August 31,
1995.
(1) Periods less than one year not annuzalized.
(2) The ratios for the period ended August 31, 1995 are annualized.
(3) See Note 4 of the Annual Report for current period amounts.
-38-
<PAGE>
FINANCIAL HIGHLIGHTS
SSGA INTERNATIONAL GROWTH OPPORTUNITIES FUND
The following table contains important financial information relating to the
Fund and has been audited by PricewaterhouseCoopers LLP, the Fund's independent
accountants. The table includes selected data for a share outstanding throughout
the fiscal period ended August 31, and other performance information derived
from the financial statements. The table appears in the Fund's Annual Report and
should be read in conjunction with the Fund's financial statements and related
notes, which are incorporated by reference in the Statement of Additional
Information and which appear, along with the report of PricewaterhouseCoopers
LLP, in the Fund's Annual Report to Shareholders. More detailed information
concerning the Fund's performance, including a complete portfolio listing and
audited financial statements, is available in the Fund's Annual Report, which
may be obtained without charge by writing or calling the Distributor at (800)
647-7327.
<TABLE>
<CAPTION>
1998++
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .03
Net realized and unrealized gain (loss) on (1.61)
investment -----
Total From Investment Operations (1.58)
-----
NET ASSET VALUE, END OF PERIOD $8.42
=====
TOTAL RETURN (%)(1) (15.80)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ($000 omitted) 22,966
Ratios to average net assets (%)(2):
Operating expenses, net(3) 1.10
Operating expenses, gross(3) 1.66
Net investment income 1.27
Portfolio turnover (%)(2) 17.24
</TABLE>
- -------------------------
++ For the period May 1, 1998 (commencement of operations) to
August 31, 1998.
(1) Periods less than one year not annuzalized.
(2) The ratios for the period ended August 31, 1998 are annualized.
(3) See Note 4 of the Annual Report for current period amounts.
-39-
<PAGE>
FINANCIAL HIGHLIGHTS
SSGA LIFE SOLUTIONS INCOME AND GROWTH FUND
The following table contains important financial information relating to the
Fund and has been audited by PricewaterhouseCoopers LLP, the Fund's independent
accountants. The table includes selected data for a share outstanding throughout
each fiscal year or period ended August 31, and other performance information
derived from the financial statements. The table appears in the Fund's Annual
Report and should be read in conjunction with the Fund's financial statements
and related notes, which are incorporated by reference in the Statement of
Additional Information and which appear, along with the report of
PricewaterhouseCoopers LLP, in the Fund's Annual Report to Shareholders. More
detailed information concerning the Fund's performance, including a complete
portfolio listing and audited financial statements, is available in the Fund's
Annual Report, which may be obtained without charge by writing or calling the
Distributor at (800) 647-7327.
<TABLE>
<CAPTION>
1998 1997++
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.93 $12.68
------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .46 --
Capital gain distributions from Underlying Funds .40(1) --
Net realized and unrealized gain (loss) on (.41) .25
investments ----- ---
Total Income from Investment Operations .45 .25
---- ---
LESS DISTRIBUTIONS:
Net investment income (.41) --
Net realized gain on investments (.32) --
----- --
Total Distributions (.73) --
----- --
NET ASSET VALUE, END OF PERIOD $12.65 $12.93
====== ======
TOTAL RETURN (%)(2) 3.53 1.97
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ($000 omitted) 23,771 13,979
Ratios to average net assets (%)(3):
Operating expenses, net(4) .45 .35
Operating expenses, gross(4) .72 1.14
Net investment income 3.00 .16
Portfolio turnover (%)(3) 93.28 106.68
</TABLE>
++ For the period July 1, 1997 (commencement of operations) to August 31,
1997.
(1) Calculation is based on average month-end shares outstanding.
(2) Periods less than one year are not annualized.
(3) The ratios for the period ended August 31, 1997 are annualized.
(4) See Note 4 of the Annual Report for current period amounts.
-40-
<PAGE>
FINANCIAL HIGHLIGHTS
SSGA LIFE SOLUTIONS BALANCED FUND
The following table contains important financial information relating to the
Fund and has been audited by PricewaterhouseCoopers LLP, the Fund's independent
accountants. The table includes selected data for a share outstanding throughout
each fiscal year or period ended August 31, and other performance information
derived from the financial statements. The table appears in the Fund's Annual
Report and should be read in conjunction with the Fund's financial statements
and related notes, which are incorporated by reference in the Statement of
Additional Information and which appear, along with the report of
PricewaterhouseCoopers LLP, in the Fund's Annual Report to Shareholders. More
detailed information concerning the Fund's performance, including a complete
portfolio listing and audited financial statements, is available in the Fund's
Annual Report, which may be obtained without charge by writing or calling the
Distributor at (800) 647-7327.
<TABLE>
<CAPTION>
1998 1997++
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $13.98 $13.69
------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .50 --
Capital gain distributions from Underlying Funds .56(1) --
Net realized and unrealized gain (loss) on (1.01) .29
investment ------ ---
Total Income from Investment Operations .05 .29
---- ---
LESS DISTRIBUTIONS:
Net investment income (.56) --
Net realized gain on investments (.52) --
------- ------
Total Distributions (1.08) --
------- ------
NET ASSET VALUE, END OF PERIOD $12.95 $13.98
====== ======
TOTAL RETURN (%)(2) .33 2.12
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ($000 omitted) 90,804 47,003
Ratios to average net assets (%)(3):
Operating expenses, net(4) .36 .35
Operating expenses, gross(4) .36 .49
Net investment income 2.07 .07
Portfolio turnover (%)(3) 101.40 51.61
</TABLE>
++ For the period July 1, 1997 (commencement of operations) to August 31,
1997.
(1) Calculation is based on average month-end shares outstanding.
(2) Periods less than one year are not annualized.
(3) The ratios for the period ended August 31, 1997 are annualized.
(4) See Note 4 of the Annual Report for current period amounts.
-41-
<PAGE>
FINANCIAL HIGHLIGHTS
SSGA LIFE SOLUTIONS GROWTH FUND
The following table contains important financial information relating to the
Fund and has been audited by PricewaterhouseCoopers LLP, the Fund's independent
accountants. The table includes selected data for a share outstanding throughout
each fiscal year or period ended August 31, and other performance information
derived from the financial statements. The table appears in the Fund's Annual
Report and should be read in conjunction with the Fund's financial statements
and related notes, which are incorporated by reference in the Statement of
Additional Information and which appear, along with the report of
PricewaterhouseCoopers LLP, in the Fund's Annual Report to Shareholders. More
detailed information concerning the Fund's performance, including a complete
portfolio listing and audited financial statements, is available in the Fund's
Annual Report, which may be obtained without charge by writing or calling the
Distributor at (800) 647-7327.
<TABLE>
<CAPTION>
1998 1997++
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $14.79 $14.44
------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .38 --
Capital gain distributions from Underlying Funds 1.02(1) --
Net realized and unrealized gain (loss) on (1.77) .35
investment ------ ---
Total Income from Investment Operations (.37) .35
----- ---
LESS DISTRIBUTIONS:
Net investment income (.27) --
In excess of net investment income (.44) --
Net realized gain on investments (.69) --
------- ------
Total Distributions (1.40) --
------- ------
NET ASSET VALUE, END OF PERIOD $13.02 $14.79
====== ======
TOTAL RETURN (%)(2) (2.68) 2.42
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ($000 omitted) 53,432 43,603
Ratios to average net assets (%)(3):
Operating expenses, net(4) .41 .35
Operating expenses, gross(4) .41 .54
Net investment income 1.52 .09
Portfolio turnover (%)(3) 67.66 39.49
</TABLE>
++ For the period July 1, 1997 (commencement of operations) to August 31,
1997.
(1) Calculation is based on average month-end shares outstanding.
(2) Periods less than one year are not annualized.
(3) The ratios for the period ended August 31, 1997 are annualized.
(4) See Note 4 of the Annual Report for current period amounts.
-42-
<PAGE>
SSgA FUNDS
SSgA Funds (the "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, Investment
Company is authorized to issue an unlimited number of shares evidencing
beneficial interests in different investment portfolios. State Street Bank and
Trust Company ("State Street"), through its division, State Street Global
Advisors ("Advisor" or "SSgA"), is the Funds' Advisor.
Through this Prospectus, Investment Company offers shares in the following
separate, diversified funds (collectively, the "Funds"):
o SSgA Money Market Fund ("Money Market Fund")
o SSgA Yield Plus Fund ("Yield Plus Fund")
o SSgA Intermediate Fund ("Intermediate Fund")
o SSgA Bond Market Fund ("Bond Market Fund")
o SSgA High Yield Bond Fund ("High Yield Bond Fund")
o SSgA Growth and Income Fund ("Growth and Income Fund")
o SSgA S&P 500 Index Fund ("S&P 500 Index Fund")
o SSgA Matrix Equity Fund ("Matrix Equity Fund")
o SSgA Small Cap Fund ("Small Cap Fund")(1)
o SSgA Special Equity Fund ("Special Equity Fund")
o SSgA Tuckerman Active REIT Fund ("Active REIT Fund")
o SSgA Aggressive Equity Fund ("Aggressive Equity Fund")
o SSgA Emerging Markets Fund ("Emerging Markets Fund")
o SSgA Active International Fund ("Active International Fund")
o SSgA International Growth Opportunities Fund ("International Growth
Opportunities Fund")
The Life Solutions Funds are comprised of various combinations of the Investment
Company's portfolios (the "Underlying Funds") described in this Prospectus.
o SSgA Life Solutions Income and Growth Fund ("Income and Growth Fund")
o SSgA Life Solutions Balanced Fund ("Balanced Fund")
o SSgA Life Solutions Growth Fund ("Growth Fund")
MANNER OF OFFERING
Distribution and Eligible Investors. Shares of the Funds are offered without a
sales commission by Russell Fund Distributors, Inc. (the "Distributor"),
Investment Company's distributor, to US and foreign institutional and retail
investors which invest for their own
- -------------------
(1) Effective August 31, 1998, the SSgA Small Cap Fund is closed to purchases by
new investors except for purchases by eligible investors as described below.
o Current shareholders of the SSgA Small Cap Fund may continue to add to
the fund account.
o Participants in 401(k) plans for which the SSgA Small Cap Fund is an
option may continue to add to their Fund account.
o Participants in asset allocation programs sponsored by financial
advisors may continue to add to their Fund account.
-43-
<PAGE>
account or in a fiduciary or agency capacity. The Funds will incur distribution
expenses under their Rule 12b-1 plan. See "General Management -- Distribution
Services and Shareholder Servicing Arrangements."
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
As indicated below, some Funds have a fundamental investment objective which may
be changed only with the approval of a majority of the Fund's shareholders as
defined by the 1940 Act. Other Funds have a nonfundamental investment objective
which may be changed by the Board of Trustees without shareholder approval,
although shareholders will receive prior notice of any change to a
nonfundamental objective. There are also fundamental and nonfundamental
investment policies and restrictions, as described in this section. There can be
no assurance that any Fund will meet its stated investment objective.
INVESTMENT OBJECTIVES AND POLICIES (ALL FUNDS EXCEPT LIFE SOLUTIONS FUNDS)
Money Market Fund. The fundamental investment objective is to maximize current
income, to the extent consistent with the preservation of capital and liquidity
and the maintenance of a stable $1.00 per share net asset value, by investing in
dollar denominated securities with remaining maturities of one year or less.
The Fund attempts to meet its investment objective by investing in high quality
money market instruments. Such instruments include: (1) US Treasury bills, notes
and bonds; (2) other obligations issued or guaranteed as to interest and
principal by the US Government, its agencies, or instrumentalities; (3)
instruments of US and foreign banks, including certificates of deposit, banker's
acceptances and time deposits; these instruments may include Eurodollar
Certificates of Deposit, Eurodollar Time Deposits and Yankee Certificates of
Deposit; (4) commercial paper of US and foreign companies; (5) asset-backed
securities; (6) corporate obligations; (7) variable amount master demand notes;
and (8) repurchase agreements.
The Fund will limit its portfolio investments to those United States
dollar-denominated instruments which at the time of acquisition the Advisor
determines present minimal credit risk and which qualify as "eligible"
securities under the Securities and Exchange Commission rules applicable to
money market mutual funds. In general, eligible securities include securities
that: (1) are rated in the highest category by least two Nationally Recognized
Statistical Rating Organizations ("NRSRO"); (2) by one NRSRO, if only one rating
service has rated the security; or (3) if unrated, are of comparable quality, as
determined by the Advisor in accordance with procedures established by the Board
of Trustees. See the Statement of Additional Information ("SAI") for a
description of the securities ratings of debt instruments and commercial paper
by NRSROs.
Yield Plus Fund. The nonfundamental investment objective is to seek high current
income and liquidity by investing primarily in a diversified portfolio of
high-quality debt securities and by maintaining a portfolio duration of one year
or less.
The Fund attempts to meet its objective by investing primarily in: (1) US
Government securities (including repurchase agreements relating to such
securities); (2) instruments of US and foreign banks, including ETDs, ECDs,
YCDs, certificates of deposit, time deposits, letters of credit and banker's
acceptances; (3) commercial paper, notes and bonds issued by foreign and
domestic corporations; (4) securities of foreign governments, agencies and
subdivisions of foreign governments and supranational organizations (such as the
World Bank); (5) asset-backed securities; (6) mortgage-related securities; and
(7) interest rate swaps.
The Fund limits its investments to bank instruments, mortgage-related
securities, asset-backed securities, commercial paper, corporate notes and bonds
and obligations of foreign governments and agencies and subdivisions of foreign
governments and supranational organizations that, at the time of acquisition:
(1) are rated in one of the four highest categories (or in the case of
commercial paper, in the two highest categories) by at least one NRSRO; or (2)
if not rated, are of comparable quality, as determined by the Advisor, in
accordance with procedures established by the Board of Trustees. All securities
may be either fixed income, zero coupon or variable- or floating-rate securities
and may be denominated in US dollars or selected foreign currencies.
The Fund will maintain a portfolio duration of one year or less. Duration is a
measure of the price sensitivity of a security to changes in interest rates.
Unlike maturity, which measures the period of time until final payment is to be
made on a security, duration measures the dollar-weighted average maturity of a
security's expected cash flows (i.e., interest and principal payments),
discounted to their present values, after giving effect to all maturity
shortening features, such as call or redemption rights. With respect to a
variable or floating-rate instrument, duration is adjusted to indicate the price
sensitivity of the instrument to changes in the interest rate in effect until
the next reset date. For substantially all securities, the duration of a
security is equal to or less than its stated maturity.
-44-
<PAGE>
Intermediate Fund. The fundamental investment objective is to seek a high level
of current income while preserving principal by investing primarily in a
diversified portfolio of debt securities with a dollar-weighted average maturity
between three and ten years.
The Fund is structured around the Lehman Brothers Intermediate
Government/Corporate Bond Index (the "LBIGC Index"). Under normal market
conditions, the Fund attempts to meet its objective by investing at least 65% of
its total assets in: (1) US Government securities (including repurchase and
reverse repurchase agreements relating to such securities); (2) commercial
paper, notes and bonds (including convertible bonds) issued by foreign and
domestic corporations; (3) mortgage-related securities; (4) asset-backed
securities; and (5) instruments of US and foreign banks, including Eurodollar
Time Deposits, Eurodollar Certificates of Deposit, Yankee Certificates of
Deposit, certificates of deposit, time deposits, letters of credit and banker's
acceptances.
The Fund limits its portfolio investments in commercial paper and corporate
notes and bonds to those that, at the time of acquisition: (1) are rated in one
of the four highest categories (or in the case of commercial paper, in the two
highest categories) by at least one NRSRO; or (2) if not rated, are of
comparable quality, as determined by the Advisor.
The Fund will measure its performance against the LBIGC Index. The Fund also
intends to maintain an average maturity and duration similar to that of the
LBIGC Index. The duration of the LBIGC Index as of August 31, 1998 was 3.3
years. The LBIGC Index is described in more detail in "Other Investment
Policies."
Bond Market Fund. The nonfundamental investment objective is to maximize total
return by investing in fixed income securities, including, but not limited to,
those represented by the Lehman Brothers Aggregate Bond Index (the "LBAB
Index"). The LBAB Index is described in more detail in "Other Investment
Policies."
Under normal market conditions, the Fund attempts to meet its objective by
investing at least 65% of its total assets in debt securities. The Fund may make
direct investments in: (1) US Government securities, including US Treasury
securities and other obligations issued or guaranteed as to interest and
principal by the US Government and its agencies and instrumentalities; (2)
corporate debt securities; (3) asset-backed securities; (4) mortgage-backed
securities including, but not limited to, collateralized mortgage obligations
and real estate mortgage investment conduits; (5) repurchase agreements; (6)
commercial paper, notes and bonds (including convertible bonds) issued by
foreign and domestic corporations; (7) mortgage-related securities; (8)
instruments of US and foreign banks, including Eurodollar Certificates of
Deposit, Eurodollar Time Deposits and Yankee Certificates of Deposit,
certificates of deposit, time deposits, letters of credit and banker's
acceptances; (9) financial futures and option contracts; (10) interest rate
exchange agreements and other swap agreements; (11) supranational and sovereign
debt obligations including subdivisions and agencies; and (12) other securities
and instruments deemed by the Advisor to have characteristics consistent with
the Fund's investment objective. Securities may be either fixed income, zero
coupon or variable or floating-rate and may be denominated in US dollars or
selected foreign currencies. As indicated above, the Fund may invest in
derivative securities, including futures and options, interest rate exchange
agreements and other swap agreements and collateralized mortgage obligations.
The Fund may invest in fixed-income securities to achieve its investment
objective. In periods of declining interest rates, the Fund's yield (its income
from portfolio investments over a stated period of time) may tend to be higher
than prevailing market rates, and in periods of rising interest rates, the yield
of the Fund may tend to be lower. Also when interest rates are falling, the
inflow of new money to the Fund from the continuous sales of its shares will
likely be invested in portfolio instruments producing lower yield than the
balance of the Fund's portfolio, thereby reducing the yield of the Fund. In
periods of rising interest rates, the opposite can be true. The net asset value
of the Fund investing in fixed-income securities also may change as general
levels of interest rates fluctuate. When interest rates increase, the value of a
portfolio of fixed-income securities can be expected to decline. Conversely,
when interest rates decline, the value of a portfolio of fixed-income securities
can be expected to increase.
The Fund limits its portfolio investments in corporate notes and bonds to those
that are rated investment-grade by an NRSRO or, if unrated, are determined by
the Advisor to be of comparable quality. Commercial paper must be rated in one
of the two highest categories by at least one NRSRO or, if unrated, are
determined by the Advisor to be of comparable quality. Investment-grade
securities include securities rated Baa3 by Moody's or BBB- by ("S&P") (and
securities of comparable quality), which securities have speculative
characteristics. If a security is downgraded and is no longer investment grade,
the Fund may continue to hold the security if the Advisor determines that such
action is in the best interest of the Fund and if the Fund would not, as a
result thereby, have more than 5% of its assets invested in noninvestment-grade
securities.
High Yield Bond Fund The nonfundamental investment objective is to maximize
total return by investing primarily in fixed income securities, including, but
not limited to, those represented by the Lehman Brothers High Yield Bond Index.
Under normal market conditions, the Fund attempts to meet its objective by
investing at least 65% of its total assets in high yield, high risk debt
securities. The Fund may make direct investments in: (1) US Government
securities, including US Treasury securities and
-45-
<PAGE>
other obligations issued or guaranteed as to interest and principal by the US
Government and its agencies and instrumentalities; (2) corporate debt securities
or other corporate instruments; (3) asset-backed securities; (4) mortgage-backed
securities including, but not limited to, collateralized mortgage obligations
and real estate mortgage investment conduits; (5) repurchase agreements; (6)
commercial paper, notes and bonds (including convertible bonds) issued by
foreign and domestic corporations; (7) mortgage-related securities; (8)
instruments of US and foreign banks, including Eurodollar Certificates of
Deposit ("ECDs"); Eurodollar Time Deposits ("ETDs") and Yankee Certificates of
Deposit ("YCDs"), certificates of deposit, time deposits, letters of credit and
banker's acceptances; (9) financial futures and option contracts; (10) interest
rate exchange agreements and other swap agreements; (11) supranational and
sovereign debt obligations including subdivisions and agencies; and (12) other
securities and instruments deemed by the Advisor to have characteristics
consistent with the Fund's investment objective. Securities may be either fixed
income, zero coupon or variable or floating-rate and may be denominated in US
dollars or selected foreign currencies. As indicated above, the Fund may invest
in derivative securities, including futures and options, interest rate exchange
agreements and other swap agreements and collateralized mortgage obligations.
Because the Fund will invest in fixed-income securities, in periods of declining
interest rates, the Fund's yield (its income from portfolio investments over a
stated period of time) may tend to be higher than prevailing market rates, and
in periods of rising interest rates, the yield of the Fund may tend to be lower.
Also when interest rates are falling, the inflow of new money to the Fund from
the continuous sales of its shares will likely be invested in portfolio
instruments producing lower yields than the balance of the Fund's portfolio,
thereby reducing the yield of the Fund. In periods of rising interest rates, the
opposite can be true. The net asset value of a Fund investing in fixed-income
securities also may change as general levels of interest rates fluctuate. When
interest rates increase, the value of a portfolio of fixed-income securities can
be expected to decline. Conversely, when interest rates decline, the value of a
portfolio of fixed-income securities can be expected to increase.
Growth and Income Fund. The fundamental investment objective is to achieve
long-term capital growth, current income and growth of income primarily through
investments in equity securities.
Under normal market conditions, the Fund will invest at least 65% of its 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.")
In addition to the policies noted above, the Fund may invest in convertible
securities obligations of foreign issuers which are dollar denominated, American
Depository Receipts (ADRs), corporate bonds, debentures, notes and warrants.
Investments in each of these instruments will not exceed 5% of the Fund's total
assets at the time of the investment.
The Fund's goal is to provide greater long-term returns than the overall US
equity market without incurring greater risks than those commonly associated
with investments in equity securities. For this purpose, the Fund will measure
its performance against the Standard & Poor's 500 Composite Stock Price Index
(the "S&P 500 Index").
The Fund's portfolio strategy combines market economics with fundamental
research. The Advisor begins by assessing current economic conditions and
forecasting economic expectations for the coming months. The industry sectors of
the S&P 500 Index are examined to determine the sector's market capitalized
weighting and to identify the performance of each sector relative to the Index
as a whole. A balance is determined for the portfolio, giving greater weight to
market sectors that are expected to outperform the overall market. Stocks are
then selected for each sector of the Fund's portfolio based on the issuer's
industry classification, the stock's historical sensitivity to changing economic
events and conditions and an assessment of the stock's current valuation.
S&P 500 Index Fund. The fundamental investment objective is to seek to replicate
the total return of the S&P 500 Index.
The Fund is not managed according to traditional methods of "active" investment
management, which involve the buying and selling of securities based upon
economic, financial and market analysis and investment judgment. Instead, the
Fund utilizes a "passive" investment approach, attempting to duplicate the
investment performance of its benchmark index through automated statistical
analytic procedures.
The Fund intends to invest in all 500 stocks in the S&P 500 Index in proportion
to their weighting in the Index. No subscription for the Fund will be accepted
until Advisor has a reasonable basis to believe that the Fund will be able to
acquire substantially all 500 stocks in the Index. To the extent that all 500
stocks cannot be purchased, the Fund will purchase a representative sample of
the stocks listed in the Index in proportion to their weightings. The S&P 500
Index is described in more detail in "Other Investment Policies."
-46-
<PAGE>
To the extent that the Fund seeks to replicate the S&P 500 Index using such
sampling techniques, a close correlation between the Fund's performance and the
performance of the Index is anticipated in both rising and falling markets. The
Fund will attempt to achieve a correlation between the performance of its
portfolio and that of the Index of at least 0.95, before deduction of Fund
expenses. A correlation of 1.00 would represent perfect correlation between
portfolio and index performance. It is anticipated that the correlation of the
Fund's performance to that of the Index will increase as the size of the Fund
increases. The Fund's ability to achieve significant correlation between Fund
and Index performance may be affected by changes in securities markets, changes
in the composition of the Index and the timing of purchases and redemptions of
Fund shares. Advisor will monitor correlation. Should the Fund fail to achieve
an appropriate level of correlation, Advisor will report to the Board of
Trustees, which will consider alternative arrangements.
The Fund will be substantially invested in the securities included in the S&P
500 Index. However, the Fund may invest temporarily, 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 "Other Investment Policies -- Cash Reserves.") The Fund may
also invest temporarily in investment grade debt securities for defensive
purposes, including convertible debt securities. Other debt will typically
represent less than 10% of the Fund's assets.
Matrix Equity Fund. The fundamental investment objective is to provide total
returns that exceed over time the S&P 500 Index through investment in equity
securities.
Equity securities will be selected by the Fund on the basis of a proprietary
analytical model of Advisor. Each security will be ranked according to two
separate and uncorrelated measures: value and the momentum of Wall Street
sentiment. The value measure compares a company's assets, projected earnings
growth and cash flow growth with its stock price within the context of its
historical valuation. The measure of Wall Street sentiment examines changes in
Wall Street analysts' earnings estimates and ranks stocks by the strength and
consistency of those changes. These two measures are combined to create a single
composite score of each stock's attractiveness. These scores are then plotted on
a matrix according to their relative attractiveness. Sector weights are
maintained at a similar level to that of the S&P 500 Index to avoid unintended
exposure to factors such as the direction of the economy, interest rates, energy
prices and inflation. The S&P 500 Index is described in more detail in "Other
Investment Policies."
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 "Other Investment
Policies -- Cash Reserves)."
In addition to the policies noted above, the Fund may invest in obligations of
foreign issuers which are US dollar denominated, American Depository Receipts
(ADRs), corporate bonds, debentures, notes and warrants. Investment in each of
these instruments will not exceed 5% of the Fund's total assets.
Small Cap Fund. The nonfundamental investment objective is to maximize total
return through investment in equity securities; under normal market conditions,
at least 65% of total assets will be invested in securities of smaller
capitalized issuers.
Equity securities will be selected by the Fund on the basis of proprietary
analytical models of Advisor.
The Fund will invest primarily in a portfolio of smaller domestic companies.
Smaller companies will include those stocks with market capitalization generally
ranging in value from $50 million to $3 billion. Investments in smaller
companies may involve greater risks because these companies generally have a
limited track record and often experience higher price volatility.
Under normal market conditions, the Fund will invest at least 65% of its total
assets in securities of smaller companies. However, the Fund may invest in other
equity securities and may temporarily for defensive purposes, without
limitation, in certain short-term investment grade debt securities. Such
securities may be used to invest uncommitted cash balances or to maintain
liquidity to meet shareholder redemptions. (See "Other Investment Policies --
Cash Reserves.") The Fund may also invest temporarily in investment grade debt
securities for defensive purposes, including convertible debt securities. Other
debt will typically represent less than 10% of the Fund's total assets.
Effective August 31, 1998, the SSgA Small Cap Fund was closed to purchases by
new investors except for purchases by eligible investors as described below:
o Current shareholders of the SSgA Small Cap Fund may continue to add to
the Fund account.
o Participants in 401(k) plans for which the SSgA Small Cap Fund is an
option may continue to add to their Fund account.
o Participants in asset allocation programs sponsored by financial
advisors may continue to add to their Fund account.
-47-
<PAGE>
Special Equity Fund. The nonfundamental investment objective is to maximize
total return through investment in mid- and small capitalization US equity
securities.
Securities will be selected on the basis of a proprietary analytical model
developed by the Advisor. The model is tailored toward small to
mid-capitalization securities and includes both value and growth components.
Sector, industry, and security weights will be maintained at a level similar to
the Russell Special Small Company(R) Index (the "RSMALL" Index) in order to
avoid unintended exposure to factors such as the direction of the economy,
interest rates, energy prices, and inflation. See "Other Investment
Policies--Russell Special Small Company Index."
Investments in smaller companies may involve greater risks because these
companies generally have a limited track record and often experience higher
price volatility.
In addition to investments in mid- and small capitalization US equity
securities, the Fund may invest in other equity securities and may temporarily
for defensive purposes, without limitation, invest in certain short-term
investment grade debt securities. Such securities may be used to invest
uncommitted cash balances or to maintain liquidity to meet shareholder
redemptions. See "Investment Policies -- Cash Reserves." For additional
investment strategies, see "Investment Policies."
Active REIT Fund. The non-fundamental investment objective is to provide income
and capital growth by investing primarily in publicly traded securities of real
estate companies.
Under normal market conditions, the Advisor will invest at least 65% of the
Fund's total assets in equity interests in Real Estate Investment Trust ("REIT")
securities. See "Other Investment Policies - S&P REIT Index." The Fund will
attempt to meet its objective through the active selection of REIT securities,
across different types and regions. The selection of investments will be made
based on the fundamental research that the Advisor conducts through its strategy
and research analyst team. Because the Fund will concentrate 25% or more of its
total assets in the real estate and real estate related industries, the Fund
will be subject to the risks associated with the direct ownership of real
estate. For a detailed discussion, please see "Risk Factors--Real Estate
Investments."
In addition to the equity securities of REITs, the Fund may invest up to 35% of
its total assets in equity securities in non-REIT securities, including other
domestic equity securities, fixed-income instruments, cash, cash equivalents,
futures and options, and special situations. See "Investment Policies". The Fund
may temporarily for defensive purposes, without limitation, invest 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."
Aggressive Equity Fund. The nonfundamental investment objective is to maximize
total return through investing in US equity securities that are under valued
relative to their growth potential as measured by SSgA's proprietary models.
The investable universe is constructed using the full constituents of the
Russell 3000(R) Index. 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. 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."
Emerging Markets Fund. The fundamental investment objective is to provide
maximum total return, primarily through capital appreciation, by investing
primarily in securities of foreign issuers.
Under normal circumstances, the Fund will invest primarily in equity securities
issued by companies domiciled, or doing a substantial portion of their business,
in countries determined by the Fund's Advisor to have a developing or emerging
economy or securities market. The Fund will diversify investments across many
countries (typically at least 10) in order to reduce the volatility associated
with specific markets. The countries in which the Fund invests will be expanded
over time as the stock markets in other countries evolve and in countries for
which subcustodian arrangements are approved by the Fund's Board of Trustees.
Nearly all of the Fund's assets will be invested in equity, and equity-like,
securities of emerging market countries (i.e., typically over 85%). Currently,
the
-48-
<PAGE>
definition of an emerging market is that gross domestic product per capita is
less than $10,000 per year. However, due to the status of a country's stock
market, the country may still qualify as an emerging market even if it exceeds
this amount. In determining securities in which to invest, the Advisor will
evaluate the countries' economic and political climates and take into account
traditional securities valuation methods, including (but not limited to) an
analysis of price in relation to assets, earnings, cash flows, projected
earnings growth, inflation, and interest rates. Liquidity and transaction costs
will also be considered.
The Fund may also invest in debt securities, including instruments issued by
emerging market companies, governments and their agencies, and convertible debt
securities. Debt securities will typically represent less than 10% of Fund
assets. The Fund is likely to purchase debt securities which are not investment
grade debt, since much of the emerging market debt falls in this category. These
securities are subject to market and credit risk. These lower rated debt
securities (also referred to as "junk bonds") may include obligations that are
in default or that face the risk of default with respect to principal or
interest.
The Fund may invest in common and preferred equity securities publicly traded in
the United States or in foreign countries on developed or emerging markets. The
Fund's equity securities may be denominated in foreign currencies and may be
held outside the United States. Certain emerging markets are closed in whole or
part to the direct purchase of equity securities by foreigners. In these
markets, the Fund may be able to invest in equity securities solely or primarily
through foreign government authorized pooled investment vehicles. Risks
associated with investment in foreign companies are noted under "Risk Factors --
Emerging Markets." The risks associated with investment in securities issued by
foreign governments and companies are described below in "Other Investment
Policies -- Foreign Government Securities."
Active International Fund. The nonfundamental investment objective is to provide
long-term capital growth by investing primarily in securities of foreign
issuers.
The Fund will attempt to meet its objective through the active selection of
countries, currencies and securities. The selection of investments will be made
through a proprietary, quantitative process developed by the Advisor.
Investments will be made in, but not limited to, countries included in the
Morgan Stanley Capital International Europe, Australia, Far East ("MSCI EAFE")
Index. The MSCI EAFE Index is described in more detail in "Other Investment
Policies."
The Fund will invest at least 65% of its total assets in equity securities of
foreign issuers. In addition to investment in equities, the Fund may hold
fixed-income instruments (including convertibles), forward contracts, cash, and
cash equivalents as well as derivatives, including options on securities and
securities indices and futures contracts and options on futures. For investment
restrictions on the use of these derivatives, please refer to the "Other
Investment Policies" section. However, the Fund may invest in other equity
securities and may temporarily for defensive purposes, without limitation,
invest 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 "Other Investment Policies -- Cash Reserves.")
The Fund may invest in common and preferred equity securities publicly traded in
the United States or in foreign countries. The Fund's equity securities may be
denominated in foreign currencies and may be held outside the United States. The
risks associated with investment in securities issued by foreign governments and
companies are described in "Risk Factors -- Foreign Securities."
Of the fixed-income instruments used by the Fund, less than 5% will be
considered lower than investment-grade. Such securities are regarded as
speculative with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligation. These lower rated debt
securities may include obligations that are in default or that face the risk of
default with respect to principal or interest. Therefore, such securities are
sometimes referred to as "junk bonds."
International Growth Opportunities Fund. The nonfundamental investment objective
is to provide long-term capital growth by investing primarily in securities of
foreign issuers.
The Fund will attempt to meet its objective through the active selection of
equity securities through the fundamental analysis of companies and investment
themes. Quantitative techniques and the use of securities other than common
stock will be used primarily to control risk and to efficiently capture
opportunities of investment themes. Investments will be made in, but not limited
to, countries included in the Morgan Stanley Capital International Europe,
Australia, Far East ("MSCI EAFE") Index. See "Other Investment Policies - MSCI
EAFE Index." For additional investment policies, see "Investment Policies."
The Fund will invest at least 65% of its total assets in equity securities of
foreign issuers. In addition to investment in equities, the Fund may hold
fixed-income instruments (including convertibles), forward contracts, cash, and
cash equivalents as well as derivatives, including options on securities and
securities indices and futures contracts and options on futures. For investment
restrictions on the use of these derivatives, please refer to the investment
policies section of this Prospectus. However, the Fund may invest in other
-49-
<PAGE>
equity securities and may temporarily for defensive purposes, without
limitation, invest 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."
Of the total number of fixed-income instruments in which the Fund will invest,
less than 5% will be considered below investment-grade. Such securities are
regarded as speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. These lower
rated debt securities may include obligations that are in default or that face
the risk of default with respect to principal or interest. Therefore, such
securities are sometimes referred to as "junk bonds." Please see the Statement
of Additional Information for a description of the securities ratings.
Investment Objectives and Asset Allocation of the SSgA Life Solutions Funds
The Life Solutions Funds are designed primarily for tax-advantaged retirement
accounts and other long-term investors. Each Life Solutions Fund seeks to
achieve its investment objective by diversifying its assets in shares of the
Investment Company's Underlying Funds. Each Life Solutions Fund's investment
objective is nonfundamental, and may be changed by a vote of a majority of the
Board of Trustees. There can be no assurance that any Fund will meet its stated
investment objective:
Life Solutions Income and Growth Fund seeks income and, secondarily, long-term
growth of capital.
Life Solutions Balanced Fund seeks a balance of growth of capital and income.
Life Solutions Growth Fund seeks long-term growth of capital.
The Life Solutions Funds are not designed as market timing vehicles, but rather
as a simple approach to help investors meet retirement and other long-term
goals. Investors may choose to invest in one or more of the Life Solutions Funds
based on their personal investment goals, risk tolerance and financial
circumstances. The chart below illustrates the relative degree to which each
Life Solutions Fund (compared to the other Life Solutions Funds) seeks to obtain
capital appreciation, income and stability of principal, within the parameters
of each of their investment objectives:
<TABLE>
<CAPTION>
-------------------------- -------------------------- ------------------------ ------------------------
Life Solutions Fund Capital Appreciation Income Volatility
-------------------------- -------------------------- ------------------------ ------------------------
<S> <C> <C> <C>
Income and Growth Low High Low
-------------------------- -------------------------- ------------------------ ------------------------
Balanced Medium Medium Medium
-------------------------- -------------------------- ------------------------ ------------------------
Growth High Low High
-------------------------- -------------------------- ------------------------ ------------------------
</TABLE>
Each Life Solutions Fund allocates its assets by investing in shares of a
combination of the Underlying Funds. In investing in the Underlying Funds, the
Life Solutions Funds seek to maintain different allocations between classes of
equity, international equity, fixed income and short-term assets funds
(including money market funds) depending on the Life Solutions Fund's investment
objective and risk profile. Allocating investments this way permits each Life
Solutions Fund to attempt to optimize performance consistent with its investment
objective. The table below illustrates the equity, bond and short-term fund
asset allocation ranges for each Life Solutions Fund. Although the Underlying
Funds invest primarily in securities within the asset class under which they are
listed, they may also invest from time to time in other types of securities
consistent with each of their investment objectives.
<TABLE>
<CAPTION>
------------------------------------------------- ---------------- ------------- ------------
Asset Class/Underlying Fund Income and Balanced Growth
Growth
------------------------------------------------- ---------------- ------------- ------------
<S> <C> <C> <C>
Equities 20-60% 40-80% 60-100%
------------------------------------------------- ---------------- ------------- ------------
US Equities
------------------------------------------------- ---------------- ------------- ------------
SSgA S&P 500 Index Fund
------------------------------------------------- ---------------- ------------- ------------
SSgA Matrix Equity Fund
------------------------------------------------- ---------------- ------------- ------------
SSgA Small Cap Fund
------------------------------------------------- ---------------- ------------- ------------
SSgA Growth and Income Fund
------------------------------------------------- ---------------- ------------- ------------
SSgA Special Equity Fund
------------------------------------------------- ---------------- ------------- ------------
-50-
<PAGE>
------------------------------------------------- ---------------- ------------- ------------
SSgA Tuckerman Active REIT Fund
------------------------------------------------- ---------------- ------------- ------------
SSgA Aggressive Equity Fund
------------------------------------------------- ---------------- ------------- ------------
International Equities(1) 15% 20% 25%
------------------------------------------------- ---------------- ------------- ------------
SSgA Active International Fund
------------------------------------------------- ---------------- ------------- ------------
SSgA Emerging Markets Fund
------------------------------------------------- ---------------- ------------- ------------
SSgA International Growth
Opportunities Fund
------------------------------------------------- ---------------- ------------- ------------
Bonds 40-80% 20-60% 0-40%
------------------------------------------------- ---------------- ------------- ------------
SSgA Bond Market Fund
------------------------------------------------- ---------------- ------------- ------------
SSgA Intermediate Fund
------------------------------------------------- ---------------- ------------- ------------
SSgA High Yield Bond Fund
------------------------------------------------- ---------------- ------------- ------------
SSgA Yield Plus Fund
------------------------------------------------- ---------------- ------------- ------------
Short Term Assets 0-20% 0-20% 0-20%
------------------------------------------------- ---------------- ------------- ------------
SSgA Money Market Fund
------------------------------------------------- ---------------- ------------- ------------
SSgA US Government Money Market Fund
------------------------------------------------- ---------------- ------------- ------------
</TABLE>
The asset allocation range for each Life Solutions Fund has been approved by the
Board of Trustees of the Investment Company and may be changed at any time by
the Board without shareholder approval. Within the asset allocation range for
each Life Solutions Fund, the Advisor will establish specific percentage targets
for each asset class and each Underlying Fund to be held by the Life Solutions
Fund based on the Advisor's outlook for the economy, financial markets and
relative market valuation of each Underlying Fund. Each Life Solutions Fund may
temporarily deviate from its asset allocation range for defensive purposes.
The percentage allocation of a Life Solutions Fund's assets could from time to
time deviate from its asset allocation range as a result of appreciation or
depreciation of the shares of the Underlying Funds in which a Life Solutions
Fund is invested. The Life Solutions Funds have adopted certain policies to
reduce the likelihood of such an occurrence. First, the Advisor will rebalance
each Life Solution Fund's holdings at least quarterly, or more frequently as the
Advisor in its discretion determines is appropriate. Rebalancing is the process
of bringing the asset allocation of a Life Solutions Fund back into alignment
with its asset allocation range. In addition, the Advisor will not allocate any
new investment dollars to any Underlying Fund in an asset class whose maximum
percentage has been exceeded. Finally, the Advisor will allocate new investment
dollars on a priority basis to Underlying Funds in any asset class whose minimum
percentage has not been achieved.
Investment Restrictions
All Funds have 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
policies appears in the Statement of Additional Information. Unless otherwise
noted, a Fund's compliance with its fundamental restrictions is determined at
the time an investment is made. Each 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 except that the Active REIT
Fund may invest 25% or more of its total assets in real estate-related
industries described under "Investment Policies). With respect to the Money
Market Fund, US banks and certain domestic branches of foreign banks are
not considered a single industry for purposes of
- ---------------------
(1) International equities are included in the total equity exposure indicated
above and should not exceed the listed percentages.
-51-
<PAGE>
this restriction. With respect to the Life Solutions Funds, shares of the
Underlying Funds and other investment companies are not considered a single
industry for purposes of this restriction.
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 the 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
additional investments if borrowed funds (including reverse repurchase
agreements) exceed 5% of 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.
Other Investment Policies
The investment policies described below reflect the Funds' current policies, are
not fundamental and may be changed by the Board of Trustees without shareholder
approval. Descriptions below are of policies which will from time to time be
used by at least 5% of a Fund's net assets. For more information about some of
the investment policies described below, or for information about other policies
that may be used by less than 5% of a Fund's net assets, see the relevant SAI.
To the extent consistent with each Fund's investment objective and restrictions,
the Funds (as indicated) may invest in the following instruments and may use the
following investment techniques:
US Government Securities (all Funds except Emerging Markets, Active
International and International Growth Opportunities). 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.
Repurchase Agreements (all Funds). Each 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 Funds 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, a 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 a Fund.
Reverse Repurchase Agreements (all Funds). The Funds 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, a 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. A 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 a Fund's
ability to reacquire the underlying securities.
Forward Commitments (all Funds except Emerging Markets, Active International and
High Yield Bond). The Funds 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 a Fund of a dollar amount
sufficient to make payment for the portfolio securities to be purchased will be
segregated on a 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 a Fund to miss an advantageous price or
yield. 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.
Section 4(2) Commercial Paper (Money Market, Yield Plus, Intermediate, High
Yield Bond and Bond Market). The Fund may also 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 institutional investors that agree that they are
purchasing the paper for investment and not with a view to public
-52-
<PAGE>
distribution. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) paper normally is resold to other institutional investors like the
Fund through or with the assistance of the issuer or investment dealers that
make a market in Section 4(2) paper. Section 4(2) paper will not be subject to
the Investment Company's percentage limitations on illiquid securities where the
Board of Trustees of the Investment Company (pursuant to guidelines adopted by
the Board) determines that a liquid trading market exists.
Asset-Backed Securities (Money Market, Yield Plus, Intermediate, High Yield Bond
and Bond Market). Asset-backed securities represent undivided fractional
interests in pools of instruments, such as consumer loans, and are similar in
structure to mortgage-related securities described below. Payments of principal
and interest are passed through to holders of the securities and are typically
supported by some form of credit enhancement, such as a letter of credit, surety
bond, limited guarantee by another entity or by priority to certain of the
borrower's other securities. The degree of credit enhancement varies, generally
applying only until exhausted and covering only a fraction of the security's par
value. If the credit enhancement of an asset-backed security held by the Fund
has been exhausted, and if any required payments of principal and interest are
not made with respect to the underlying loans, the Fund may experience loss or
delay in receiving payment and a decrease in the value of the security. Further
details are set forth in the Statement of Additional Information under
"Investment Restrictions and Policies -- Investment Policies."
When-Issued Transactions (all Funds except Emerging Markets, Active
International and International Growth Opportunities). The Funds 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, a Fund segregates cash and marketable securities equal in value to
its when-issued commitments. Between the trade and settlement dates, a 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 a Fund to miss a price or yield considered
advantageous. A 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. A Fund will invest no
more than 25% of its net assets in when-issued securities.
Illiquid Securities (all Funds). The Money Market Fund will invest no more than
10% of its net assets, and the Bond, High Yield Bond, Yield Plus, Matrix, Index,
Small Cap, Special Equity, Growth and Income, Intermediate, Active REIT,
Aggressive Equity, Emerging Markets, International Growth Opportunities and
Active International Funds will invest no more than 15% of each of their 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 (all Funds except Emerging Markets,
International Growth Opportunities and Active International). 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.
Mortgage-Related Securities (Money Market, Bond Market, High Yield Bond, Yield
Plus and Intermediate). The Funds may invest in mortgage-related securities,
including Government National Mortgage Association ("GNMA") Certificates
("Ginnie Maes"), Federal Home Loan Mortgage Corporation ("FHLMC") Mortgage
Participation Certificates ("Freddie Macs") and Federal National Mortgage
Association ("FNMA") Guaranteed Mortgage Certificates ("Fannie Maes"). Mortgage
certificates are mortgage-backed securities representing undivided fractional
interests in pools of mortgage-backed loans. These loans are made by mortgage
bankers, commercial banks, savings and loan associations and other lenders.
Ginnie Maes are guaranteed by the full faith and credit of the US Government,
but Freddie Macs and Fannie Maes are not.
Zero Coupon Securities (Money Market, Bond Market, High Yield Bond, Yield Plus
and Intermediate). Zero coupon securities are notes, bonds and debentures that:
(1) do not pay current interest and are issued at a substantial discount from
par value; (2) have been stripped of their unmatured interest coupons and
receipts; or (3) pay no interest until a stated date one or more years into the
future. These securities also include certificates representing interests in
such stripped coupons and receipts. Generally, changes in interest rates will
have a greater impact on the market value of a zero coupon security than on the
market value of comparable securities that pay interest periodically during the
life of the instrument.
Variable and Floating Rate Securities (Money Market, Bond Market, High Yield
Bond, Yield Plus, International Growth Opportunities and Intermediate). A
floating rate security provides for the automatic adjustment of its interest
rate whenever a specified interest rate changes. A variable rate security
provides for the automatic establishment of a new interest rate on set dates.
Interest rates on these securities are ordinarily tied to, and are a percentage
of, a widely recognized interest rate, such as the yield on
-53-
<PAGE>
90-day US Treasury bills or the prime rate of a specified bank. These rates may
change as often as twice daily. Generally, changes in interest rates will have a
smaller effect on the market value of variable and floating rate securities than
on the market value of comparable fixed income obligations. Thus, investing in
variable and floating rate securities generally allows less opportunity for
capital appreciation and depreciation than investing in comparable fixed income
securities. The Funds may also invest in Funding Agreements, which are privately
placed, unregistered obligations negotiated with a purchaser.
Eurodollar Certificates of Deposit (ECDs), Eurodollar Time Deposits (ETDs) and
Yankee Certificates of Deposit (YCDs) (Money Market, Bond Market, High Yield
Bond, Yield Plus and Intermediate). ECDs are US dollar denominated certificates
of deposit issued by foreign branches of domestic banks. ETDs are US dollar
denominated deposits in foreign branches of US banks and foreign banks. YCDs are
US dollar denominated certificates of deposit issued by US branches of foreign
banks.
Different risks than those associated with the obligations of domestic banks may
exist for ECDs, ETDs and YCDs because the banks issuing these instruments, or
their domestic or foreign branches, are not necessarily subject to the same
regulatory requirements that apply to domestic banks, such as loan limitations,
examinations and reserve, accounting, auditing, recordkeeping and public
reporting requirements.
Euro Currency Conversion (Money Market, Bond Market, High Yield Bond, Yield
Plus, Intermediate, Emerging Markets, Active International and International
Growth Opportunities). The "euro" is the single European currency that will
replace the currencies of those countries in the European Union that will
implement European Economic and Monetary Union (EMU) as outlined in the
Maastricht Treaty of 1992. Existing national currencies will become
denominations of the euro at fixed rates to the euro on January 1, 1999.
Although at this time there can be no assurance that there will be no adverse
impact on the Investment Company, the Advisor, Administrator, Distributor,
Transfer Agent and Custodian have advised investment Company that they have been
actively working on systems to adapt to the euro conversion.
Securities Lending (all Funds). The Funds may lend portfolio securities with a
value of up to 33-1/3% of each of their total assets. For these purposes, total
assets shall include the value of all assets received as collateral for the
loan. Such loans may be terminated at any time. A 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 its securities, a 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, a 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. A 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, a 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, a Fund will also bear the risk of any decline in value of
securities acquired with cash collateral. A Fund will minimize this risk by
limiting the investment of cash collateral to high quality instruments of short
maturity.
Futures Contracts and Options on Futures (all Funds except Money Market). For
hedging purposes, including protecting the price or interest rate of a security
that a Fund intends to buy, a Fund may enter into futures contracts that relate
to securities in which it 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. Under such contracts no delivery of the actual securities
making up the index takes place. Rather, upon expiration of the contract,
settlement is made by exchanging 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 Custodian for the
benefit of the futures broker. The initial margin serves as a "good faith"
deposit that a Fund will honor its 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, a 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.
-54-
<PAGE>
Options on Securities and Securities Indices (all Funds except Money Market).
The Funds may write and purchase covered put and call options on securities in
which it may directly invest. Option transactions of a 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, a 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 Funds may purchase or sell options on securities indices that are comprised
of securities in which the Funds 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.
Cash Reserves (all Funds except Money Market). For defensive purposes, the Funds
may temporarily invest, 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. When using this strategy, the weighted average maturity of securities
held by a Fund will decline, and thereby possibly cause its yield to decline as
well.
American Depository Receipts (ADRs) (S&P 500 Index, Matrix Equity, Small Cap,
Special Equity, Aggressive Equity, Growth and Income, International Growth
Opportunities, Emerging Markets and Active International) and European
Depository Receipts (EDRs) (International Growth Opportunities, Emerging Markets
and Active International). The Funds may invest in securities of foreign issuers
in the form of ADRs, EDRs and similar instruments, or other securities
convertible into securities of eligible issuers. These securities may not
necessarily be denominated in the same currency as the securities for which they
may be exchanged. Generally, ADRs, in registered form, are designed for use in
the US securities markets, and EDRs are issued for trading primarily in European
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. 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. For purposes of a
Fund's investment policies, a Fund's investments in ADRs, EDRs and similar
instruments will be deemed to be investments in the equity securities
representing securities of foreign issuers into which they may be converted.
Warrants (Small Cap, Matrix Equity, Special Equity, Aggressive Equity, Growth
and Income, Emerging Markets and Active International). The Funds 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 (Growth and Income, Small Cap, Aggressive Equity, High
Yield Bond, Special Equity, Emerging Markets and Active International). The
Funds 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.
Interest Rate Swaps (Bond Market, High Yield Bond, Yield Plus and Intermediate).
The Funds may enter into interest rate swap transactions with respect to any
security it is entitled to hold. Interest rate swaps involve the exchange by a
Fund with another party of their respective rights to receive interest, e.g., an
exchange of floating rate payments for fixed rate payments. The Funds expect to
enter into these transactions primarily to preserve a return or spread on a
particular investment or portion of its portfolio or to protect against any
increase in the price of securities it anticipates purchasing at a later date.
The Funds intend to use these transactions as a hedge and not as a speculative
investment.
-55-
<PAGE>
Mortgage-Backed Security Rolls (Bond Market, High Yield Bond, Yield Plus and
Intermediate). The Funds may enter into "forward roll" transactions with respect
to mortgage-backed securities issued by GNMA, FNMA or FHLMC. In a forward roll
transaction, a Fund will sell a mortgage security to a dealer or other permitted
entity and simultaneously agree to repurchase a similar security from the
institution at a later date at an agreed upon price. The mortgage securities
that are repurchased will bear the same interest rate as those sold, but
generally will be collateralized by different pools of mortgages with different
prepayment histories than those sold. There are two primary risks associated
with the roll market for mortgage-backed securities. First, the value and safety
of the roll depends entirely upon the counterparty's ability to redeliver the
security at the termination of the roll. Therefore, the counterparty to a roll
must meet the same credit criteria as any existing repurchase counterparty.
Second, the security which is redelivered at the end of the roll period must be
substantially the same as the initial security, i.e., it must have the same
coupon, be issued by the same agency and be of the same type, have the same
original stated term to maturity, be priced to result in similar market yields
and must be "good delivery." Within these parameters, however, the actual pools
that are redelivered could be less desirable than those originally rolled,
especially with respect to prepayment characteristics.
Preferred Stocks (All Funds except Money Market, High Yield Bond and Yield
Plus). Preferred stock, unlike common stock, generally confers a stated dividend
rate payable from the corporation's earnings. Such preferred stock dividends may
be cumulative or noncumulative, fixed, participating, auction rate or other. If
interest rates rise, a fixed dividend on preferred stocks may be less
attractive, causing the price of preferred stocks to decline either absolutely
or relative to alternative investments. Preferred stock may have mandatory
sinking fund provisions, as well as provisions that allow the issuer to call or
redeem the stock. The rights to payment of preferred stocks are generally
subordinate to rights associated with a corporation's debt securities.
Foreign Government Securities (International Growth Opportunities, Emerging
Markets and Active International). Foreign government securities which the Funds
may invest in generally consist of obligations issued or backed by the national,
state or provincial government or similar political subdivisions or central
banks in foreign countries. Foreign government securities also include debt
obligations of supranational entities, which include international organizations
designated or backed by governmental entities to promote economic reconstruction
or development, international banking institutions and related government
agencies. These securities also include debt securities of "quasi-government
agencies" and debt securities denominated in multinational currency units of an
issuer. Neither Fund will invest a material percentage of its assets in
sovereign debt.
Equity Swaps (All Funds except Money Market, Yield Plus, Intermediate, High
Yield Bond and Bond Market). 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. The Advisor will cause the funds to enter into swap
agreements only with counterparties that would be eligible for consideration as
repurchase agreement counterparties under the Funds' repurchase agreement
guidelines.
Foreign Currency Transactions (Bond Market, High Yield Bond, Yield Plus and
Intermediate). The Funds may engage in foreign currency transactions as
described below. The US dollar value of assets held by a Fund may be affected
favorably or unfavorably by changes in foreign currency exchange rates and
exchange control regulations, and a Fund may incur costs in connection with
conversions between various currencies. The Funds will engage in foreign
currency exchange transactions either on a spot (i.e., cash) basis at the spot
rate prevailing in the foreign currency exchange market, through forward and
futures contracts to purchase or sell foreign currencies or by purchasing and
writing put and call options on foreign currencies. The Funds may purchase and
write these contracts for the purpose of protecting against declines in the
dollar value of foreign securities it holds and against increases in the dollar
cost of foreign securities it plans to acquire.
A forward foreign currency exchange contract is an obligation to purchase or
sell a specific currency at a future date, which may be any fixed number of days
from the date upon which the parties enter the contract, at a price set at the
time the contract is made. These contracts are traded directly between currency
traders (usually large commercial banks) and their customers. Foreign currency
futures contracts are traded on exchanges and are subject to procedures and
regulations applicable to other futures contracts. Forward foreign currency
exchange contracts and foreign currency futures contracts may protect a Fund
from uncertainty in foreign currency exchange rates, and may also limit
potential gains from favorable changes in such rates.
Put and call options on foreign currencies are traded on securities and
commodities exchanges, in the over-the-counter market, and privately among major
recognized dealers in such options. The Funds may purchase and write these
options for the purpose of protecting against declines in the dollar value of
foreign securities it holds and against increases in the dollar cost of foreign
securities it plans to acquire. If a rise is anticipated in the dollar value of
a foreign currency in which securities to be acquired are denominated, the
-56-
<PAGE>
increased cost of such securities may be offset in whole or in part by
purchasing calls or writing puts on that foreign currency. If a decline in the
dollar value of a foreign currency is anticipated, the decline in value of
portfolio securities denominated in that currency may be in whole or in part by
writing calls or purchasing puts on that foreign currency. However, certain
currency rate fluctuations would cause the option to expire unexercised, and
thereby cause a Fund to lose the premium it paid and its transaction costs.
Foreign Currency (International Growth Opportunities, Emerging Markets and
Active International). The Funds have authority to deal in forward foreign
currency exchange contracts (including those involving the US dollar) as a hedge
against possible variations in the exchange rate between various currencies.
This is accomplished through individually negotiated contractual agreements to
purchase or to sell a specified currency at a specified future date and price
set at the time of the contract. A Fund's dealings in forward foreign currency
exchange contracts may be with respect to a specific purchase or sale of a
security, or with respect to its portfolio positions generally. A Fund is not
obligated to hedge its portfolio positions and will enter into such transactions
only to the extent, if any, deemed appropriate by Advisor. Forward commitments
generally provide a cost-effective way of defending against losses due to
foreign currency depreciation in which the securities are denominated.
In addition to the forward exchange contracts, the Emerging Markets and Active
International Funds may also purchase or sell listed or OTC foreign currency
options and foreign currency futures and related options as a short or long
hedge against possible variations in foreign currency exchange rates. The cost
to a Fund of engaging in foreign currency transactions varies with such factors
as the currencies involved, the length of the contract period and the market
conditions then prevailing. Transactions involving forward exchange contracts
and futures contracts and options thereon are subject to certain risks. Put and
call options on currency may also be used to hedge against fluctuation in
currency notes when forward contracts and/or futures are deemed to be not cost
effective. Options will not be used to provide leverage in any way. See "Risk
Factors -- Futures Contracts and Options on Futures" for further discussion of
the risks associated with such investment techniques.
Certain differences exist among these hedging instruments. For example, foreign
currency options provide the holder thereof the rights to buy or sell a currency
at a fixed price on a future date. A futures contract on a foreign currency is
an agreement between two parties to buy and sell a specified amount of a
currency for a set price on a future date. Futures contracts and options on
futures contracts are traded on boards of trade of futures exchanges. The Funds
will not speculate in foreign security or currency options or futures or related
options.
The Funds may not hedge their positions with respect to the currency of a
particular country to an extent greater than the aggregate market value (at the
time of making such sale) of the securities held in its portfolio denominated or
quoted in that particular foreign currency. Neither Fund will enter into a
position hedging commitment if, as a result thereof, it would have more than 10%
of the value of its assets committed to such contracts. Neither Fund will enter
into a forward contract with a term of more than one year.
Emerging Markets (International Growth Opportunities, Emerging Markets and
Active International Funds). The Fund may invest in equity securities issued by
companies domiciled, or doing a substantial portion of their business, in
countries determined by the Fund's Advisor to have a developing or emerging
economy or securities market. The Fund will diversify investments across many
countries (typically at least 10) in order to reduce the volatility associated
with specific markets. The countries in which the Fund invests will be expanded
over time as the stock markets in other countries evolve. In determining
securities in which to invest, the Advisor will evaluate the countries' economic
and political climates and take into account traditional securities valuation
methods, including (but not limited to) an analysis of price in relation to
assets, earnings, cash flows, projected earnings growth, inflation, and interest
rates. Liquidity and transaction costs will also be considered.
Special Situations (High Yield Bond, International Growth Opportunities and
Emerging Markets). The Fund and the Advisor believe that carefully selected
investments in joint ventures, cooperatives, partnerships, private placements,
unlisted securities, and other similar vehicles (collectively, "special
situations") could enhance the Fund's capital appreciation potential. These
investments are generally illiquid. The Fund will invest no more than 15% of its
net assets in all types of illiquid securities or securities that are not
readily marketable, including special situations. The Fund is not likely to hold
illiquid securities initially. However, due to foreign ownership restrictions,
the Fund may invest periodically in illiquid securities which are or become
illiquid due to restrictions on foreign ownership imposed by foreign
governments. Said securities may be more difficult to price and trade. The
absence of a regular trading market for illiquid securities imposes additional
risks on investment in these securities. Illiquid securities may be difficult to
value and may often be disposed of only after considerable expense and delay.
High Risk, High Yield Bonds (High Yield Bond). The Fund may invest in debt
securities rated less than BBB- by S&P or Baa by Moody's, or in unrated
securities judged by the Advisor to be of comparable quality. Lower rated debt
securities generally offer a higher yield than that available from higher grade
issues. However, lower rated debt securities involve higher risks than
investment-grade bonds, in that they are especially subject to adverse changes
in general economic conditions and, in the industries in which the
-57-
<PAGE>
issuers are engaged, to changes in the financial condition of the issuers and to
price fluctuation in response to changes in interest rates. Debt rated BB, B,
CCC, CC and C by S&P, and debt rated Ba, B, Caa, Ca and C by Moody's, is
regarded as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the obligation.
For S&P, BB indicates the lowest degree of speculation and D the highest. For
Moody's, Ba indicates the lowest degree of speculation and C the highest. These
lower rated debt securities may include obligations that are in default or that
face the risk of default with respect to principal or interest. Such securities
are sometimes referred to as "junk bonds." For additional risk associated with
high yield bonds, please see "Certain Risk Factors - High Yield Bonds" in this
Prospectus.
Investment-Grade Bonds (all Funds). The Fund may invest in corporate notes and
bonds which are rated investment-grade by a Nationally Recognized Statistical
Rating Organization ("NRSRO") or, if unrated, are determined by the Advisor to
be of comparable quality. Investment-grade securities include securities rated
Baa3 by Moody's or BBB- by S&P (and securities of comparable quality), which
securities have speculative characteristics. Please see the Statement of
Additional Information for a description of the securities ratings of debt
instruments and commercial paper.
Total Rate of Return Swaps (All Funds except Money Market and Yield Plus). The
Fund may contract with a counterparty to pay a stream of cash flows and receive
the total return of an index or a security for purposes of attempting to obtain
a particular desired return at a lower cost to the Fund than if the Fund had
invested directly in an instrument that yielded that desired return. The Advisor
will cause the Fund to enter into swap agreements only with counterparties that
would be eligible for consideration as repurchase agreement counterparties under
the Fund's repurchase agreement guidelines.
Debt Securities (all Funds). The Funds may also invest temporarily in investment
grade debt securities for defensive purposes. The Funds may invest in
convertible debt securities. Please see the Statement of Additional Information
for a description of securities ratings.
Real Estate Investment Trusts (Active REIT Fund). Equity REITs are defined as
REITs with 75% or greater of their gross invested book assets invested directly
or indirectly in the equity ownership of real estate, and their value depends
upon that of the underlying properties. Mortgage REITs are defined as REITs with
75% or more of their gross invested book assets invested directly or indirectly
in mortgages. Mortgage trusts make construction, development or long-term
mortgage loans, and are sensitive to the credit quality of the borrower. Hybrid
REITs are defined as not meeting the equity or mortgage tests. The value of real
estate investment trusts is also affected by management skill, cash flow, and
tax and regulatory requirements. Investments in equity and mortgage REITs are
subject to different risk factors. See "Risk Factors."
Real Estate-Related Industries (Active REIT Fund). In addition to real estate
investment trusts, real estate industry companies may include: brokers or real
estate developers; and companies with substantial real estate holdings, such as
paper and lumber producers and hotel and entertainment companies.
Purchase of Other Investment Company Funds (all Funds). To the extent permitted
under the 1940 Act and exemptive rules and orders thereunder, each Fund may seek
to achieve its investment objective by investing solely in the shares of other
investment companies that have substantially similar investment objectives and
policies.
The S&P 500 Index. The S&P 500 Index is composed of 500 common stocks which are
chosen by Standard & Poor's Corporation ("Standard & Poor's") to best capture
the price performance of a large cross-section of the US publicly traded stock
market. The Index is structured to approximate the general distribution of
industries in the US economy. The inclusion of a stock in the S&P 500 Index in
no way implies that Standard & Poor's believes the stock to be an attractive
investment, nor is Standard & Poor's a sponsor or in any way affiliated with the
Fund. The 500 securities, most of which trade on the New York Stock Exchange,
represent approximately 75% of the market value of all US common stocks. Each
stock in the S&P 500 Index is weighted by its market capitalization. That is,
each security is weighted by its total market value relative to the total market
values of all the securities in the Index. Component stocks included in the S&P
500 Index are chosen with the aim of achieving a distribution at the index level
representative of the various components of the US GNP and therefore do not
represent the 500 largest companies. Aggregate market value and trading activity
are also considered in the selection process. A limited percentage of the Index
may include foreign securities.
The Lehman Brothers Aggregate Bond Index. The Bond Fund will measure its
performance against the Lehman Brothers Aggregate Bond Index (the "LBAB Index").
The Fund also intends to maintain an average maturity and duration similar to
that of the LBAB Index. The duration of the LBAB Index as of August 31, 1998 was
4.6 years. The LBAB Index is made up of the Government/Corporate Bond Index, the
Mortgage-Backed Securities Index and the Asset-Backed Index. The
Government/Corporate Bond Index includes the Government and Corporate Bond
Indices. The LBAB Index includes fixed rate debt issues rated investment
-58-
<PAGE>
grade or higher by Moody's, S&P or Fitch, in that order. All in the LBAB Index
issues have at least one year to maturity and an outstanding par value of at
least $100 million.
The Russell 2000(R) Index. The Russell 2000 Index consists of the smallest 2,000
companies in the Russell 3000(R) Index, representing approximately 11% of the
Russell 3000 Index total market capitalization. The Russell 3000 Index is
composed of 3,000 large US companies, as determined by market capitalization,
representing approximately 98% of the total US equity market. The purpose of the
Russell 2000 Index is to provide a comprehensive representation of the
investable US small-capitalization equity market. The average market
capitalization is $700 million.
The Lehman Brothers Intermediate Government/Corporate Bond Index ("LBIGC
Index"). The Intermediate Fund will measure its performance against, and also
intends to maintain an average maturity and duration similar to that of, the
LBIGC Index. The LBIGC Index is a subset of the Lehman Brothers
Government/Corporate Bond Index and it comprises all securities that appear in
this Index limited to those with maturities ranging from one to ten years only.
The LBIGC Index includes the Government and Corporate Bond Indices. The LBIGC
Index includes fixed rate debt issues rated investment-grade or higher by
Moody's, S&P or Fitch, in that order. All issues in the Index have at least one
year to maturity and an outstanding par value of at least $100 million.
The MSCI EAFE Index. The MSCI EAFE Index is an arithmetic, market value-weighted
average of the performance of over 1,000 securities listed on the stock
exchanges of the following countries: Australia, Austria, Belgium, Denmark,
Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, Malaysia,
Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden,
Switzerland and the United Kingdom. These are the countries listed in the MSCI
EAFE Index as of the date of this Prospectus. Countries may be added to or
deleted from the list.
S&P REIT Index. S&P launched the S&P REIT (Real Estate Investment Trust) Index
on June 26, 1997; modeled after the other highly regarded S&P Indexes. The S&P
REIT index consists of 100 REIT's and covers more than 80% of the securitized
real estate market. Each REIT security is carefully screened to insure proper
liquidity. Issues have to be traded on major US stock exchange to qualify and
must have a market value of at least $100 million. In addition to requiring a
high level of liquidity, Standard & Poor's also insists upon stringent financial
fundamentals for REIT's chosen to be in the Index. Specifically, in order to
qualify, a REIT must demonstrate a strong level of earnings performance and a
consistent record of paying dividends. The index is comprised of three major
types of REITS: equity, mortgage and hybrid. The index also reflects the
property distribution of the REIT marketplace. Roughly 25% of the REIT's in the
index are invested in retail properties such as shopping malls, strip malls, and
outlet centers. Another 23% of the index is in REIT's tied to residential
properties, such as apartment buildings. Almost 16% of the index in securities
invested is in industrial and office complexes.
Lehman Brothers High Yield Bond Index. The High Yield Bond Fund will measure its
performance against the Lehman Brothers High Yield Bond Index (the "Index"). The
duration of the Index as of August 31, 1998 was 4.8 years. The Index includes
fixed rate, public nonconvertible, noninvestment-grade issues registered with
the SEC that are rated Ba1 or lower by Moody's Investors Service ("Moody's"). If
a Moody's rating is unavailable, the bonds must be rated BB+ or lower by
Standard & Poor's Rating Group (S&P"), or by Fitch's Investors Service ("Fitch")
if an S&P rating is unavailable. A small number of unrated bonds is included in
the Index; to be eligible they must have previously held a high yield rating or
have been associated with a high yield issuer, and must trade accordingly.
Russell Special Small Company Index. The RSMALL Index is comprised of the
largest 3,000 US securities based on market capitalization (the securities
comprising the Russell 3000(R) Index), excluding all securities in the S&P 500
Index. The small capitalization segment of the RSMALL Index ranges from
approximately $25 million to $3 billion in capitalization and represents about
40% of the RSMALL Index's total capitalization weight. The mid-capitalization
segment's capitalization range is approximately $3 billion to $25 billion, and
makes up the remaining 60% of the RSMALL Index's cap weight. The capitalization
weightings of the Fund will reflect the composition of the benchmark.
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.
-59-
<PAGE>
Foreign Investments. Investment in securities of non-US issuers and securities
denominated in foreign currencies involve investment risks that are different
from those of US issuers, including: uncertain future political, diplomatic and
economic developments; possible imposition of exchange controls or other
governmental restrictions; less publicly available information; lack of uniform
accounting, auditing and financial reporting standards, practices and
requirements; lower trading volume, less liquidity and more volatility for
securities; less government regulation of securities exchanges, brokers and
listed companies; political or social instability; and the possibility of
expropriation or confiscatory taxation, each of which could adversely affect
investments in such securities. ADRs are subject to all of the above risks,
except the imposition of exchange controls, and currency fluctuations during the
settlement period.
Foreign Securities. Investors should consider carefully the substantial risks
involved in securities of companies and governments of foreign nations. There
may be less publicly available information about foreign companies comparable to
the reports and ratings published regarding US companies. Foreign companies are
not generally subject to uniform accounting, auditing and financial reporting
standards, and auditing practices and requirements may not be comparable to
those applicable to US companies. Many foreign markets have substantially less
volume than either the established domestic securities exchanges or the OTC
markets. Securities of some foreign companies are less liquid and more volatile
than securities of comparable US companies. Commission rates in foreign
countries, which may be fixed rather than subject to negotiation as in the US,
are likely to be higher. In many foreign countries there is less government
supervision and regulation of securities exchanges, brokers and listed companies
than in the US, and capital requirements for brokerage firms are generally
lower. Settlement of transactions in foreign securities may, in some instances,
be subject to delays and related administrative uncertainties.
Emerging Markets. Investments in companies domiciled in emerging market
countries may be subject to additional risks. These risks include: (1) Volatile
social, political and economic conditions can cause investments in emerging or
developing markets exposure to economic structures that are generally less
diverse and mature. Emerging market countries can have political systems which
can be expected to have less stability than those of more developed countries.
The possibility may exist that recent favorable economic developments in certain
emerging market countries may be suddenly slowed or reversed by unanticipated
political or social events in such countries. Moreover, the economies of
individual emerging market countries may differ favorably or unfavorably from
the US economy in such respects as the rate of growth in gross domestic product,
the rate of inflation, capital reinvestment, resource self-sufficiency and
balance of payments position. (2) The small current size of the markets for such
securities and the currently low or nonexistent volume of trading can result in
a lack of liquidity and in greater price volatility. Until recently, there has
been an absence of a capital market structure or market-oriented economy in
certain emerging market countries. Because the Fund's securities will generally
be denominated in foreign currencies, the value of such securities to the Fund
will be affected by changes in currency exchange rates and in exchange control
regulations. A change in the value of a foreign currency against the US dollar
will result in a corresponding change in the US dollar value of the Fund's
securities. In addition, some emerging market countries may have fixed or
managed currencies which are not free-floating against the US dollar. Further,
certain emerging market currencies may not be internationally traded. Certain of
these currencies have experienced a steady devaluation relative to the US
dollar. Many emerging markets countries have experienced substantial, and in
some periods extremely high, rates of inflation for many years. Inflation and
rapid fluctuations in inflation rates have had, and may continue to have,
negative effects on the economies and securities markets of certain emerging
market countries. (3) The existence of national policies may restrict the Fund's
investment opportunities and may include restrictions on investment in issuers
or industries deemed sensitive to national interests. (4) Some emerging markets
countries may not have developed structures governing private or foreign
investment and may not allow for judicial redress for injury to private
property.
Foreign Currency. A Fund may be affected either favorably or unfavorably by
fluctuations in the relative rates of exchange between the currencies of
different nations, exchange control regulations and indigenous economic and
political developments. The Fund endeavors to buy and sell foreign currencies on
favorable terms. Such price spread on currency exchange (to cover service
charges) may be incurred, particularly when the Fund changes investments from
one country to another or when proceeds from the sale of shares in US dollars
are used for the purchase of securities in foreign countries. Also, some
countries may adopt policies which would prevent the Fund from repatriating
invested capital and dividends, withhold portions of interest and dividends at
the source, or impose other taxes, with respect to the Fund's investments in
securities of issuers of that country. There also is the possibility of
expropriation, nationalization, confiscatory or other taxation, foreign exchange
controls (which may include suspension of the ability to transfer currency from
a given country), default in foreign government securities, political or social
instability, or diplomatic developments that could adversely affect investments
in securities of issuers in those nations.
High Yield Bonds. (High Yield Bond Fund) During periods of economic uncertainty,
highly leveraged issuers may experience financial stress which could adversely
affect their ability to make payments of principal and interest and increase the
possibility of default. In addition the growth of the market for lower rated
debt securities paralleled a long economic expansion. The market for
-60-
<PAGE>
lower rated debt securities is generally thinner and less active than that for
higher quality securities, which would limit the Fund's ability to sell such
securities at fair value in response to changes in the economy or the financial
markets. While such debt may have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposure to adverse
conditions. The Advisor will seek to reduce the risks associated with investing
in such securities by the depth of its own credit analysis. Investors should
carefully consider their ability to assume the risks of owning shares of a
mutual fund that invests in lower-rated securities before making an investment.
For additional information, please refer to the Fund's SAI.
Asset-Backed Securities. The value of asset-backed securities is affected by
changes in the market's perception of the asset backing the security, changes in
the creditworthiness of the servicing agent for the instrument pool, the
originator of the instruments or the financial institution providing any credit
enhancement, and the expenditure of any portion of any credit enhancement. The
risks of investing in asset-backed securities are ultimately dependent upon
payment of the underlying instruments by the obligors, and the Fund would
generally have no recourse against the obligee of the instruments in the event
of default by an obligor. The underlying instruments are subject to prepayments.
Mortgage-Backed Security Rolls. There are two primary risks associated with the
roll market for mortgage-backed securities. First, the value and safety of the
roll depends entirely upon the counterparty's ability to redeliver the security
at the termination of the roll. Therefore, the counterparty to a roll must meet
the same credit criteria as any existing repurchase counterparty. Second, the
security which is redelivered at the end of the roll period must be
substantially the same as the initial security, i.e., it must have the same
coupon, be issued by the same agency and be of the same type, have the same
original stated term to maturity, be priced to result in similar market yields
and must be "good delivery." Within these parameters, however, the actual pools
that are redelivered could be less desirable than those originally rolled,
especially with respect to prepayment characteristics.
Real Estate Investments. Real estate investments are sensitive to conditions
affecting the real estate industry, including declines in the value of real
estate, risks related to general and local economic conditions, overbuilding and
increased competition, increases in property taxes and operating expenses,
changes in neighborhood values, the appeal of properties to tenants, rental
income issues and increases in interest rates. In addition, equity real estate
investment trusts may be affected by changes in the value of the underlying
property owned by the trust, while mortgage real estate investment trusts may be
affected by the quality of any credit extended. Moreover, the underlying
portfolios of equity and mortgage real estate trusts may not be diversified, and
are therefore subject to the risk of financing a single or a limited number of
projects. Such trusts are also dependent upon management skills and are subject
to heavy cash flow dependence, defaults by borrowers, self-liquidation and the
possibility of failing to qualify for tax-free pass-through of income under the
Internal Revenue Code and to maintain exemption from the 1940 Act. The value of
securities of companies which service the real estate industry may also be
affected by these risks.
LIFE SOLUTIONS FUNDS: SPECIAL RISK FACTORS
Investing in Underlying Funds. The investments of each Life Solutions Fund are
concentrated in the Underlying Funds, so each Life Solutions Fund's investment
performance is directly related to the investment performance of the Underlying
Funds that it holds. The ability of each Life Solutions Fund to meet its
investment objective is directly related to the ability of the Underlying Funds
to meet their objectives and to the allocation among the Underlying Funds by the
Advisor. There can be no assurance that the investment objective of any Life
Solutions Fund or Underlying Fund will be achieved. For information about the
investment objectives, techniques and risks involved in of each of the
Underlying Funds, please refer to "Description of the Underlying Funds" below,
the Appendix to this Prospectus and the SAI.
Affiliated Persons. SSgA and the officers and trustees of the Life Solutions
Funds also serve as investment advisor, officers and trustees, respectively, of
the Underlying Funds. Therefore, conflicts may arise as these persons fulfill
their fiduciary responsibilities to the Life Solutions Funds and the Underlying
Funds. The Trustees believe they have structured the Life Solutions Funds to
avoid these concerns. If a situation arises that may result in a conflict, the
Trustees and officers of the Life Solutions Funds will carefully analyze the
situation and take all necessary steps to minimize or eliminate the potential
conflicts.
Investment Practices of Underlying Funds. In addition to their principal
investments, certain Underlying Funds may invest a portion of their assets in
foreign securities; enter into forward currency transactions; lend their
portfolio securities, enter into stock index, interest rate and currency futures
contracts, and options on such contracts; engage in options transactions; make
short sales; purchase zero coupon bonds and payment-in-kind bonds; purchase
restricted and illiquid securities; enter into forward roll transactions;
purchase securities on a when-issued or delayed delivery basis; enter into
repurchase or reverse repurchase agreements; borrow money; and engage in various
other investment practices. All Life Solutions Funds may invest in Underlying
Funds that in turn invest in
-61-
<PAGE>
international securities or emerging markets and thus are subject to additional
risks of these investments, including changes in foreign currency exchange rates
and political risk. For more details, see "Description of the Underlying Funds,"
the Appendix and the SAI.
PORTFOLIO MATURITY AND TURNOVER
Money Market Fund. This Fund must limit investments to securities with remaining
maturities of 397 days or less (or as otherwise provided in Rule 2a-7 of the
1940 Act), as calculated in accordance with Rule 2a-7, and must maintain a
dollar-weighted average maturity of 90 days or less. This Fund will normally
hold portfolio instruments to maturity, but may dispose of them prior to
maturity if the Advisor finds it advantageous.
S&P 500 Index Fund. Ordinarily, securities will be sold from the Fund only to
reflect certain changes in its benchmark index (including mergers or changes in
the composition of the index) or to accommodate cash flows into and out of the
Fund while maintaining the similarity of the Fund to the benchmark index.
Accordingly, the turnover rate for the Fund is not expected to exceed 50%, a
generally lower turnover rate than for most actively managed investment
companies.
Bond Market, High Yield Bond, Yield Plus and Intermediate Funds. Because these
Funds will actively trade to benefit from short-term yield disparities among
different issues of fixed-income securities, or otherwise to increase income,
the Funds may be subject to a greater degree of portfolio turnover than might be
expected from investment companies which invest substantially all of their
assets on a long-term basis. Portfolio turnover rates cannot be predicted, but
it is anticipated that the Funds will generally not exceed the following rates
(excluding turnover of securities having a maturity of one year or less):
o Bond Market--566% (This higher than average turnover rate is not
expected to materially affect the Fund's performance.)
o High Yield Bond--250%
o Yield Plus--100-300%
o Intermediate--250%
Matrix, Small Cap, Special Equity, Active REIT, Aggressive Equity, Growth and
Income, International Growth Opportunities, Emerging Markets and Active
International Funds. Portfolio turnover rates cannot be predicted, but it is
anticipated that these Funds will generally not exceed the following rates:
o Matrix Equity--150%
o Small Cap--200%
o Special Equity--200%
o Active REIT--50%
o Aggressive Equity--200%
o Growth and Income--50%
o International Growth Opportunities--100%
o Emerging Markets--30%
o Active International--60%
Life Solutions Funds. Each Life Solutions Fund's turnover rate should not exceed
100% annually. A Life Solutions Fund may purchase or sell securities to: (a)
accommodate purchases and sales of its shares; (b) change the percentages of its
assets invested in each of the Underlying Funds in response to market
conditions; and (c) maintain or modify the allocation of its assets among the
Underlying Funds within the percentage limits described above. For information
on the portfolio turnover rates of the Underlying Funds, please see the SAI.
A high turnover rate (over 100%) may: (1) increase transaction expenses which
may adversely affect a Fund's performance; and (2) result in increased brokerage
commissions custodian fees and other transaction costs, and the possibility of
realized capital gains or losses.
The Advisor's sell discipline for the International Growth Opportunities,
Emerging Markets and Active International Funds' investment in securities of
foreign issuers is based on the premise of a long-term investment horizon,
however, sudden changes in valuation levels arising from, for example, new
macroeconomic policies, political developments, and industry conditions could
change
-62-
<PAGE>
the assumed time horizon. Some countries impose restrictions on repatriation of
capital and/or dividends which would lengthen the Advisor's assumed time horizon
in those countries. Liquidity, volatility, and overall risk of a position are
other factors considered by the Advisor in determining the appropriate
investment horizon. Therefore, these Funds may dispose of securities without
regard to the time they have been held when such action, for defensive or other
purposes, appears advisable.
The Funds may effect portfolio transactions with or through State Street
Brokerage Services, Inc., an affiliate of the Advisor, when the Advisor
determines that the Funds will receive competitive execution, price and
commissions.
Life Solutions Performance: The Underlying Funds. The following chart shows the
average annual total returns for each of the Underlying Funds in which the Life
Solutions Funds may invest for the most recent one-, five- and ten-year periods
(or since inception if shorter) and the 30-day yields for income-oriented funds,
for the period ended August 31, 1998.
<TABLE>
<CAPTION>
- ------------------------- ----------------- ------------ --------- ---------- --------- ----------- ---------------- ---------------
Net 7-day Yield for 30-day Yield
Assets as of Since period ended for period
8/31/98 Inception 1 Yr. 3 Yr. 5 Yr. Inception 8/31/98 ended 8/31/98
Underlying Fund (000) Date (%) (%) (%) (%) (%) (%)
- ------------------------- ----------------- ------------ --------- ---------- --------- ----------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
S&P 500 Index $1,615,913 12/30/92 7.91 21.50 17.99 17.31 -- --
- ------------------------- ----------------- ------------ --------- ---------- --------- ----------- ---------------- ---------------
Matrix Equity 445,077 05/04/92 2.09 18.67 15.70 15.74 -- --
- ------------------------- ----------------- ------------ --------- ---------- --------- ----------- ---------------- ---------------
Small Cap 344,630 11/23/94 (22.32) 9.12 11.91 13.56 -- --
- ------------------------- ----------------- ------------ --------- ---------- --------- ----------- ---------------- ---------------
Special Equity 13,146 05/01/98 -- -- -- (28.30) -- --
- ------------------------- ----------------- ------------ --------- ---------- --------- ----------- ---------------- ---------------
Active REIT 18,458 05/01/98 -- -- -- (17.99) -- --
- ------------------------- ----------------- ------------ --------- ---------- --------- ----------- ---------------- ---------------
Growth and Income 111,626 09/01/93 10.93 21.09 16.89 16.89 -- --
- ------------------------- ----------------- ------------ --------- ---------- --------- ----------- ---------------- ---------------
Active International 76,565 03/07/95 (9.50) (0.92) -- 1.66 -- --
- ------------------------- ----------------- ------------ --------- ---------- --------- ----------- ---------------- ---------------
Emerging Markets 206,370 03/01/94 (45.36) (12.14) -- (7.49) -- --
- ------------------------- ----------------- ------------ --------- ---------- --------- ----------- ---------------- ---------------
International Growth
Opportunities
22,966 05/01/98 -- -- -- (15.80) -- --
- ------------------------- ----------------- ------------ --------- ---------- --------- ----------- ---------------- ---------------
Bond Market 190,151 02/07/96 9.86 -- -- 6.54 -- 5.44
- ------------------------- ----------------- ------------ --------- ---------- --------- ----------- ---------------- ---------------
Intermediate 76,691 09/01/93 8.64 6.90 5.36 5.36 -- 5.16
- ------------------------- ----------------- ------------ --------- ---------- --------- ----------- ---------------- ---------------
High Yield Bond 11,908 05/05/98 -- -- -- (0.59) -- 7.57
- ------------------------- ----------------- ------------ --------- ---------- --------- ----------- ---------------- ---------------
Yield Plus 672,465 11/09/92 5.40 5.60 5.29 5.04 -- 5.54
- ------------------------- ----------------- ------------ --------- ---------- --------- ----------- ---------------- ---------------
Money Market 5,477,326 05/02/88 5.41 5.35 4.98 5.80 5.35 5.30
- ------------------------- ----------------- ------------ --------- ---------- --------- ----------- ---------------- ---------------
Government Money Market 945,897 03/01/91 5.33 5.26 4.89 4.68 5.20 5.18
- ------------------------- ----------------- ------------ --------- ---------- --------- ----------- ---------------- ---------------
</TABLE>
The performance data relating to the Underlying Funds set forth above is not,
and should not be viewed as, indicative of the future performance of either the
Underlying Funds or the Life Solutions Funds.
DIVIDENDS AND DISTRIBUTIONS
The Board of Trustees intends to declare and pay dividends as noted in the table
below. Dividends will be paid from net investment income as follows:
<TABLE>
<CAPTION>
----------------------------- ---------------------- ----------------------------------
Fund Dividends Declared Dividends Paid
----------------------------- ---------------------- ----------------------------------
<S> <C> <C>
Money Market Daily Last business day of each month
----------------------------- ---------------------- ----------------------------------
-63-
<PAGE>
----------------------------- ---------------------- ----------------------------------
Yield Plus Daily Last business day of each month
----------------------------- ---------------------- ----------------------------------
High Yield Bond Quarterly Quarterly
----------------------------- ---------------------- ----------------------------------
Bond Market Quarterly Quarterly
----------------------------- ---------------------- ----------------------------------
Matrix Equity Quarterly Quarterly
----------------------------- ---------------------- ----------------------------------
S&P 500 Index Quarterly Quarterly
----------------------------- ---------------------- ----------------------------------
Growth and Income Quarterly Quarterly
----------------------------- ---------------------- ----------------------------------
Intermediate Quarterly Quarterly
----------------------------- ---------------------- ----------------------------------
Active REIT Monthly Monthly
----------------------------- ---------------------- ----------------------------------
Aggressive Equity Annually Annually
----------------------------- ---------------------- ----------------------------------
Special Equity Annually Annually
----------------------------- ---------------------- ----------------------------------
Small Cap Annually Annually
----------------------------- ---------------------- ----------------------------------
International Growth Annually Annually
Opportunities
----------------------------- ---------------------- ----------------------------------
Emerging Markets Annually Annually
----------------------------- ---------------------- ----------------------------------
Active International Annually Annually
----------------------------- ---------------------- ----------------------------------
Life Solutions Income and Annually Annually
Growth
----------------------------- ---------------------- ----------------------------------
Life Solutions Balanced Annually Annually
----------------------------- ---------------------- ----------------------------------
Life Solutions Growth Annually Annually
----------------------------- ---------------------- ----------------------------------
</TABLE>
The Board of Trustees intends to declare capital gain distributions annually,
generally in mid-October. Distributions will be declared from net short- and
long-term capital gains, if any. It is intended that an additional distribution
may be declared and paid in December if required for the Funds to avoid the
imposition of a 4% federal excise tax on undistributed capital gains. The Money
Market Fund does not expect any material long-term capital gains or losses.
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.
In addition, the Life Solutions Funds receive capital gain distributions from
the Underlying Funds. Capital gain distributions may be expected to vary
considerably from time to time.
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, or if a check
remains uncashed for at least six months, the cash election will be changed
automatically and the future dividends and other distributions will be
reinvested in additional shares of the relevant Fund until the investor notifies
the SSgA Funds in writing of the correct address and requests in writing that
the election to receive dividends and other distributions in cash be reinstated.
In addition, following the six-month period, any undeliverable or uncashed
checks shall be cancelled and the amounts will be reinvested in the relevant
Fund at the per share net asset value determined as of the date of cancellation
of the checks. No interest will accrue on the amounts represented by the
uncashed distribution or redemption checks.
Except for the Money Market Fund, any dividend or capital gain distribution paid
by a fund shortly after a purchase of shares will reduce the per share net asset
value of a 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:
o Reinvestment Option--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.
-64-
<PAGE>
o Income-Earned Option--Capital gain distributions will be automatically
reinvested, but a check or wire will be sent for each dividend
distribution.
o Cash Option--A check, wire or direct deposit (ACH) will be sent for
each dividend and capital gain distribution.
o Direct Dividends Option--Dividends and capital gain distribution will
be automatically invested in another identically registered SSgA Fund.
Please note that dividends will not be paid until the last business day even if
an account closes during the month. If the account, at the end of the month, has
a zero balance due to a redemption, the dividend will automatically be sent as a
check to the address of record regardless of distribution option.
Dividends which are declared daily and paid monthly will wire (if that option is
elected) the proceeds to a pre-designated bank on the first business day of the
following month in which the dividend is payable. Investors should verify with
the receiving bank, as it may charge a fee to accept this wire. Direct deposits
through the Automatic Clearing House ("ACH") are transmitted to the investor's
bank account two days after the payable date of the distributions and generally
are not charged a fee by a bank.
Dividends which are declared either quarterly or annually may transmit (if that
option is elected) the proceeds by direct deposit through ACH. ACH will transmit
the proceeds to the pre-designated bank account by the payable date. Proceeds
from a dividend or capital gains will not be wired b federal funds to a bank.
TAXES
The following discussion is only a summary of certain federal income tax issues
generally affecting the Funds and their shareholders. Circumstances among
investors may vary and each investor is encouraged to discuss investment in a
Fund with the investor's tax advisor.
Each 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, no Fund will 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 shareholders. The Board intends
to distribute each year substantially all of the Funds' 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
long-term gains are taxable as long-term gains regardless of the length of time
a shareholder has held such shares and whether paid in cash or additional
shares. The Life Solutions Funds may incur additional capital gains on the sale
of their investments in the Underlying Funds if the Life Solutions Funds
rebalance their portfolios.
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 the 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 six months or less will be treated as a
long-term loss to the extent of capital gain dividends received with respect to
such shares.
With respect to the Money Market Fund, no capital gain or loss is anticipated
because the Fund seek to maintain a stable $1.00 per share net asset value.
Shareholders will be notified after each calendar year of the amount of income
dividends and net capital gains distributed. Shareholders of the Fund will also
be advised of the percentage, if any, of the dividends by the Fund that are
exempt from federal income tax and the portion, if any, of those dividends that
is a tax preference item for purposes of the alternative minimum tax. 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.
Foreign Income Taxes (International Growth Opportunities, Emerging Markets and
Active International only). Investment income received by the Funds from sources
within foreign countries may be subject to foreign income taxes withheld at the
source. The
-65-
<PAGE>
United States has entered into tax treaties with many foreign countries which
would entitle a 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 a 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 a Fund. A Fund can elect to mark-to-market
its PFIC holdings in lieu of paying taxes on gains or distributions therefrom.
It is anticipated that any taxes on a Fund with respect to investments in PFICs
would be insignificant.
Foreign shareholders should consult with their tax advisors as to if and how the
federal income tax and its withholding requirements applies to them.
If more than 50% in value of a Fund's total assets at the close of any taxable
year consists of securities of foreign corporations, a Fund may file an election
with the Internal Revenue Service (the "Foreign Election") that would permit
shareholders to take a credit (or a deduction) for foreign income taxes paid by
a Fund. The Fund may be subject to certain holding period requirements relative
to securities held in order to take advantage of this credit. If the Foreign
Election is made, shareholders would include in their gross income both
dividends received from a Fund and foreign income taxes paid by a Fund.
Shareholders of a Fund would be entitled to treat the foreign income taxes
withheld as a credit against their United States federal income taxes, subject
to the limitations set forth in the Internal Revenue Code with respect to the
foreign tax credit generally. Alternatively, shareholders could treat the
foreign income taxes withheld as a deduction from gross income in computing
taxable income rather than as a tax credit. It is anticipated that a Fund will
qualify to make the Foreign Election; however, a Fund cannot be certain that it
will be eligible to make such an election or that any particular shareholder
will be eligible for the foreign tax credit.
VALUATION OF FUND SHARES
Net Asset Value Per Share. 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. The Funds
determine 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).
Except for the Money Market Fund, a business day is one on which the New York
Stock Exchange is open for business.
The Money Market 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 or Boston Federal Reserve are open for business.
Valuation of Money Market Fund Securities. The Money Market Fund seeks to
maintain a $1.00 per share net asset value and, accordingly, uses the amortized
cost valuation procedure to value its portfolio instruments. The "amortized
cost" valuation procedure 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.
Valuation of Non-Money Market Fund Securities. With the exceptions noted below,
the Funds value portfolio securities at "market value." This generally means
that the 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 sale 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 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,
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. Some international securities trade on days that the
Fund is not open for business. As a result, the net asset value of Fund shares
may fluctuate on days when Fund shareholders may not buy or sell Fund shares.
-66-
<PAGE>
Debt obligation securities maturing within 60 days of the valuation date are
valued at amortized cost unless the Board determines that amortized cost does
not represent their market value. The amortized cost valuation procedure
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 the
amortized cost 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 Funds value securities for which market quotations are not readily available
at "fair value," as determined in good faith pursuant to procedures established
by the Board of Trustees.
PURCHASE OF FUND SHARES
Minimum Initial and Subsequent Investments and Account Balance. Each Fund
requires a minimum initial investment of $1,000, with the exception of IRA
accounts, for which the minimum initial investment is $250 and the S&P 500 Index
Fund for which the minimum investment is $10,000. Subsequent investments must be
at least $100. An investment in a Fund (other than IRA accounts) may be subject
to redemption at the Fund's discretion if the account balance is less than
$1,000 (or less than $10,000 in the S&P 500 Index Fund) 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 required minimum. Failure to bring the account
balance to the required minimum 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. Shareholders with accounts established prior to
December 24, 1997 are not subject to the $10,000 minimum requirement of the S&P
500 Index Fund. 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. With the
exceptions noted below, 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 p.m. Eastern time to be effective
on the date received. If the Servicing Agent or broker-dealer has a signed
selling agreement with the SSgA Funds, trades may be placed for trade date and
payment made within 5 business days to be effective. With respect to the Yield
Plus Fund, purchase orders which are accepted: (1) prior to 12 noon Eastern time
will purchase shares based on that day's closing net asset value and earn the
dividend declared on the date of purchase; and (2) at or after 12 noon Eastern
time will purchase shares based on that day's closing net asset value and earn
the dividend determined on the next day.
The Funds reserve the right to reject any purchase order if payment for Fund
shares has not been received by the Transfer Agent prior to 4 p.m. Eastern time.
Order and Payment Procedures. There are several ways to invest in the Funds. The
Funds require a purchase order in good form, which consists of a completed and
signed Application for each new account, unless the account is opened through a
third party which has a signed agreement with the SSgA Funds and does not
require a completed application to be submitted to the SSgA Funds. 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>
-67-
<PAGE>
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.
Telephone Exchange Privilege. Subject to each 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 to the shareholder.
With respect to the Funds offered through this prospectus, management believes
that market timing strategies may be disruptive. For this reason, the Investment
Company reserves the right to refuse or restrict an exchange by any person if
the Investment Company reasonably believes that an exchange is part of a market
timing strategy and that a Fund may be adversely affected by the exchange.
Although the Investment Company will attempt to give you prior notice whenever
it is reasonably able to do so, it may impose these restrictions at any time. Of
course, your right to redeem shares would be unaffected by these restrictions.
Each Fund reserves the right to terminate or modify the exchange privilege in
the future.
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 (Name of Fund) Fund(s)
Account Number and Registration
Dollar Amount Per Account (if one wire is to cover more than one purchase)
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. Any wires received at State Street Bank
without a corresponding call into the Customer Service Department will be
purchased as indicated on the wire at the next determined net asset value and
will earn the dividend declared on the next business day.
Automatic Investment Plan. Once the initial investment has been made, investors
may make subsequent investments of at least $100 monthly, quarterly or annually
by direct deposit through Automatic Clearing House ("ACH") by completing the
appropriate section of the Application and attaching a voided personal check.
Investors may make subsequent investments monthly, quarterly or annually by
deducting $100 or more from their bank checking accounts. An investor may elect
this option on the Application and call the Customer Service Department at (800)
647-7327 prior to 3 p.m. Eastern time for additional automatic purchases, to
change the amount of the existing automatic purchase, or to stop it. Shares will
be purchased at the offering price next determined following receipt of the
order by the Transfer Agent.
Systematic Exchange. The Funds offer 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 Advisor 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
-68-
<PAGE>
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 a 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 in good order by following
one of the methods described below. Typically, 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. If Fund shares were purchased by check or
an automatic investment program ("AIP") and the shareholder elects to redeem
shares within 15 days of such purchase, the shareholder may experience delays in
receiving redemption proceeds. The Fund will generally postpone sending
redemption proceeds from such investment until the Fund can verify that the
check or AIP investment has been collected. There will be no such delay for
redemptions following investments paid by federal funds wire or by bank
cashier's check, certified check or treasurer's check. With respect to the Yield
Plus Fund, a dividend will be paid on shares redeemed if the redemption request
is received by State Street after 12 noon Eastern time. Redemption requests
received before 12 noon Eastern time will not be entitled to that day's
dividend. With respect to the Money Market Fund, no dividends will be paid on
shares on the date of redemption.
Unless otherwise noted, redemption requests must be received prior to 4 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 p.m. Eastern time may transmit the request to the Transfer Agent
by 9 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.
Checkwriting Service (Money Market Fund only). If investors have authorized the
check writing feature on the Application and have completed the signature card,
they may redeem shares in their account, provided that the appropriate
signatures are on the check. The minimum check amount is $500. There is a
one-time service charge of $5 per Fund to establish this feature, and investors
may write an unlimited number of checks provided that the account minimum of
$1,000 per Fund is maintained.
Cash Sweep Program (Money Market and Yield Plus Fund only). Money managers of
master trust clients may participate in a cash sweep program to automatically
invest excess cash in the Money Market, Government or Yield Plus Funds. A money
manager must select the Fund, give authorization to complete the Fund's
Application and authorize the investment of excess cash into or the withdrawal
of required cash from the Fund on a daily basis. Where the Advisor acts as the
money manager, the Advisor will receive an advisory fee from the client.
Telephone Redemption. Shareholders may normally redeem Fund shares by
telephoning the Customer Service Department at (800) 647-7327 between 8 a.m. and
4 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 Funds do 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. The wire
schedule for the Funds is as follows:
o Money Market--Requests received via telephone prior to 4 p.m. Eastern
time will be sent the same day according to pre-designated
instructions.
-69-
<PAGE>
o Yield Plus--Requests received prior to 12 noon Eastern time will have
the shares redeemed using that day's closing price with the proceeds
wired the same day, unless the request is for 100% of the account.
Because Yield Plus has a fluctuating NAV, redemption requests for 100%
of the account (if received prior to 12 noon Eastern time) will have
100% of the shares redeemed using that day's closing price, with 95%
of the proceeds being wired the same day and the remaining 5%
automatically wired the following business day. All requests received
after 12 noon Eastern time will have the shares redeemed using that
day's closing price and the proceeds wired the following business day.
Redemption requests received prior to 12 noon Eastern time for the Yield Plus
Fund will not be eligible for that day's interest.
o All Other Funds--Requests must be received prior to 4 p.m. The shares
will be redeemed using that day's closing price, and the proceeds will
be wired the following business day.
Systematic Withdrawal Plan by Check. Investors with an account balance over
$10,000 may make periodic cash withdrawals automatically paid to the investor or
to any person designated by the investor. If the checks are returned to the Fund
as undeliverable or remain uncashed for six months or more, the systematic
withdrawal plan will be cancelled and the amount will be reinvested in the
relevant Fund at the per share net asset value determined as of the date of the
cancellation of the checks. No interest will accrue on the amounts represented
by the uncashed distributions or redemption checks.
Systematic Withdrawal Plan by ACH. Investors may make automatic withdrawals of
$100 or more by completing the appropriate sections of the Application and
attaching a voided check. Investors may also choose to establish this option
with pre-designated withdrawal dates and amounts, if the account balance is over
$10,000 or by calling the Customer Service Department at (800) 647-7327, prior
to 3 p.m. Eastern time, requesting the withdrawal. Withdrawals by telephone do
not require a minimum account balance provided the minimum investment of $1,000
is maintained.
Please note that proceeds from ACH withdrawals will be transmitted to the
investor's bank two days after the trade is placed or executed automatically.
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.
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.
-70-
<PAGE>
<TABLE>
<CAPTION>
Seller Requirements for Written Requests
<S> <C>
Owner of individual, joint, o Letter of instruction, signed by all persons
sole proprietorship, authorized to sign for the account stating general
UGMA/UTMA (custodial titles/capacity, exactly as the account is
accounts for minors) or registered; and
general partner accounts
o Signature guarantee, if applicable (see above).
Owners of corporate or o Letter of instruction signed by authorized
association accounts person(s), stating capacity as indicated by the
corporate resolution;
o Corporate resolution, certified within the past
90 days; and
o Signature guarantee, if applicable (see above).
Owners or trustees of trust o Letter of instruction, signed by all trustees;
accounts
o If the trustees are not named in the
registration, please provide a copy of the trust
document certified within the past 60 days; and
o Signature guarantee, if applicable (see above).
Joint tenancy shareholders o Letter of instruction signed by surviving
whose co-tenants are deceased tenant(s);
o Certified copy of the death certificate; and
o 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 Fund reserves 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 division of State Street Corporation a publicly
-71-
<PAGE>
held bank holding company. State Street, with over $441 billion (US) under
management as of September 30, 1998, provides complete global investment
management services from offices in North America, South America, Europe, Asia,
Australia and the Middle East.
The Advisor, subject to Board supervision, directs the investments of each Fund
in accordance with their investment objectives, policies and restrictions. The
Fund pays the Advisor a fee, calculated daily and paid monthly, that on an
annual basis is equal to a certain percentage of each Fund's average daily net
assets, as described on the "Fund Operating Expense" table for each Fund, under
"Advisory Fees."
The Life Solutions Funds will not be charged a fee by the Advisor. However, each
Life Solutions Fund, as a shareholder in the Underlying Funds, will bear its
proportionate share of any investment advisory fees and other expenses paid by
the Underlying Funds. Each Underlying Fund pays the Advisor a fee, calculated
daily and paid monthly, that on an annual basis is equal to a certain percentage
of each Underlying Fund's average daily net assets. However, the Advisor has
voluntarily agreed to waive or reimburse its fees for certain Underlying Funds.
The following table indicates the Advisory fees paid by each Underlying Fund as
a percentage of average daily net assets (net of waivers and reimbursements) and
the percentage which each Underlying Fund would have paid absent a waiver or
reimbursement for the fiscal year ended August 31, 1998:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Advisory Fees (% of Average Daily Net Assets) for the
Fiscal Year Ended August 31, 1998:
- --------------------------------------------------------------------------------------------------
Advisory Fee Net of Waivers Advisory Fee Absent the
Underlying Fund or Reimbursements (%) Waivers or Reimbursements (%)
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
S&P 500 Index 0.00 0.10
- -------------------------------------- ----------------------------- -----------------------------
Matrix Equity 0.46 0.75
- -------------------------------------- ----------------------------- -----------------------------
Small Cap 0.75 0.75
- -------------------------------------- ----------------------------- -----------------------------
Special Equity 0.30 0.75
- -------------------------------------- ----------------------------- -----------------------------
Active REIT 0.27 0.65
- -------------------------------------- ----------------------------- -----------------------------
Growth and Income 0.66 0.85
- -------------------------------------- ----------------------------- -----------------------------
Active International 0.46 0.75
- -------------------------------------- ----------------------------- -----------------------------
Emerging Markets 0.62 0.75
- -------------------------------------- ----------------------------- -----------------------------
International Growth Opportunities 0.19 0.75
- -------------------------------------- ----------------------------- -----------------------------
Bond Market 0.26 0.30
- -------------------------------------- ----------------------------- -----------------------------
Intermediate 0.27 0.80
- -------------------------------------- ----------------------------- -----------------------------
Yield Plus 0.25 0.25
- -------------------------------------- ----------------------------- -----------------------------
High Yield Bond 0.00 0.30
- -------------------------------------- ----------------------------- -----------------------------
Money Market 0.25 0.25
- -------------------------------------- ----------------------------- -----------------------------
US Gov't Money Market 0.25 0.25
- -------------------------------------- ----------------------------- -----------------------------
Life Solutions Balanced 0.00 --
- -------------------------------------- ----------------------------- -----------------------------
Life Solutions Growth 0.00 --
- -------------------------------------- ----------------------------- -----------------------------
Life Solutions Income and Growth (0.27) --
- -------------------------------------- ----------------------------- -----------------------------
</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.
-72-
<PAGE>
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 December 1, 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, all employees who are deemed
to be access persons (employees who have interaction with funds or accounts
managed by SSgA as part of their job function) must pre-clear personal
securities transactions. The Code of Ethics is designed to ensure that employees
conduct their personal securities transactions in a manner that does not create
an actual or potential conflict of interest to SSgA's business or fiduciary
responsibilities. In addition, the Code of Ethics establishes standards
prohibiting the trading in or recommending of securities based on material,
nonpublic information or the divulgence of such information to others.
PORTFOLIO MANAGEMENT
Bond Market and Intermediate Funds. Mr. John P. Kirby, Principal, is the
portfolio manager primarily responsible for investment decisions regarding the
SSgA Intermediate and Bond Market Funds. Prior to joining State Street Bank in
1995, Mr. Kirby was an account manager with Lowell, Blake & Associates. Prior to
that, Mr. Kirby was a portfolio manager at One Federal Asset Management a
Shawmut Bank subsidiary, and at Cambridge Port Savings as an asset/liability
risk specialist. He has a BA from Boston college and is a CFA candidate. There
are six other portfolio managers working with Mr. Kirby.
High Yield Bond Fund. Mr. Bruce Walbridge, Principal, has been with State Street
since March 1987. Before joining the Fixed Income group in July 1993 as a credit
analyst, Mr. Walbridge was an assistant portfolio manager in the International
Equity group. Prior to the launch of the SSgA High Yield Bond Fund, he managed
several domestic bond portfolios including the $4 billion Flagship
Government/Corporate Bond Fund. Utilizing his credit analysis background, Mr.
Walbridge's focus over the last four and a half years has been on corporate bond
analysis and trading. There are three other portfolio managers who assist in
managing the Fund.
Yield Plus Fund. Mr. John Reohr, Principal, is the portfolio manager primarily
responsible for investment decisions regarding the Fund. Mr. Reohr joined State
Street in April 1993 with responsibilities in cash and enhanced cash portfolio
management. Mr. Reohr began managing the SSgA Yield Plus Fund in January 1998.
Mr. Reohr began his fixed income career in 1983 working for Lehman Brothers'
Treasury Trading Desk. Until 1989, Mr. Reohr managed short and intermediate
fixed income portfolios for Continental Bank. Since then, Mr. Reohr has also
managed government, mortgage, money market and Federal funds arbitrage
portfolios for the Federal Home Loan Bank of Boston. He earned his BA in
Political Science at Dickinson College and his MBA from the University of
Chicago. There are 10 other portfolio managers working with Mr. Reohr.
Matrix Equity Fund. Mr. Theodore G. Gekas is the lead portfolio manager
primarily responsible for investment decisions regarding the SSgA Matrix Equity
Fund. Mr. Gekas is a Principal of SSgA and has been with the firm since 1995 in
the Global Enhanced and Structured Products Groups. Prior to joining SSgA, Mr.
Gekas developed asset allocation and forecasting models for the global equity
and fixed income markets with Citibank. There are seven other portfolios
managers assisting with the management of this Fund.
S&P 500 Index Fund. Mr. James B. May, Principal, has been the lead portfolio
manager for this Fund since May 1995. Mr. May has been a portfolio manager in
the US Structured Products Group of State Street since January 1994. He served
as an Investment Support
-73-
<PAGE>
Analyst in the US Passive Services Group from 1991 to 1993. He holds a BS in
Finance from Bentley College and his MBA from Boston College. There are four
other portfolio managers who work with Mr. May in managing the Fund.
Special Equity Fund. Mr. Guy R. Scott, CFA, is the lead portfolio manager
primarily responsible for investment decisions regarding the SSgA Special Equity
Fund. Mr. Scott has been with State Street Global Advisors ("SSgA") since 1997.
Prior to joining the firm, Mr. Scott was a senior vice president and portfolio
manager at The Boston Company for seven years. There are four other portfolios
managers assisting with the management of this Fund.
Small Cap Fund. Ms. Jennifer Bardsley, Principal, is the portfolio manager
primarily responsible for investment decisions regarding the Small Cap Fund. Ms.
Bardsley joined State Street in March 1993. She became a member of the
Investments Systems Group and moved into the US Active Equities Group in January
1996. She holds BA degrees in Economics and Russian from Middlebury College, and
an MS degree in Computer Science from Boston College. There are seven other
portfolio managers who work with Ms. Bardsley in managing the Funds.
Active REIT Fund. Mr. David B. Smith, CFA, Principal, joined State Street Global
Advisors in 1990. As a senior equity analyst and portfolio manager, he
specialized in Real Estate Investment Trusts (REITs). Prior to his current
responsibilities, David covered REITs and the financial services market segment,
which includes banks, thrifts, insurance companies, credit card businesses, and
asset management firms. He also has experience managing portfolios for SSgA.
There are two other managers working with Mr. Smith.
Aggressive Equity Fund. Mr. Richard B. Weed, CFA, Principal, 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 in March 1994. He holds an MS in Finance and Accounting
from the MIT Sloan School of Management, has an MS in Chemical Engineering from
Northeastern University, and a BS in Chemical Engineering from Worcester
Polytechnic Institute. Mr. Weed is a member of the Boston Security Analysts
Society and AIMR. There are seven other portfolio managers who assist in
managing the Fund.
Growth and Income Fund. Mr. L. Emerson Tuttle, Principal, is the portfolio
manager primarily responsible for investment decisions regarding the Fund and
provides investment management services for employee benefit plans and
endowments. Mr. Tuttle joined State Street in 1981. From 1987 to 1989, Mr.
Tuttle was portfolio manager for Private Client Services at State Street Bank in
Zurich, Switzerland. Mr. Tuttle is a 1973 magna cum laude graduate of Yale
College, and earned a JD degree magna cum laude from Suffolk Law School. He is a
member of the Massachusetts bar and a Chartered Financial Analyst. Mr. Tuttle is
also a member of the Boston Security Analysts Society and has 18 years of
investment experience. There are four other portfolio managers who work with Mr.
Tuttle in managing the Fund.
International Growth Opportunities Fund. Mr. Jeff Davis, CFA, is the lead
portfolio manager primarily responsible for investment decisions regarding the
SSgA International Growth Opportunities Fund. Mr. Davis, a Principal, Chief
Investment Strategist and Senior Portfolio Manager, has been with SSgA since
1992. Mr. Davis left SSgA briefly to serve as Managing Director of Schooner
Asset management, a Latin American and Eastern European private equity firm, and
returned in 1997 to assume his current role. There are four other portfolios
managers assisting with the management of this Fund.
Emerging Markets Fund. Mr. Josh Feuerman, Principal, is the portfolio manager
primarily responsible for investment decisions regarding the Fund. Mr. Feuerman
joined State Street in 1987. He is a portfolio manager in SSgA's Global Active
Equities Group responsible for emerging markets portfolios. He also assists in
the marketing of SSgA's equity products to existing and prospective clients as
well as to the consultant community. There are seven other portfolio managers
who work with Mr. Feuerman in managing the Fund.
Active International Fund. Mr. Robert Rubano, Principal, has been the lead
portfolio manager for this Fund since its inception in March 1995. Mr. Rubano
has been with State Street since 1990 as a portfolio manager of active
international funds. He is a graduate of Boston University's MBA program with
concentration in Finance and also holds a BA in Government and Mathematics from
Bowdoin College. There are seven other portfolio managers who work with Mr.
Rubano in managing the Fund.
-74-
<PAGE>
SSgA Life Solutions Growth, Income and Growth, and Balanced Funds. Mr. Heydon
Traub, CFA, is the lead portfolio manager primarily responsible for investment
decisions regarding the SSgA Life Solutions Funds. Mr. Traub is a Principal of
SSgA and heads the Global Asset Allocation Group. He has been with the firm
since 1987. There are two other portfolios managers assisting with the
management of these Funds.
Administration Agreement. Frank Russell Investment Management Company ("FRIMCo"
or "Administrator") serves as the Funds' administrator. The Administrator
currently serves as investment manager and administrator to 27 mutual funds and
4 qualified insurance mutual fund products with assets of $13.0 billion and
$50.9 million, respectively, as of October 31, 1998, and acts as administrator
to 22 mutual funds with assets of $15.1 billion as of October 31, 1998.
Pursuant to the Administration Agreement with Investment Company, the
Administrator will: (1) supervise all aspects of the Funds' operations; (2)
provide the Funds with administrative and clerical services, including the
maintenance of certain of the Funds' books and records; (3) arrange the periodic
updating of the Funds' prospectuses and any supplements thereto; (4) provide
proxy materials and reports to Fund shareholders and the Securities and Exchange
Commission; and (5) provide the Funds 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 Funds
pay the Administrator a combined fee that on an annual basis is equal to the
following percentages of their average aggregate daily net assets:
o All Funds (except Emerging Markets and Active International)
o To and including $500 million--.06%;
o Over $500 million to and including $1 billion--.05%; and
o Over $1 billion--.03%.
o International Growth Opportunities, Emerging Markets and Active
International
o To and including $500 million--.07%;
o Over $500 million to and including $1 billion--.06%;
o Over $1 billion to and including $1.5 billion--.04%; and
o Over $1.5 billion--.03%.
The percentage of the fee paid by the each Fund is equal to the percentage 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 fees noted above which are 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% 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, the Distributor, 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
-75-
<PAGE>
reimbursed in an amount up to .25% of the net asset value of shares of the Fund
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 shares of the
Fund 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., Metropolitan Division of Commercial Banking, Global Cash Management and
Retirement Investment Services, which includes State Street 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. These agreements are
reviewed annually by the Board of Trustees.
Payments to Distributor, as well as payments to Service Organizations, are not
permitted by the Plan to exceed .25% per year of the average net asset value of
the Fund's shares. 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. The Fund's liability for any such expenses carried forward
shall terminate at the end of two years following the year in which the
expenditure was incurred. Service Organizations will be responsible for prompt
transmission of purchase and redemption orders and may charge fees for their
services.
FUND EXPENSES
The Funds will pay all of their expenses other than those expressly assumed by
the Advisor and the Administrator. The Funds' principal expenses are the annual
advisory fee payable to the Advisor and distribution and shareholder servicing
expenses. Other expenses include: (1) taxes, if any; (2) expenses for legal,
auditing and financial accounting services; (3) expense of preparing (including
typesetting, printing and mailing) reports, prospectuses and notices to existing
shareholders; (4) administrative fees; (5) custodian fees; (6) expense of
issuing and redeeming Fund shares; (7) the cost of registering Fund shares under
federal and state laws; (8) shareholder meetings and related proxy solicitation
expenses; (9) the fees, travel expenses and other out-of-pocket expenses of
Trustees who are not affiliated with Advisor or any of its affiliates; (10)
insurance, interest, brokerage and litigation costs; (11) 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 (12) other expenses properly payable by the Funds. Certain expenses
not directly attributable to any one Fund but applicable to all Funds, such as
Trustee fees, insurance, legal and other expenses will be allocated to each Fund
based on each Fund's net assets.
PERFORMANCE CALCULATIONS
YIELD
Money Market, Yield Plus, Bond Market, High Yield Bond, Active REIT and
Intermediate Funds may from time to time advertise their yields. Yield for each
Fund is calculated as follows:
-76-
<PAGE>
Money Market Fund. The yield of the Money Market Fund refers to the income
generated by an investment in shares of the Fund over a seven-day period (which
period will be stated in the advertisement). This income is then annualized.
That is, the amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. The effective yield is calculated similarly but,
when annualized, the income earned by an investment in the Fund is assumed to be
reinvested. The effective yield will be slightly higher than the yield
prescribed by the Securities and Exchange Commission because of the compounding
effect of this assumed reinvestment.
From time to time, the Money Market Fund may also report yield and effective
yield as calculated over a one-month period (which period will also be stated in
the advertisement). These one-month periods will be annualized using the same
method as described above for yields calculated on the basis of seven-day
periods. From time to time, yields calculated on a monthly basis may also be
linked to provide yield figures for periods greater than one month.
Bond Market, High Yield Bond, Active REIT, Yield Plus and Intermediate Funds.
Yield is calculated by dividing the net investment income per share earned
during the most recent 30-day (or one-month) period by the maximum offering
price per share on the last day of the month. This income is then annualized.
That is, the amount of income generated by the investment during that 30-day
period is assumed to be generated each month over a 12-month period and is shown
as a percentage of the investment. For purposes of the yield calculation,
interest income is computed based on the yield to maturity of each debt
obligation and dividend income is computed based upon the stated dividend rate
of each security in the Fund's portfolio. The calculation includes all recurring
fees that are charged to all shareholder accounts.
TOTAL RETURN
From time to time, each Fund may advertise its total return. The total return of
a Fund is the average annual compounded rate of return from a hypothetical
investment in the Fund over one-year, five-year and ten-year periods or for the
life of the Fund (as stated in the advertisement), assuming the reinvestment of
all dividend and capital gains distributions.
Comparative performance information may be used from time to time in advertising
or marketing Fund shares, including data (as applicable to each respective Fund)
from Lipper Analytical Services, Inc., IBC's Money Fund Report, Wall Street
Journal Score Card, Morningstar, Inc., S&P 500 Index, Russell 2000 Index, MSCI
EAFE Index, LBAB Index, Lehman Brothers High Yield Bond Index, S&P REIT Index,
Russell Special Small Company Index, MSCI EAFE Index, Lipper Real Estate Funds
Average, Consumer Price Index. or other industry publications, business
periodicals, rating services and market indices. The Funds may also advertise
nonstandardized performance information which is for periods in addition to
those required to be presented.
Quoted yields, returns 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 Funds, provides portfolio
recordkeeping services and serves as the Funds' 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. PricewaterhouseCoopers LLP, Boston,
Massachusetts, is Investment Company's independent accountants.
Sub-Transfer Agents. The Fund has authorized one or more brokers to accept on
its behalf and for its clients only purchase and redemptions orders. These
sub-transfer agents are authorized to designate other intermediaries to accept
purchase and redemption orders from their clients on the Fund's behalf. The Fund
will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order. Customer orders will be priced at the Fund's net asset value next
computed after they are accepted by an authorized broker or the broker's
designee provided that the authorized broker or the broker's designee timely
transmits the customer order to the Investment Company.
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 the Distributor at (800) 647-7327.
Year 2000. The services provided to the Investment Company and its shareholders
by the Advisor, Administrator, Distributor, Transfer Agent, Custodian and other
service providers depend on the smooth functioning of their computer systems and
those of their outside
-77-
<PAGE>
service providers. Many computer software systems in use today cannot
distinguish the year 2000 from the year 1900 because of the way the dates are
encoded and calculated. Such event could have a negative impact of handling
securities trades, payments of interest and dividends, pricing and account
services, among other services. Although at this time there can be no assurance
that there will be no adverse impact on the Investment Company, the Advisor,
Administrator, Distributor, Transfer Agent and Custodian have advised the
Investment Company that they have been actively working on necessary changes to
their computer systems to prepare for the year 2000 and expect that their
systems, and those of their outside service providers, will be adapted in time
for the event. The obligation to make such adaptations, if any, would be the
responsibility of the service provider that maintains the system. The Investment
Company does not expect to incur any material expense in that regard.
Organization, Capitalization and Voting. The 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.
The Investment Company issues shares divisible into an unlimited number of
series (or funds), each of which is a separate trust under Massachusetts law.
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
may 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 may be removed at any time by a vote of two-thirds of
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.
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.
The Investment Company does not issue share certificates for the Fund. Transfer
Agent sends monthly statements to shareholders of the Fund 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.
Controlling Persons. As of December 1, 1998, the following shareholders owned of
record 25% or more of outstanding shares of the stated Funds, and are therefore
deemed to be controlling persons of the respective Funds. Such shares may be
held pursuant to a shareholder servicing arrangement in omnibus accounts for
underlying shareholders:
Yield Plus Fund
o Stock Performance Index Futures Fund CM18, a fund of State Street Bank and
Trust Company, 225 Franklin Street, Boston, MA 02110-2804 -- 70%.
Growth and Income Fund
o State Street Solutions, State Street Bank and Trust Company, TTEE, P.O. Box
1389, Boston, MA 02104-1389 -- 32%.
Matrix Fund
o State Street Bank Solutions, State Street Bank and Trust Company, TTEE,
P.O. Box 1389, Boston, MA 02104-1389 -- 26%.
Special Equity
o State Street Bank and Trust Company, State Street Retirement Fund,
Batterymarch Park 3, 3 Pinehill Drive, Quincy, MA 02169-7422 -- 99%.
Active REIT Fund
o Iceship & Company, State Street Bank and Trust Company, One Enterprise
Drive, North Quincy, MA 02171-2126 -- 41%.
Emerging Markets Fund
o Charles Schwab & Company, Inc., 101 Montgomery Street, San Francisco, CA
94104-4122 -- 53%.
-78-
<PAGE>
Life Solutions Income and Growth
o State Street Solutions, State Street Bank and Trust Company, TTEE, P.O. Box
1389, Boston, MA 02104-1389--63%.
Life Solutions Balanced Fund
o State Street Solutions, State Street Bank and Trust Company, TTEE, P.O. Box
1389, Boston, MA 02104-1389 -- 60%; and
o Trustees of Alcatel Network, State Street Bank and Trust Company, AO04, One
Enterprise Drive, Quincy, MA 02171-2126 --38%.
Life Solutions Growth Fund
o State Street Solutions, State Street Bank and Trust Company, TTEE, P.O. Box
1389, Boston, MA 02104-1389--91%.
-79-
<PAGE>
INFORMATION REGARDING STANDARD & POOR'S CORPORATION
"Standard & Poor's," "S&P," "Standard & Poor's 500," and "500" are trademarks of
Standard & Poor's and have been licensed for use by SSgA Fund. The Fund is not
sponsored, endorsed, sold or promoted by Standard & Poor's. Standard & Poor's
makes no representation or warranty, express or implied, to the shareholders of
the Fund regarding the advisability of investing in securities generally or in
the Fund particularly or the ability of the S&P 500 Index to track general stock
market performance. Standard & Poor's only relationship to the Fund is the
licensing of the trademarks and tradenames of Standard & Poor's including the
S&P 500 Index, which is determined, composed and calculated by Standard & Poor's
without regard to the Fund. Standard & Poor's has no obligation to take the
needs of the shareholders of the Fund into consideration in determining,
composing or calculating this Index. Standard & Poor's is not responsible for
and has not participated in the determination of the prices and amount of the
Fund or the timing of the issuance or sale of the shares or in the determination
or calculation of the equation by which the shares of the Fund are to be
redeemed. Standard & Poor's has no obligation or liability in connection with
the administration, marketing or trading of the Fund.
STANDARD & POOR'S DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE
INDEX OR ANY DATA INCLUDED THEREIN AND STANDARD & POOR'S SHALL HAVE NO LIABILITY
FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. STANDARD & POOR'S MAKES NO
WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE FUND OR THE
SHAREHOLDERS OF THE FUND OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX
OR ANY DATA INCLUDED THEREIN. STANDARD & POOR'S MAKES NO EXPRESS OR IMPLIED
WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE INDEX OR ANY DATA INCLUDED
THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL STANDARD &
POOR'S HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL
DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH
DAMAGES.
-80-
<PAGE>
SSgA FUNDS
One International Place
Boston, Massachusetts 02110
CUSTOMER SERVICE: (800) 647-7327
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
PricewaterhouseCoopers LLP
One Post Office Square
Boston, Massachusetts 02109
