SSGA FUNDS, 485BPOS, 1999-12-17

SSGA FUNDS
485BPOS, 1999-12-17

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Filed Pursuant to Rule 485(b)

As filed with the Securities and Exchange Commission on December 17, 1999

Registration No. 33-19229; 811-5430
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ( X )
-----
Pre-Effective Amendment No. _____ (_____)

Post-Effective Amendment No. 54 ( X )
----- -----

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 ( X )
-----

Amendment No. 56 ( X )
-----

(Check appropriate box or boxes)

SSgA FUNDS
(Exact Name of Registrant as Specified in Charter)

909 A Street
Tacoma, Washington 98402
(Address of Principal Executive Offices)

Registrant's telephone number, including area code: (253) 627-7001

<TABLE>
<CAPTION>
Name and Address of Copies to:
- ------------------- ---------
Agent for Service:
- -----------------
<S> <C>
Karl J. Ege Philip H. Newman, Esq.
Secretary and General Counsel Goodwin, Procter & Hoar
Frank Russell Investment Management Company Exchange Place
909 A Street Boston, Massachusetts 02109
Tacoma, Washington 98402
</TABLE>

Approximate Date of Proposed Public Offering: As soon as
practicable after the effective date of this Registration Statement.

It is proposed that this filing will become effective under Rule 485:
( X ) immediately upon filing pursuant to paragraph (b)
( ) on (_____________) pursuant to paragraph (b)
( ) 60 days after filing pursuant to paragraph (a)
( ) on (date) pursuant to paragraph (a)(1)
(___) 75 days after filing pursuant to paragraph (a)(2)
( ) on (date) pursuant to paragraph (a)(2) of Rule 485

If appropriate, check the following:
( X ) This post-effective amendment designates a new effective date for
a previously filed post-effective amendment.

<PAGE>

SSgA FUNDS

Form N-1A Cross Reference Sheet
<TABLE>
<CAPTION>
PART A ITEM NUMBER AND CAPTION PROSPECTUS CAPTION
<S> <C> <C>
1. Front and Back Cover Pages Front and Back Cover Pages

2. Risk/Return Summary: Investments, Risks and Investment Objectives and Principal Investment
Performance Strategies; Additional Information about the
Fund's Objectives Investment Strategies
and Risks; Principal Risks; Risk and Return

3. Risk/Return Summary: Fee Table Risk and Return

4. Investment Objectives, Principal Strategies, Investment Objectives and Principal Investment Strategies;
and Related Risks Principal Risks;
(a) Investment Objective

(b) Investment Objectives and Principal Investment Strategies;
Portfolio Turnover; Additional Information about the Fund's Objectives,
Investment Strategies and Risks

5. Management's Discussion of Fund Performance Annual Reports to Shareholders

6. Management, Organization and Capital Structure Management of the Fund
(a)(1), (2) Investment Advisor

(a)(3) Not Applicable

(b) Not Applicable

7. Shareholder Information

(a) Pricing of Fund Shares

(b) Purchase of Fund Shares

(d) Dividends and Distributions

(e) Taxes

(f) Not Applicable

8. Distribution Arrangements

(a) Fees and Expenses of the Fund

(b) Fees and Expenses of the Fund

9. Financial Highlights Information Financial Highlights
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
PART B ITEM NUMBER AND CAPTION STATEMENT OF ADDITIONAL INFORMATION CAPTION
<S> <C> <C>
10. Cover Page and Table of Contents Cover Page and Table of Contents

11. Fund History Fund History

12. Description of the Fund and Its Investments Description of the Fund and its Investment Risks
and Risks
(a) Description of the Fund and its Investment Risks

(b) Investment Strategies; Investment Risks

(d) Temporary Defensive Position

(e) Portfolio Turnover

13. Management of the Fund

(a), (b), (c) Board of Trustees and Officers

(d) Compensation

(d) Not Applicable

14. Control Persons and Principal Holders of Controlling and Principal Shareholders
Securities
(a), (b), (c) Controlling and Principal Shareholders

15. Investment Advisory and Other Services Investment Advisory and Other Services

(a) Advisor

(b) Distributor

(c), (d) Distribution and Shareholder Servicing Arrangements

(e) Not Applicable

(f) Not Applicable

(g) Distribution Plan and Shareholder Servicing
Arrangements--Distribution Plan

(h) Administrator; Transfer Agent and Custodian;
Independent Public Accountants

16. Brokerage Allocation and Other Policies Brokerage Practices and Commissions
(a), (b), (c) Brokerage Practices and Commissions
(d) Not Applicable

(e) Brokerage Practices and Commissions

17 Capital Stock and Other Securities Capitalization and Voting
(a) Capitalization and Voting

(b) Not Applicable
<PAGE>

18. Purchase, Redemption and Pricing of Shares
(a) Pricing of Fund Shares

(b) Not Applicable

(d) Not Applicable

19 Taxation of the Fund Taxes

20. Underwriters
(a) Distributor

(b), (c) Not Applicable

21. Calculation of Performance Data Calculation of Performance Data

22. Financial Statements Financial Statements
</TABLE>

Part C

Information required to be included in Part C is set forth under the
appropriate item, so numbered in Part C of this Registration Statement.

<PAGE>
Filed Pursuant to Rule 485(b)
File Nos. 33-19229; 811-5430

SSgA FUNDS
One International Place
Boston, Massachusetts 02110
1-800-997-7327
www.ssgafunds.com

YIELD PLUS FUND

As with all mutual funds, the Securities and Exchange Commission has neither
determined that the information in this prospectus is accurate and complete,
nor approved or disapproved of these securities. Any representation to the
contrary is a criminal offense.

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.

PROSPECTUS DATED DECEMBER 17, 1999

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
-----
<S> <C>
Investment Strategies and Principal Risks ............................................ 3
Investment Objective ................................................................ 3
Principal Investment Strategies ..................................................... 3
Principal Risks of Investing in the Fund ............................................ 3
Risk and Return ..................................................................... 5
Fees and Expenses of the Fund ........................................................ 6
Management of the Fund ............................................................... 7
Additional Information About the Fund's Objectives, Investment Strategies and Risks .. 7
Shareholder Information .............................................................. 9
Purchase of Fund Shares ............................................................. 9
Redemption of Fund Shares ........................................................... 11
Distribution Services and Shareholder Servicing Arrangements ........................ 13
Pricing of Fund Shares .............................................................. 13
Dividends and Distributions ......................................................... 13
Taxes ............................................................................... 14
Financial Highlights ................................................................. 15
Additional Information about the Fund ......................................... Back Cover
</TABLE>

2
<PAGE>

INVESTMENT STRATEGIES
AND PRINCIPAL RISKS

Investment Objective

The fund's 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.

This objective may be changed by the fund's trustees without shareholder
approval.

The fund is not a money market fund and the price of this fund may fluctuate.

Principal Investment Strategies

The fund attempts to meet its objective by investing primarily in high-quality,
dollar denominated investment-grade debt instruments, such as mortgage related
securities, corporate notes, variable and floating rate notes and other
asset-backed securities. Unlike a money market fund, the price of the Yield
Plus Fund will fluctuate because of the fund may invest in securities with
higher levels of risk and different maturities.

The fund management team bases its decisions on the relative attractiveness of
different sectors and issues which can vary depending on the general level of
interest rates, market determined risk premiums, as well as supply/demand
imbalances in the market. Risks associated with these investments are described
in the Principal Risks section.

The Yield Plus Fund has obtained a credit quality rating of AA-f and a fund
volatility rating of S1+ from Standard & Poor's. The fund is rated AA-f based
on the creditworthiness of its assets and sound management and practices. The
AA-f rating indicates the fund's holdings and counterparties provide "very
strong protection" against losses from credit defaults. A fund volatility
rating of S1+ indicates an extremely low sensitivity to changing market
conditions. To obtain such rating the fund may be required to adopt additional
investment restrictions, which may affect the fund's performance.

Principal Risks of Investing in the Fund

Investment in the fund, like any investment, has risks. Fund shares will rise
and fall in value and there is a risk you could lose money by investing in the
fund. There can be no assurance that the fund will achieve its objective. An
investment in the fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.

Risks of Mortgage-Related Securities. The fund may invest in mortgage-backed
securities. Each mortgage pool underlying mortgage-backed securities consists
of mortgage loans evidenced by promissory notes secured by first mortgages or
first deeds of trust or other similar security instruments creating a first
lien on owner occupied and non-owner occupied one-unit to four-unit residential
properties, multifamily (i.e., five or more) properties, agriculture
properties, commercial properties and mixed use properties (the "Mortgaged
Properties"). The Mortgaged Properties may consist of detached individual
dwelling units, multifamily dwelling units, individual condominiums,
townhouses, duplexes, triplexes, fourplexes, row houses, individual units in
planned unit developments and other attached dwelling units. The Mortgaged
Properties may also include residential investment properties and second homes.

o Prepayment Risk. The investment characteristics of adjustable and fixed rate
mortgage-backed securities differ from those of traditional fixed-income
securities. The major differences include the payment of interest and
principal on mortgage-backed securities on a more frequent (usually monthly)
schedule, and the possibility that principal may be prepaid at any time due
to prepayments on the underlying mortgage loans or other assets. These
differences can result in significantly greater price and yield volatility
than is the case with traditional fixed-income securities. As a result, if a
fund purchases mortgage-backed securities at a premium, a faster than
expected prepayment rate will reduce both the market value and the yield to
maturity from those which were anticipated. A prepayment rate that is slower
than expected will have the opposite effect of increasing yield to maturity
and market value. Conversely, if a fund purchases mortgage-backed securities
at a discount, faster than expected prepayments will increase, while slower
than expected prepayments will reduce yield to maturity and market values. To
the extent that a fund invests in mortgage-backed securities, the Advisor may
seek to manage these potential risks by investing in a variety of
mortgage-backed securities and by using certain hedging techniques.

o Call Risk. In addition, the fund is subject to call risk, the risk that an
issuer will exercise its right to pay principal on an obligation held by a
fund (such as a Mortgage-Backed Security) earlier than expected is a call
risk. This may happen when there is a decline in interest rates. Under these
circumstances, a fund may be unable to recoup all of its initial investment
and will also suffer from having to reinvest in lower yielding securities.

o Extension Risk. The fund is also subject to extension risk that an issuer
will exercise its right to pay principal on an obligation held by a fund
(such as a Mortgage-Backed Security) later than expected is an extension
risk. This may happen when there is a rise in interest rates. Under these
circumstances, the value of the obligation will decrease and a fund will also
suffer from the inability to invest in higher yielding securities.

Dollar-Denominated Instruments. Non-US corporations and banks issuing
dollar-denominated instruments in the US are not necessarily subject to the
same regulatory requirements that apply to US corporations and banks, such as
accounting, auditing and recordkeeping standards, the public availability of
information and, for banks, reserve requirements, loan limitations and
examinations. This increases the possibility that a non-US corporation or bank
may become

3
<PAGE>

insolvent or otherwise unable to fulfill its obligations on these instruments.
These instruments are also subject to credit/default risk. There is the risk
that an issuer of fixed-income securities held by a fund (which may have low
credit ratings) may default on its obligation to pay interest and repay
principal.

Variable and Floating Rate Securities. The fund will purchase variable and
floating rate securities to help enable the fund to maintain its desired
portfolio duration. The fund's investments include securities with greater than
one year duration and the reset feature on the variable and/or floating rate
note can help to shorten the duration. Variable and floating rate securities may
be issued or guaranteed by entities such as the: (1) US Government, or an agency
or instrumentality thereof, (2) corporations, (3) financial institutions or (4)
insurance companies. A variable rate security provides for the automatic
establishment of a new interest rate on set dates. The funds may also purchase
floating rate securities. A floating rate security provides for the automatic
adjustment of its interest rate whenever a specified interest rate changes.
Interest rates on these securities are ordinarily tied to, and are a percentage
of, a widely recognized interest rate, such as the yield on 90-day US Treasury
bills or the prime rate of a specified bank. 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.

Variable and floating rate securities are subject to interest rate risk, the
risk that, when interest rates increase, fixed-income securities held by a fund
will decline in value. Long-term fixed-income securities will normally have more
price volatility become of this risk than short-term securities.

They are also subject to credit/default risk, the risk that an issuer of
fixed-income securities held by a Fund (which may have low credit ratings) may
default on its obligation to pay interest and repay principal.

Asset-Backed Securities. Asset-backed securities are securities whose principal
and interest payments are collateralized by pools of assets such as auto loans,
credit card receivables, leases, installment contracts and personal property.
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 over collateralization, 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.

o Prepayment Risk. Like mortgage-backed securities, asset-backed securities are
often subject to more rapid repayment than their stated maturity date would
indicate as a result of the pass-through of prepayments of principal on the
underlying loans. During periods of declining interest rates, prepayment of
loans underlying asset-backed securities can be expected to accelerate. A
fund's ability to maintain positions in such securities will be affected by
reductions in the principal amount of such securities resulting from
prepayments, and its ability to reinvest the returns of principal at
comparable yields is subject to generally prevailing interest rates at that
time. To the extent that a fund invests in asset-backed securities, the
values of such fund's portfolio securities will vary with changes in market
interest rates generally and the differentials in yields among various kinds
of asset-backed securities.

o Other Risks Associated with Asset-Backed Securities. Asset-backed securities
present certain additional risks that are not presented by mortgage-backed
securities because asset-backed securities generally do not have the benefit
of a security interest in collateral that is comparable to mortgage assets.
Credit card receivables are generally unsecured and the debtors on such
receivables are entitled to the protection of a number of state and federal
consumer credit laws, many of which give such debtors the right to set-off
certain amounts owed on the credit cards, thereby reducing the balance due.
Automobile receivables generally are secured, but by automobiles rather than
residential real property. Most issuers of automobile receivables permit the
loan servicers to retain possession of the underlying obligations. If the
servicer were to sell these obligations to another party, there is a risk
that the purchaser would acquire an interest superior to that of the holders
of the asset-backed securities. In addition, because of the large number of
vehicles involved in a typical issuance and technical requirements under
state laws, the trustee for the holders of the automobile receivables may not
have a proper security interest in the underlying automobiles. Therefore,
there is the possibility that, in some cases, recoveries on repossessed
collateral may not be available to support payments on these securities.

Fixed Income Securities. Prices of fixed-income securities rise and fall in
response to interest rate changes. Generally, when interest rates rise, prices
of fixed-income securities fall. The longer the duration of the security, the
more sensitive the security is to this risk. A 1% increase in interest rates
would reduce the value of a $100 note by approximately one dollar if it had a
one year duration, but would reduce its value by approximately fifteen dollars
if it had a 15 year duration. There is also a risk that one or more of the
securities will be downgraded in credit rating or go into default. Lower-rated
bonds generally have higher credit risks.

4
<PAGE>

they are working to avoid such problems and expect all systems to be adapted in
time for the event. Because it is the obligation of those service providers to
ensure the proper functioning of their computer systems, the SSgA Funds do not
expect to incur any material expense in connection with year 2000 preparations.

Risk and Return
The following bar chart illustrates the risks of investing in the fund by
showing changes in the fund's performance from year to year over the life of
the fund. How the fund has performed in the past is not necessarily an
indication of how the fund will perform in the future.

[START BAR CHART]

Annual Total Returns -- Yield Plus

[END BAR CHART]

Best Quarter--March 31, 1995: 1.78%
Worst Quarter--September 30, 1993: 0.71%
Current Fiscal Quarter--August 31, 1999: 0.88%

The following table further illustrates the risks of investing in the fund by
showing how the fund's average annual returns for 1 and 5 years and since the
fund's inception compare to the returns of a broad-based securities market
index.

Average Annual Total Returns
For the Periods Ended December 31, 1998:

<TABLE>
<CAPTION>
1 Year 5 Years Inception
---------- --------- ----------
<S> <C> <C> <C>
Yield Plus Fund 4.83% 5.30% 4.96%
LIBOR 90-day Index 5.52 5.53 5.03
</TABLE>

30-Day Yields
For the Period Ended December 31, 1998:

<TABLE>
<CAPTION>
Current
----------
<S> <C>
Yield Plus Fund 5.28%
</TABLE>

Current yield information for the fund is available toll free by calling
1-800-747-7327 or by visiting our website at www.ssgafunds.com.

5
<PAGE>

FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.

<TABLE>
<S> <C>
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends or Other Distributions None
Redemption Fee None
Exchange Fee None
Maximum Account Fee None

Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
Management Fee .25%
Distribution and Service (12b-1) Fees(1) .09
Other Expenses .07
-----
Total Annual Fund Operating Expenses .41%
=====
</TABLE>

- -----------
(1) The ratio includes .04% for 12b-1 Distribution and .05% for 12b-1
Shareholder Servicing Fees.

Example
This example is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in the fund for the time
periods indicated, and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return
each year and that the fund's operating expenses remain the same. Although
your actual costs may be higher or lower, based on these assumptions, your
costs would be:

<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
- -------- --------- --------- ---------
<S> <C> <C> <C>
$ 42 $132 $230 $518
===== ==== ==== ====
</TABLE>

Investors purchasing fund shares through a financial intermediary, such as a
bank or an investment advisor, may also be required to pay additional fees for
services provided by the intermediary. Such investors should contact the
intermediary for information concerning what additional fees, if any, will be
charged.

Long-term shareholders of the fund may pay more in Rule 12b-1 fees than the
economic equivalent of the maximum front-end sales charge permitted by the
National Association of Securities Dealers, Inc.

6
<PAGE>

MANAGEMENT OF THE FUND

Investment Advisor. State Street Bank and Trust Company (State Street or
Advisor), 225 Franklin Street, Boston, Massachusetts 02110, serves as the
investment advisor for the fund and directs the investment of the fund in
accordance with the fund's investment objective, policies and restrictions.

For these services, the fund pays State Street an annual management fee,
calculated daily and paid monthly, of 0.25% of the average daily net asset
value of the 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 who assist in managing the fund.

ADDITIONAL INFORMATION ABOUT
THE FUND'S OBJECTIVES, INVESTMENT
STRATEGIES AND RISKS

The investment objective of the fund as stated above may be changed by the
fund's trustees without shareholder approval.

The investment policies described below reflect the fund's current practices.
In addition to the principal risks explained above, other risks are explained
in some of the descriptions of the investment policies below:

The fund is subject to a variety of risks associated with its investment in
fixed income securities:

o Credit/Default Risk--The risk that an issuer of fixed-income securities held
by the fund (which may have low credit ratings) may default on its obligation
to pay interest and repay principal.

o Industry Concentration Risk--The risk that the fund concentrates its
investments in specific industry sectors that have historically experienced
substantial price volatility. The fund is subject to greater risk of loss as
a result of adverse economic, business or other developments than if its
investments were diversified across different industry sectors. Securities of
issuers held by the fund may lack sufficient market liquidity to enable a
fund to sell the securities at an advantageous time or without a substantial
drop in price.

o Interest Rate Risk--The risk that when interest rates increase, securities
held by a fund will decline in value. Long-term fixed-income securities will
normally have more price volatility because of this risk than short-term
securities.

o Liquidity Risk--The risk that a fund will not be able to pay redemption
proceeds within the time period stated in this Prospectus because of unusual
market conditions, an unusually high volume of redemption requests, or other
reasons.

o Market Risk--The risk that the value of the securities in which a fund
invests may go up or down in response to the prospects of individual
companies and/or general economic conditions. Price changes may be temporary
or last for extended periods.

o Management Risk--The risk that a strategy used by the Investment Adviser may
fail to produce the intended results.

o Derivatives Risk--The risk that loss may result from a fund's investments in
options, futures, swaps, structured securities and other derivative
instruments.

Investment-Grade Securities. 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 nationally recognized statistical rating
organization; 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.

Portfolio Duration. 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

7
<PAGE>

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.

Mortgage-Related Securities. The fund 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"), Federal National Mortgage
Association ("FNMA") Guaranteed Mortgage Certificates ("Fannie Maes"), and
Commercial Mortgage-Backed Securities ("CMBS"). 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 Mae is a wholly-owned corporate instrumentality of the United States.
Ginnie Mae is authorized to guarantee the timely payment of the principal of
and interest on certificates that are based on and backed by a pool of mortgage
loans insured by the Federal Housing Administration ("FHA Loans"), or
guaranteed by the Veterans Administration ("VA Loans"), or by pools of other
eligible mortgage loans. In order to meet its obligations under any guaranty,
Ginnie Mae is authorized to borrow from the United States Treasury in an
unlimited amount.

Fannie Mae is a stockholder-owned corporation chartered under an act of the
United States Congress. Each Fannie Mae Certificate is issued and guaranteed by
Fannie Mae and represents an undivided interest in a pool of mortgage loans (a
"Pool") formed by Fannie Mae.

Fannie Mae has certain contractual responsibilities. The obligations of Fannie
Mae under its guaranty of the Fannie Mae Certificates are obligations solely of
Fannie Mae.

Freddie Mac is a publicly held U.S. Government sponsored enterprise. The
principal activity of Freddie Mac currently is the purchase of first lien,
conventional, residential mortgage loans and participation interests in such
mortgage loans and their resale in the form of mortgage securities, primarily
Freddie Mac Certificates.

Freddie Mac guarantees to each registered holder of a Freddie Mac Certificate
the timely payment of interest at the rate provided for by such Freddie Mac
Certificate (whether or not received on the underlying loans). Freddie Mac also
guarantees to each registered Certificate holder ultimate collection of all
principal of the related mortgage loans, without any offset or deduction, but
does not, generally, guarantee the timely payment of scheduled principal. The
obligations of Freddie Mac under its guaranty of Freddie Mac Certificates are
obligations solely of Freddie Mac.

US Government Securities. US Government securities include US Treasury bills,
notes and bonds and other obligations issued or guaranteed as to interest and
principal by the US Government, 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.

Futures Contracts and Options on Futures. For hedging purposes, including
protecting the price or interest rate of securities that the Fund intends to
buy, the Fund may enter into futures contracts that relate to securities in
which they may directly invest and indices comprised of such securities and may
purchase and write call and put options on such contracts.

Options on futures contracts give the purchaser the right to assume a position
at a specified price in a futures contract at any time before expiration of the
option contract. When trading futures contracts, the Fund will not commit more
than 5% of the market value of its total assets to initial margin deposits on
futures and premiums paid for options on futures.

There are certain investment risks in using derivatives such as futures
contracts and options on futures. Loss can result from a lack of correlation
between changes in the value of derivative instruments and the portfolio assets
(if any) being hedged, the potential illiquidity of the markets for derivative
instruments, or risks arising from margin requirements and related leverage
factors associated with such transactions. The use of these management
techniques also involves the risk of loss if the Advisor is incorrect in its
expectation of fluctuations in securities prices, interest rates or currency
prices.

Eurodollar Certificates of Deposit (ECDs), Eurodollar Time Deposits (ETDs) and
Yankee Certificates of Deposit (YCDs). ECDs are US dollar denominated
certificates of

8
<PAGE>

deposit issued by a bank outside of the United States. 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. 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. Foreign laws and
accounting standards typically are not as strict as they are in the US and
therefore there may be fewer restrictions regarding loan limitations, less
frequent examinations and less stringent requirements regarding reserve
accounting, auditing, recordkeeping and public reporting requirements.

Section 4(2) Commercial Paper. 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 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. As a result it
suffers from a liquidity risk, the risk that the securities may be difficult to
value because of the absence of an active market and may be disposed of only
after considerable expense and delay. Section 4(2) paper will not be subject to
the fund's 15% limitation on illiquid securities set forth below where the
Board of Trustees of the Investment Company (pursuant to guidelines adopted by
the Board) determines that a liquid trading market exists.

Repurchase Agreements. The fund may enter into repurchase agreements with banks
and other financial institutions, such as broker-dealers. In substance, a
repurchase agreement is a loan for which the fund receives securities as
collateral. Under a repurchase agreement, a fund purchases securities from a
financial institution that agrees to repurchase the securities at the fund's
original purchase price plus interest within a specified time (normally one
business day). The fund will limit repurchase transactions to those member
banks of the Federal Reserve System and broker-dealers whose creditworthiness
Advisor considers satisfactory. If the other party or "seller" defaults, a fund
might suffer a loss to the extent that the proceeds from the sale of the
underlying securities and other collateral held by the fund are less than the
repurchase price and the fund's cost associated with delay and enforcement of
the repurchase agreement. In addition, in the event of bankruptcy of the
seller, a fund could suffer additional losses if a court determines that the
fund's interest in the collateral is not enforceable.

In evaluating whether to enter into a repurchase agreement, the Investment
Adviser will carefully consider the creditworthiness of the seller.
Distributions of the income from repurchase agreements will be taxable to a
Fund's shareholders.

Portfolio Turnover. Because the fund will actively trade to benefit from
short-term yield disparities among different issues of fixed-income securities,
or otherwise to increase its income, the fund may be subject to a greater
degree of portfolio turnover than might be expected from a fund which invests
substantially all of its assets on a long-term basis. The portfolio turnover
rate cannot be predicted, but it is anticipated that the fund's annual turnover
rate generally fall within the range of 100-300% (excluding turnover of
securities having a maturity of one year or less). A high turnover rate (over
100%) will: (1) increase transaction expenses which will adversely affect a
fund's performance; and (2) result in increased brokerage commissions and other
transaction costs, and the possibility of realized capital gains.

SHAREHOLDER INFORMATION

Purchase of Fund Shares
Distribution and Eligible Investors. Shares of the funds are offered without a
sales commission by Russell Fund Distributors, Inc. (the Distributor), to
institutional and retail investors which invest for their own account or in a
fiduciary or agency capacity.

Minimum Initial and Subsequent Investments and Account Balance. The fund
requires a minimum initial investment of $1,000, with the exception of IRA
accounts, for which the minimum initial investment is $250. Subsequent
investments must be at least $100. An investment in the account (other than IRA
accounts) may be subject to redemption at the fund's discretion if the account
balance is less than $1,000 as a result of shareholder redemptions. The
Transfer Agent will give shareholders 60 days' notice that the account will be
closed unless an investment is made to increase the account balance to the
$1,000 minimum. Failure to bring the account balance to $1,000 may result in
the Transfer Agent closing the account at the net asset value ("NAV") next
determined on the day the account is closed and mailing the proceeds to the
shareholder's address shown on the Transfer Agent's records. The fund reserves
the right to reject any purchase order. Investors purchasing fund assets
through a pension or other participation plan should contact their plan
administrator for further information on purchases.

Purchase Dates and Times. Fund shares may be purchased on any business day
without a sales commission. A business day is one on which the New York Stock
Exchange is open for regular trading. All purchases must be made in US dollars.
Purchase orders in good form (described below) and payments for fund shares by
check or by wire transfer must be received by the Transfer Agent prior to the
close of the regular trading session of the New York Stock Exchange, which is
ordinarily 4 p.m. Eastern time (the "Pricing Time"), to be effective on the date
received. If an order or payment is received after the Pricing Time, the order
will be effective on

9
<PAGE>

the next business day. Orders placed through a servicing agent or broker-dealer
that has a selling agreement with the Distributor or the SSgA Funds must be
received by the servicing agent or broker-dealer prior to the Pricing Time. In
addition, purchase orders received and accepted (1) prior to 12 noon Eastern
time will purchase shares based on that day's closing net asset value and earn
dividends on the date of the 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
dividends determined on the next business day.

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 Distributor or 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
1-800-647-7327, or write: SSgA Funds, P.O. Box 8317, Boston, MA 02266-8317. You
may also access this information online at www.ssgafunds.com.

To allow the Advisor to manage the fund most effectively, investors are
strongly urged to initiate all trades (investments, exchanges or redemptions of
shares) as early in the day as possible and to notify the Transfer Agent at
least one day in advance of transactions in excess of $25 million.

Mail. For new accounts, please mail the completed Application and check.
Additional investments should also be made by check. You must include the fund
name and account number on your check, 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 State Street Bank. If using a servicing
agent or broker-dealer, please verify with them the proper address and
instructions required before writing and mailing your check. All purchase
requests should be mailed to one of the following addresses:

<TABLE>
<CAPTION>
Regular Mail: Registered, Express or Certified Mail:
- ----------------------- ---------------------------------------
<S> <C>
SSgA Funds SSgA Funds
P.O. Box 8317 2 Heritage Drive
Boston, MA 02266-8317 North Quincy, MA 02171
</TABLE>

All purchases made by check should be in US dollars from a US bank. Third party
checks and checks drawn on credit card accounts will not be accepted.

Telephone Exchange Privilege. You may exchange a minimum of $100 of your shares
for shares of any other SSgA Fund, as long as the minimum investment
requirement is met. The fund offers this service without charge. To use this
option, contact the Customer Service Department at 1-800-647-7327. 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 you purchased shares of the
fund by check, the shares must have been present in your 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. Please contact your tax advisor.

Management believes that market timing strategies may be disruptive to the
fund. 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 the 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. You may make initial or subsequent investments by wiring
federal funds to State Street, as Transfer Agent, by:

1. Telephoning the Customer Service Department at 1-800-647-7327 between 8 a.m.
and 4 p.m. Eastern time, and stating: (a) your 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 exact 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)

If all wires, checks and transfers are not identified properly as instructed
above, the Transfer Agent may delay, reject and/or incorrectly apply the
settlement of your 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.

Purchase requests received via telephone prior to 12 noon Eastern time will
receive the net asset value next determined and be entitled to that day's
dividend provided the wire is received by State Street Bank by 4 p.m. Eastern
time. Purchase requests received after 12 noon Eastern time will receive the net
asset value next determined and begin earning dividends the following business
day.

10
<PAGE>

Automatic Investment Plan. Once the initial investment has been made, you may
make subsequent investments of $100 or more monthly, quarterly or annually by
direct deposit through Automatic Clearing House (ACH) by debiting your bank
checking account. Please complete the appropriate section of the Application
and attach a voided personal check to correctly code your account with the bank
instructions. Once this option has been established, you may call the Customer
Service Department at 1-800-647-7327 prior to 3 p.m. Eastern time to make
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 fund offers the option of having $100 or more
exchanged within the SSgA Funds for accounts with identical registrations. You
can choose the date, the frequency (monthly, quarterly or annually) and the
amount. Exchanges may be done among the SSgA Funds once the minimum initial
investment per fund has been satisfied.

Third Party Transactions. If you are purchasing fund shares through a program
of services offered by a financial intermediary, such as a bank, broker-dealer,
investment advisor or others, you may be required by the intermediary to pay
additional fees. You should contact the intermediary for information concerning
what additional fees, if any, may be charged.

In-Kind Exchange of Securities. State Street may, at its discretion, permit you
to purchase shares through the exchange of other securities you own. Any
securities exchanged must meet the following criteria:

1. The investment objective, policies and limitations must match that of the
fund;

2. They must have a readily ascertainable market value;

3. They must be liquid;

4. They must not be subject to restrictions on resale; and

5. The market value of any securities exchanged, plus any cash, must be at
least $25 million; State Street reserves the right to make exceptions to
this minimum at its discretion.

Shares purchased in exchange for securities generally may not be redeemed or
exchanged until the transfer has settled--within 3 business days following the
date of the exchange.

The basis of the exchange will depend upon the relative net asset value of the
shares purchased and securities exchanged. Securities accepted by the fund will
be valued in the same manner as the fund values its assets. Any interest earned
on the securities following their delivery to the Transfer Agent and prior to
the exchange will be considered in valuing the securities. All interest,
dividends subscription or other rights attached to the securities become the
property of the fund, along with the securities.

Redemption of Fund Shares

Fund shares may be redeemed on any business day at the net asset value next
determined after the receipt of a redemption request 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. A dividend will be paid according to
the established dividend payment schedule 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. 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.

Redemption requests must be received prior to 4 p.m. Eastern time in order to
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, pursuant
to a duly executed shareholder servicing agreement with the SSgA Funds or the
Distributor.

Cash Sweep Program. Money managers of master trust clients may participate in a
cash sweep program to automatically invest excess cash in the fund. 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.

11
<PAGE>

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 your address of record, if the address has not been changed
within 60 days of the redemption request. To the extent the Transfer Agent fails
to use reasonable procedures as a basis for its belief, it and/or its service
contractors may be liable for telephone instructions that prove to be fraudulent
or unauthorized. The fund, the Distributor or the Transfer Agent will be
responsible for the authenticity of terminal access instructions only if it acts
with willful misfeasance, bad faith or gross negligence.

By Wire. Proceeds exceeding $1,000 may be sent via wire transfer to the
investor's pre-designated bank. Proceeds may be sent, depending on the fund, on
the same or the next day. Although the fund does not charge a fee for this
feature, the investor's bank may charge a fee for receiving the wire. Investors
are advised to check with their bank before requesting this feature. Requests
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 will not be eligible for that day's interest.

Systematic Withdrawal Plan by Check. If your account balance is over $10,000,
you may request periodic cash withdrawals automatically be paid to you or any
person you designate. 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. You may make automatic withdrawals of $100
or more by completing the appropriate sections of the Application and attaching
a voided check to code your account correctly with the bank information. You
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 1-800-647-7327, prior to 3 p.m. Eastern time, requesting
the withdrawal. Withdrawals by telephone do not require a minimum account
balance provided the fund's minimum investment is maintained.

Please note that proceeds from ACH withdrawals will be transmitted to the
investor's bank two days after the withdrawal.

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. All proceeds by check will normally be sent the
following business day. A check is not available for telephone redemption
requests in excess of $50,000. Requests must be in writing.

During periods of drastic economic or market changes, shareholders using this
method may encounter delays.

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. Your address of record has changed within the past 60 days;

2. You are redeeming more than $50,000 worth of shares; or

3. You are 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.

12
<PAGE>

<TABLE>
<CAPTION>
Seller Requirements for Written Requests
- ------------------------- -----------------------------------
<S> <C>
Owner of individual, o Letter of instruction, signed
joint, sole proprietor- by all persons authorized to
ship, UGMA/UTMA sign for the account stating
(custodial accounts for general titles/capacity, exactly
minors) or general as the account is registered;
partner accounts and
o Signature guarantee, if
applicable (see above).
Owners of corporate or o Letter of instruction signed
association accounts by authorized 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 o Letter of instruction, signed
trust accounts by all trustees;
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 o Letter of instruction signed
shareholders whose by surviving tenant(s);
co-tenants are o Certified copy of the death
deceased certificate; and
o Signature guarantee, if
applicable (see above).
</TABLE>

Please contact the Customer Service Department at 1-800-647-7327 for questions
and further instructions.

The fund may pay any portion of the redemption amount in excess of $25 million
by a distribution in kind of readily marketable securities from the portfolio
of the fund in lieu of cash. You will incur brokerage charges and may incur
other fees on the sale of these portfolio securities. In addition, you will be
subject to the market risks associated with such securities until such time as
you choose to dispose of the security. 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.

Distribution Services and Shareholder
Servicing Arrangements

The fund has adopted a distribution plan pursuant to Rule 12b-1 (the Plan)
under the Investment Company Act of 1940. The Plan allows the fund to pay
distribution and other fees for the sale and distribution of fund shares and
for services provided to shareholders. Because these fees are paid out of fund
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
Payments to the Distributor, as well as payments from the fund to service
organizations providing shareholder services to the fund, are not permitted by
the Plan to exceed .25% of a fund's average net asset value per year. Any
payments that are required to be made to the Distributor or service
organization that cannot be made because of the .25% limitation may be carried
forward and paid in the following two fiscal years so long as the Plan is in
effect.

Service organizations providing shareholder services to the fund will be
responsible for prompt transmission of purchase and redemption orders and may
charge you a fee for their services.

Pricing of Fund Shares
The fund determines the price per share once each business day at 4:00 p.m.
Eastern time, or the close of the New York Stock Exchange, if earlier. The
price 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 fund values portfolio securities at market value. The fund values
securities for which market quotations are not readily available at fair value,
as determined in good faith pursuant to procedures established by the Board of
Trustees.

Debt obligation securities maturing within 60 days of the valuation date are
valued at amortized cost unless the Board determines that the amortized cost
method does not represent market value.

Dividends and Distributions
The Board of Trustees intends to declare dividends on shares of the fund from
net investment income daily and have them payable as of the last business day
of each month. Distributions will be made at least annually from net short- and
long-term capital gains, if any. In most instances, distributions will be
declared and paid in mid-October with additional distributions declared and
paid in December, if required, for the Fund to avoid imposition of a 4% federal
excise tax on undistributed capital gains. The 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.

13
<PAGE>

will be changed automatically. Future dividends and other distributions will be
reinvested in additional shares of the relevant fund until you notify the SSgA
Funds in writing of the correct address. You must also request 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 will 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.

Any dividend or capital gain distribution paid by the fund shortly after a
purchase of shares will reduce the per share net asset value of the fund by the
amount of the dividend or distribution. In effect, the payment will represent a
return of capital to the shareholder. However, you will be subject to taxes
with respect to such dividend or distribution.

Distribution Option. You 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 you do not
indicate a choice on the Application, this option will be automatically
assigned.

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.

If the cash option is selected and you chose a wire or direct deposit (ACH),
distribution will be sent to a pre-designated bank by the payable date. If you
chose cash option and requested a check, the check will be mailed to you.

Taxes
Dividends from net investment income and distributions of net short-term capital
gains are taxable to you 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 you have
held the shares and whether you were paid in cash or additional shares.

The fund's distributions, whether received as cash or reinvested in additional
shares of the fund, may be subject to federal income taxes. Dividends and
distributions may also be subject to state or local taxes. Depending on the tax
rules in the state in which you live, 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.

Selling (including an exchange of) your fund shares 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 long-term capital gain dividends received with
respect to such shares.

You will be notified after each calendar year of the amount of income dividends
and net capital gains distributed. You 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 shareholders invested in any SSgA Fund should consult with their tax
advisors as to if and how the federal income tax and its withholding
requirements applies to them.

The tax discussion in this prospectus is only a summary of certain federal
income tax issues generally affecting the fund and its shareholders.
Circumstances among investors may vary, so you are encouraged to discuss
investment in the fund with your tax advisor.

14
<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand a fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an
investment in a fund (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers
LLP, whose report, along with the fund's financial statements, are included in
the annual report, which is available upon request by calling the Distributor
at 1-800-647-7327.

<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
---------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.97 $10.01 $10.00 $10.00 $ 9.99
------- ------- ------- ------- ---------
INCOME FROM OPERATIONS:
Net investment income(1) .54 .57 .54 .56 .56
Net realized and unrealized gain (loss) (.07) (.04) .01 -- .02
------- ------- ------- ------- ---------
Total From Operations .47 .53 .55 .56 .58
------- ------- ------- ------- ---------
DISTRIBUTIONS:
Dividends from net investment income (.54) (.57) (.54) (.56) (.56)
Dividends from net realized gain on investments -- -- -- -- (.01)
------- ------- ------- ------- ---------
Total Distributions (.54) (.57) (.54) (.56) (.57)
------- ------- ------- ------- ---------
NET ASSET VALUE, END OF PERIOD $9.90 $ 9.97 $10.01 $10.00 $0.00
======= ======= ======= ======= =========
TOTAL RETURN (%) 4.67 5.40 5.67 5.73 6.01
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ($000 omitted) 525,494 672,465 840,055 933,485 1,447,097
Ratios to average net assets (%):
Operating expenses .41 .41 .38 .36 .38
Net investment income 5.29 5.66 5.42 5.59 5.64
Portfolio turnover rate (%) 167.12 249.10 92.38 97.05 199.69
</TABLE>

- -----------

(1) For the period subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.

15
<PAGE>

(This page has been left blank intentionally.)
<PAGE>

SSgA FUNDS

SSgA Money Market Fund

SSgA US Government Money Market Fund

SSgA Tax Free Money Market Fund

SSgA Yield Plus Fund

SSgA Intermediate Fund

SSgA Bond Market Fund

SSgA High Yield Bond Fund

SSgA Growth and Income Fund

SSgA S&P 500 Index Fund

SSgA Matrix Equity Fund

SSgA Small Cap Fund
(Closed to new investors as of August 31, 1998)

SSgA Special Equity Fund

SSgA Tuckerman Active REIT Fund

SSgA Aggressive Equity Fund

SSgA IAM SHARES Fund

SSgA Emerging Markets Fund

SSgA Active International Fund

SSgA International Growth Opportunities Fund

SSgA Life Solutions Growth Fund

SSgA Life Solutions Balanced Fund

SSgA Life Solutions Income and Growth Fund

<PAGE>

ADDITIONAL INFORMATION ABOUT THE FUND
A Statement of Additional Information includes additional information about the
fund. The Statement of Additional Information is incorporated into this
Prospectus by reference.

Additional information about the fund's investments is available in the fund's
annual and semi-annual reports to shareholders. In the fund's annual report,
you will find a discussion of the market conditions and investment strategies
that significantly affected the fund's performance during its last fiscal year.

The Statement of Additional Information and the fund's annual and semi-annual
reports are available, without charge, upon request. To request a Statement of
Additional Information, the fund's annual or semi-annual report, other
information about the fund or to make any shareholder inquiry, please contact
the fund at:

Russell Fund Distributors, Inc.
One International Place
Boston, Massachusetts 02110
1-800-997-7327

You also can review and copy information about the fund, including the
Statement of Additional Information, at the Securities and Exchange
Commission's Public Reference Room in Washington, D.C. You can receive
information on the operation of the Public Reference Room by calling
1-800-SEC-0330. Copies also may be obtained, upon payment of a duplicating fee,
by writing the Securities and Exchange Commission's Public Reference Section,
Washington, D.C. 20549-6009. The SEC also maintains a website (www.sec.gov)
that contains the Statement of Additional Information and other information
about the fund. You may also access the SSgA Funds' website at
www.ssgafunds.com.

SSgA Funds' Investment Company Act File No. 811-5430.

<PAGE>
Filed Pursuant to Rule 485(b)
File Nos. 33-19229; 811-5430

SSgA FUNDS
One International Place

Boston, Massachusetts 02110
1-800-997-7327
www.ssgafunds.com

EMERGING MARKETS FUND

The Emerging Markets Fund seeks to provide maximum total return, primarily
through capital appreciation, by investing primarily in securities of foreign
issuers.

PROSPECTUS DATED DECEMBER 17, 1999

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
-----
<S> <C>
Investment Strategies and Principal Risks ............................................ 3
Investment Objective ................................................................ 3
Principal Investment Strategies ..................................................... 3
Principal Risks of Investing in the Fund ............................................ 3
Exchange Rate Risk .................................................................. 3
Risk and Return ..................................................................... 4
Fees and Expenses of the Fund ........................................................ 5
Management of the Fund ............................................................... 6
Additional Information about the Fund's Objectives, Investment Strategies and Risks .. 6
Shareholder Information .............................................................. 7
Purchase of Fund Shares ............................................................. 7
Redemption of Fund Shares ........................................................... 8
Distribution Services and Shareholder Servicing Arrangements ........................ 10
Pricing of Fund Shares .............................................................. 10
Dividends and Distributions ......................................................... 10
Taxes ............................................................................... 11
Financial Highlights ................................................................. 13
Additional Information about the Fund ........................................ Back Cover
</TABLE>

2
<PAGE>

INVESTMENT STRATEGIES
AND PRINCIPAL RISKS

Investment Objective

The fund's investment objective is to provide maximum total return, primarily
through capital appreciation, by investing primarily in securities of foreign
issuers.

This objective may be changed only with the approval of a majority of the
fund's shareholders as defined in the Investment Company Act of 1940 (the 1940
Act).

Principal Investment Strategies

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 management team 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. Nearly all of the fund's assets will be invested in equity, and
equity-like, securities concentrated in emerging market countries (i.e.,
typically over 85% but no less than 65%). Currently, the 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 fund's management team will
evaluate the countries' economic and political climates with prospects for
sustained macro and micro economic growth. The fund's management team will 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. Risks of emerging markets are
discussed in the Principal Risks section.

Through the use of proprietary evaluation models, the fund invests primarily in
the International Finance Corporation Investable (IFCI) Index countries. As the
IFCI Index introduces new emerging market countries, the fund will expand to
gain exposure to new emerging countries.

Principal Risks of Investing in the Fund

Emerging Markets. Investments in emerging or developing markets involve
exposure to economic structures that are generally less diverse and mature, and
to political systems which have less stability than those of more developed
countries. Emerging market securities are subject to currency transfer
restrictions and may experience delays and disruptions in securities settlement
procedures.

International Securities. A fund's return and net asset value may be
significantly affected by political or economic conditions and regulatory
requirements in a particular country. Foreign markets, economies and political
systems may be less stable than US markets, and changes in exchange rates of
foreign currencies can affect the value of a fund's foreign assets. Foreign
laws and accounting standards typically are not as strict as they are in the US
and there may be less public information available about foreign companies.

Exchange Rate Risk. 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.

Equity Securities. The value of equity securities will rise and fall in
response to the activities of the company that issued the stock, general market
conditions, and/or economic conditions.

Year 2000. The SSgA Funds' operations depend on the smooth functioning of its
service providers' computer systems. The SSgA Funds and its shareholders could
be adversely affected if those computer systems do not properly process and
calculate date-related information on or after January 1, 2000. Many computer
software systems in use today cannot distinguish between the year 2000 and the
year 1900. Although year 2000 related computer problems could have a negative
effect on the SSgA Funds and its shareholders, the service providers have
advised the SSgA Funds that they are working to avoid such problems and expect
all systems to be adapted in time for the event. Because it is the obligation
of those service providers to ensure the proper functioning of their computer
systems, the SSgA Funds do not expect to incur any material expense in
connection with year 2000 preparations.

3
<PAGE>

[START BAR CHART]

Annual Total Returns -- Emerging Markets

[END BAR CHART]

Best Quarter--September 30, 1994: 29.65%

Worst Quarter--December 31, 1997: (21.41%)
Current Fiscal Quarter--August 31, 1999: 10.09%

The following table further illustrates the risks of investing in the fund by
showing how the fund's average annual returns for 1 year and since the fund's
inception compare to the returns of a broad-based securities market index.

Average Annual Total Returns
For the Periods Ended December 31, 1998:

<TABLE>
<CAPTION>
1 Year Inception
------------- ------------
<S> <C> <C>
Emerging Markets Fund (15.94%) ( 2.61%)
IFC Investable Composite Index (22.02) (10.11)
</TABLE>

4
<PAGE>

FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.

Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
Management Fee(1) .75%
Distribution and Service (12b-1) Fees(1,2) .12
Other Expenses(1) .47
-----
Gross Expenses 1.34
-----
Less Contractual Fee Reimbursement (.09)
-----
Total Net Annual Fund Operating Expenses(1) 1.25%
=====
</TABLE>

- -----------
(1) The Advisor has contractually agreed to reimburse the Emerging Markets Fund
for all expenses in excess of 1.25% of average daily net assets on an annual
basis until December 31, 2002. The annual management fee after the
reimbursement is .66%. The total annual expenses shown above have been
restated to reflect the reimbursement.

(2) The ratio includes .09% for 12b-1 Distribution and .03% for 12b-1
Shareholder Servicing Fees.

Example
This example is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds.

<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
- -------- --------- --------- ---------
<S> <C> <C> <C>
$ 127 $397 $734 $1,613
====== ==== ==== ======
</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.

5
<PAGE>

MANAGEMENT OF THE FUND

For these services, the fund pays State Street an annual management fee,
calculated daily and paid monthly, of 0.66% (after fee reimbursement) of the
average daily net asset value of the fund.

Mr. Brad Aham, CFA, Principal, is the portfolio manager primarily responsible
for investment decisions regarding the fund. He joined the firm in 1993. Mr.
Aham has worked with the Active Emerging Markets product since its inception,
and he manages several institutional funds. In addition to managing portfolios,
he performs quantitative and qualitative research for SSgA. There are three
other portfolio managers who assist in managing the fund.

ADDITIONAL INFORMATION ABOUT THE FUND'S OBJECTIVES, INVESTMENT STRATEGIES AND
RISKS

The investment objective of the fund as stated above may only be changed with
shareholder approval. The investment policies described below reflect the
fund's current practices. In addition to the principal risks explained above,
other risks are explained in some of the descriptions of the investment
policies below:

Equity Securities. 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. These foreign government pooled vehicles are also
subject to risks. These securities could be more expensive because of
additional management fees charged by the underlying pools. In addition, such
pools may have restrictions on redemptions, limiting the liquidity of the
investment.

Foreign Government Securities. Foreign government securities which the fund 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. The fund will not invest a material percentage of
its assets in sovereign debt. Since these are obligations of sovereign
governments, they are particularly subject to a risk of default from political
instability.

Equity Swaps. The fund intends to use equity swaps to preserve a return or
spread on an investment and to gain equity exposure to a market at a lower
price. 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 allow the funds to enter into swap agreements only with
counterparties that would be eligible for consideration as repurchase agreement
counterparties under the SSgA Funds' repurchase agreement guidelines. Swap
agreements bear the risk that the portfolios will not be able to meet their
obligation to the counterparty. This risk will be mitigated by investing the
portfolios in the specific asset for which it is obligated to pay a return.

Futures Contracts and Options on Futures. To equitize cash the fund may enter
into futures contracts that relate to securities in which they may directly
invest and indices comprised of such securities and may purchase and write call
and put options on such contracts. The fund may also purchase futures and
options if cheaper than the underlying stocks.

A financial futures contract is a contract to buy or sell a specified quantity
of financial instruments such as US Treasury bills, notes and bonds, commercial
paper and bank certificates of deposit or the cash value of a financial
instrument index at a specified future date at a price agreed upon when the
contract is made. A stock index futures contract is a contract to buy or sell
specified units of a stock index at a specified future date at a price agreed
upon when the contract is made. The value of a unit is based on the current
value of the contract index. Under such contracts no delivery of the actual
stocks making up the index takes place. Rather, upon expiration of the
contract, settlement is made by exchanging cash in an amount equal to the
difference between the contract

6
<PAGE>

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 from 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 the Custodian
for the benefit of the futures broker. The initial margin serves as a "good
faith" deposit that the fund will honor their futures commitments. Subsequent
payments (called "variation margin") to and from the broker are made on a daily
basis as the price of the underlying investment fluctuates.

Risk of Derivatives. There are certain investment risks in using derivatives
such as futures contracts, options on futures and equity swaps as a hedging
technique. Loss can result from a lack of correlation between changes in the
value of derivative instruments and the portfolio assets (if any) being hedged,
the potential illiquidity of the markets for derivative instruments, or risks
arising from margin requirements and related leverage factors associated with
such transactions. The use of these management techniques also involves the
risk of loss if the Adviser is incorrect in its expectation of fluctuations in
securities prices, interest rates or currency prices.

SHAREHOLDER INFORMATION

Minimum Initial and Subsequent Investments and Account Balance. The fund
requires a minimum initial investment of $1,000, with the exception of IRA
accounts, for which the minimum initial investment is $250. Subsequent
investments must be at least $100. An investment in the account (other than IRA
accounts) may be subject to redemption at the fund's discretion if the account
balance is less than $1,000 as a result of shareholder redemptions. The
Transfer Agent will give shareholders 60 days' notice that the account will be
closed unless an investment is made to increase the account balance to the
$1,000 minimum. Failure to bring the account balance to $1,000 may result in
the Transfer Agent closing the account at the net asset value (NAV) next
determined on the day the account is closed and mailing the proceeds to the
shareholder's address shown on the Transfer Agent's records. The fund reserves
the right to reject any purchase order. If you are purchasing fund assets
through a pension or other participation plan, you should contact your plan
administrator for further information on purchases.

Purchase Dates and Times. Fund shares may be purchased on any business day. A
business day is one on which the New York Stock Exchange is open for regular
trading. All purchases must be made in US dollars. Purchase orders in good form
(described below) and payments for fund shares by check or by wire transfer
must be received by the Transfer Agent prior to the close of the regular
trading session of the New York Stock Exchange, which is ordinarily 4 p.m.
Eastern time (the "Pricing Time"), to be effective on the date received. If an
order or payment is received after the Pricing Time, the order will be
effective on the next business day. Orders placed through a servicing agent or
broker-dealer that has a selling or servicing agreement with the Distributor or
the SSgA Funds must be received by the servicing agent or broker-dealer prior
to the Pricing Time.

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.

7
<PAGE>

option, contact the Customer Service Department at 1-800-647-7327. 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 you purchased shares of the
fund by check, the shares must have been present in your 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. Please contact your tax advisor.

Each fund reserves the right to terminate or modify the exchange privilege in
the future.

Federal Funds Wire. You may make initial or subsequent investments by wiring
federal funds to State Street, as Transfer Agent, by:

2. Instructing the wiring bank to wire federal funds to:

1. The investment objective, policies and limitations must match that of the
fund;
2. They must have a readily ascertainable market value;
3. They must be liquid;
4. They must not be subject to restrictions on resale; and
5. The market value of any securities exchanged, plus any cash, must be at
least $25 million; State Street reserves the right to make exceptions to
this minimum at its discretion.

Shares purchased in exchange for securities generally may not be redeemed or
exchanged until the transfer has settled--within 3 business days following the
date of the exchange.

8
<PAGE>

will be mailed to your address of record. Upon request, redemption proceeds
will be wire transferred to your account at a domestic commercial bank that is
a member of the Federal Reserve System. If you purchased fund shares by check
or an automatic investment program (AIP) and you elect to redeem shares within
15 days of the purchase, you may experience delays in receiving redemption
proceeds. In this case, the fund will generally postpone sending redemption
proceeds until it 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.

Redemption requests must be received prior to 4 p.m. Eastern time in order to
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 to receive the net asset value and dividend as of
the prior business day, pursuant to a duly executed Shareholder Servicing
Agreement with the SSgA Funds or the Distributor.

Telephone Redemption. Shareholders may normally redeem fund shares by
telephoning the Customer Service Department at 1-800-647-7327 between 8 a.m.
and 4 p.m. Eastern time. You must complete the appropriate section of the
application and attach a voided check to code your account correctly with the
bank information before utilizing this feature. The fund and the Transfer Agent
will employ reasonable procedures to confirm that instructions communicated by
telephone are properly authorized. Neither the fund, the Distributor nor the
Transfer Agent will be responsible for any loss or expense for executing
instructions that are deemed to be authorized and genuine 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 your address of record, if the address has not been changed within 60 days
of the redemption request. To the extent the Transfer Agent fails to use
reasonable procedures as a basis for its belief, it and/or its service
contractors may be liable for telephone instructions that prove to be
fraudulent or unauthorized. The fund, the Distributor or the Transfer Agent
will be responsible for the authenticity of terminal access instructions only
if it acts with willful misfeasance, bad faith or gross negligence.

By Wire. Proceeds exceeding $1,000 may be sent via wire transfer to your bank
as previously indicated on your application or letter of instruction in good
order. The shares will be redeemed from the account on the day the redemption
instructions are received and the proceeds wire will be sent the following
business day. Although the fund does not charge a fee for this feature, your
bank may charge a fee for receiving the wire. Please check with your bank
before requesting this feature. If bank instructions are not indicated on the
account, a signature guaranteed letter of instruction is required to add the
bank information to send proceeds via wire.

Please note that proceeds from ACH withdrawals will be transmitted to the
investor's bank two days after the withdrawal.

During periods of drastic economic or market changes, shareholders using this
method may encounter delays.

1. Your address of record has changed within the past 60 days;
2. You are redeeming more than $50,000 worth of shares; or 3. You are
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:

9
<PAGE>

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.

<TABLE>
<CAPTION>
Seller Requirements for Written Requests
- ----------------------------- ----------------------------------
<S> <C>
Owner of individual, o Letter of instruction, signed
joint, sole proprietorship, by all persons authorized to
UGMA/UTMA (custodial sign for the account stating
accounts for minors) general titles/capacity, exactly
or general partner as the account is registered;
accounts and
o Signature guarantee, if
applicable (see above).
Owners of corporate or o Letter of instruction signed
association accounts by authorized 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 o Letter of instruction, signed
trust accounts by all trustees;
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 o Letter of instruction signed
shareholders whose by surviving tenant(s);
co-tenants are o Certified copy of the death
deceased certificate; and
o Signature guarantee, if
applicable (see above).
</TABLE>

Please contact the Customer Service Department at 1-800-647-7327 for questions
and further instructions.

Distribution Services and Shareholder
Servicing Arrangements

Service organizations providing shareholder services to the fund will be
responsible for prompt transmission of purchase and redemption orders and may
charge you a fee for their services.

Pricing of Fund Shares

The fund determines the price per share once each business day at 4:00 p.m.
Eastern time, or the close of the New York Stock Exchange, if earlier. The
price 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.

Debt obligation securities maturing within 60 days of the valuation date are
valued at amortized cost unless the Board determines that the amortized cost
method does not represent market value.

Dividends and Distributions

The Board of Trustees intends to declare and pay dividends on shares of the
fund annually from net investment income. The Board of Trustees intends to
declare distributions annually from net short- and long-term capital gains, if
any, generally in mid-October. It is intended that an additional distribution
may be declared and paid in December if required for the fund to avoid the
imposition of a 4% federal excise tax on undistributed capital gains.

10
<PAGE>

of that year if the dividend is paid prior to February 1 of the following year.

Income dividends and capital gains distributions will be paid in additional
shares at their net asset value on the record date unless you have elected to
receive them in cash. You may make this election 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 you, or if a check remains uncashed
for at least six months, the cash election will be changed automatically.
Future dividends and other distributions will be reinvested in additional
shares of the relevant fund until you notify the SSgA Funds in writing of the
correct address. You must also request 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 will 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.

Distribution Option. You can choose from four different distribution options as
indicated on the account Application:

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.

Taxes

Dividends from net investment income and distributions of net short-term
capital gains are taxable to you 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
you have held the shares and whether you were paid in cash or additional
shares.

Foreign Income Taxes. Investment income received by the fund from sources
within foreign countries may be subject to foreign income taxes withheld at the
source. The United States has entered into tax treaties with many foreign
countries which would entitle the fund to a reduced rate of such taxes or
exemption from taxes on such income. It is impossible to determine the
effective rate of foreign tax for the fund in advance since the amount of the
assets to be invested within various countries is not known.

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, the fund may file an
election with the Internal Revenue Service (the Foreign Election) that would
permit you to take a credit (or a deduction) for foreign income taxes paid by
the fund. The fund may be subject to certain holding requirements with respect
to securities held to take advantage of this credit. If the Foreign Election is
made, you would include in you gross income both dividends received from the
fund and foreign income taxes paid by the fund. You would be entitled to treat
the foreign income taxes withheld as a credit against your United States
federal income taxes, subject to the limitations set forth in the Internal
Revenue Code with respect

11
<PAGE>

to the foreign tax credit generally. Alternatively, you 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 the fund will
qualify to make the Foreign Election; however, the fund cannot be certain that
it will be eligible to make such an election or that you will be eligible for
the foreign tax credit.

12
<PAGE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 6.52 $12.33 $10.87 $10.30 $11.45
------- ------- ------- ------- ------
INCOME FROM OPERATIONS:
Net investment income(1) .15 .18 .12 .11 .14
Net realized and unrealized gain (loss) 4.07 (5.58) 1.51 .68 (1.19)
------- ------- ------- ------- ------
Total From Operations 4.22 (5.40) 1.63 .79 (1.05)
------- ------- ------- ------- ------
DISTRIBUTIONS:
Dividends from net investment income (.27) (.15) (.11) (.12) (.10)
Dividends from net realized gain on investment -- (.26) (.06) (.10) --
------- ------- ------- ------- -------
Total Distributions (.27) (.41) (.17) (.22) (.10)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $10.47 $ 6.52 $12.33 $10.87 $10.30
======= ======= ======= ======= ======
TOTAL RETURN (%) 66.41 (45.36) 15.12 7.83 (9.28)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period ($000 omitted) 335,655 206,370 252,708 120,216 68,385
Ratios to average net assets (%):
Operating expenses, net(2) 1.25 1.25 1.25 1.28 1.50
Operating expenses, gross(2) 1.34 1.38 1.51 1.67 1.90
Net investment income 1.78 1.85 1.07 1.10 1.74
Portfolio turnover (%) 39.64 38.94 15.00 4.36 19.77
</TABLE>

- -----------

(1) For the period subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.

(2) See Note 4 of the Annual Report for current period amounts.

13
<PAGE>

(This page has been left blank intentionally.)

<PAGE>

SSgA FUNDS

SSgA Money Market Fund

SSgA US Government Money Market Fund

SSgA Tax Free Money Market Fund

SSgA Yield Plus Fund

SSgA Intermediate Fund

SSgA Bond Market Fund

SSgA High Yield Bond Fund

SSgA Growth and Income Fund

SSgA S&P 500 Index Fund

SSgA Matrix Equity Fund

SSgA Small Cap Fund
(Closed to new investors as of August 31, 1998)

SSgA Special Equity Fund

SSgA Tuckerman Active REIT Fund

SSgA Aggressive Equity Fund

SSgA IAM SHARES Fund

SSgA Emerging Markets Fund

SSgA Active International Fund

SSgA International Growth Opportunities Fund

SSgA Life Solutions Growth Fund

SSgA Life Solutions Balanced Fund

SSgA Life Solutions Income and Growth Fund

<PAGE>

ADDITIONAL INFORMATION ABOUT THE FUND

A Statement of Additional Information includes additional information about the
fund. The Statement of Additional Information is incorporated into this
Prospectus by reference.

Russell Fund Distributors, Inc.
One International Place
Boston, Massachusetts 02110
1-800-997-7327

SSgA Funds' Investment Company Act File No. 811-5430.

<PAGE>
Filed Pursuant to Rule 485(b)
File Nos. 33-19229; 811-5430

SSgA FUNDS
One International Place
Boston, Massachusetts 02110
1-800-997-7327
www.ssgafunds.com

IAM SHARES FUND

The SSgA IAM SHARES Fund seeks to achieve its investment objective of
maximizing the fund's total return primarily through investments in equity
securities of companies that have entered into collective bargaining agreements
with the International Association of Machinists and Aerospace Workers or
affiliated labor unions (IAM companies).

PROSPECTUS DATED DECEMBER 17, 1999

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
-----
<S> <C>
Investment Strategies and Principal Risks ............................................ 3
Investment Objective ................................................................ 3
Principal Investment Strategies ..................................................... 3
Principal Risks of Investing in the Fund ............................................ 3
Risk and Return ...................................................................... 3
Fees and Expenses of the Fund ........................................................ 4
Management of the Fund ............................................................... 5
Additional Information about the Fund's Objectives, Investment Strategies and Risks .. 5
Shareholder Information .............................................................. 6
Purchase of Fund Shares ............................................................. 6
Redemption of Fund Shares ........................................................... 7
Distribution Services and Shareholder Servicing Arrangements ........................ 9
Pricing of Fund Shares .............................................................. 9
Dividends and Distributions ......................................................... 9
Taxes ............................................................................... 10
Financial Highlights ................................................................. 11
Additional Information about the Fund ....................................... Back Cover
</TABLE>

2
<PAGE>

INVESTMENT STRATEGIES
AND PRINCIPAL RISKS

Investment Objective

The fund's investment objective is to maximize total return by investing
primarily in equity securities of companies that have entered into collective
bargaining agreements with the International Association of Machinists and
Aerospace Workers or affiliated labor unions ("IAM companies").

This objective may be changed by the fund's trustees without shareholder
approval.

Principal Investment Strategies

The purpose of the IAM SHARES Fund is to provide an investment vehicle where
the majority of holdings are securities of IAM companies. Under normal market
conditions, the fund will invest at least 65% of its total assets in equity
securities of IAM companies. As of the date of this prospectus, a universe of
342 IAM-represented companies was developed by the IAM. Based on the current
model environment, nearly half of the 342 IAM-represented companies qualify as
investments by this fund. All investments are publicly traded and sufficiently
capitalized, the current weighted average capitalization is $99.6 billion.
Investments that are not selected in the current model environment are still
included in the investable universe and may be selected for future investment.

The fund's investment strategy is driven by an investment process that manages
portfolio exposure to fundamental attributes in a multifactor risk model
environment. These attributes include industry allocations as well as factors
such as size, style, growth expectations and valuation ratios. This model
attempts to create a portfolio with the best expected return per unit of risk.

IAM companies are diverse both geographically and by industry. The portfolio
manager will rebalance the fund frequently in order to maintain its relative
exposure to IAM companies, as well as to account for any changes to the
universe of IAM companies. While the fund seeks a high correlation with the S&P
500 Index[RegTM] returns, the fund will not fully replicate the S&P 500 Index,
therefore, the fund's returns will likely vary from the index's returns.

Principal Risks of Investing in the Fund
The principal risks of investing in the fund are those risks generally
associated with investing in common stocks, including the possibility that the
fund will fluctuate in value significantly over time. Because the fund will
invest at least 65% of its in assets in IAM companies, the return may be less
than in a fund that may invest without restriction in all types of companies.
The fund's emphasis on large-cap stocks makes the fund susceptible to the
business risks of larger companies, which usually cannot change as quickly as
smaller companies in response to competitive challenges. Larger companies also
tend not to be able to maintain the high growth rates of well-managed smaller
companies, especially during strong economic periods. Finally, the success of
the fund's principal investment strategy depends on the Advisor's skill in
designing and using its proprietary analytical model as a tool for selecting
undervalued stocks.

Risk and Return

The IAM SHARES Fund has not been in existence for a full calendar year.
Therefore, performance information is not included. The prospectus will be
updated when information is available. The fund began operating on June 2,
1999.

3
<PAGE>

FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.

Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
Management Fee .25%
Distribution and Service (12b-1) Fees(1) .04
Other Expenses .38
-----
Gross Expenses .67
-----
Less Contractual Advisory Fee Reimbursement (.02)
-----
Total Net Annual Fund Operating Expenses(2) .65%
=====
</TABLE>

- -----------
(1) The ratio includes .02% for 12b-1 Distribution and 0.2% for 12b-1
Shareholder Servicing Fees.

(2) The Advisor has contractually agreed to reimburse the IAM SHARES Fund for
all expenses in excess of .65% of average daily net assets on an annual
basis until December 31, 2002. The annual management fee after the
reimbursement is .23%. The total annual expenses shown above have been
restated to reflect the reimbursement.

Example

This example is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds.

<TABLE>
<CAPTION>
1 year 3 years
- -------- ---------
<S> <C>
$ 66 $208
===== ====
</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.

4
<PAGE>

MANAGEMENT OF THE FUND

For these services, the fund pays State Street an annual management fee,
calculated daily and paid monthly, of 0.23% (after fee waiver) of the average
daily net asset value of the fund.

Mr. Michael J. Feehily, CFA, Principal of SSgA, is the portfolio manager
primarily responsible for investment decisions regarding the fund. Mr. Feehily
joined State Street Corporation in August 1992 in the Global Operations area
before moving to the Performance & Analytics group. He helped to develop and
work with a proprietary application which is used to analyze venture capital,
real estate, and other private investments. Mr. Feehily holds a BS in Finance,
Investments and Economics from Babson College and an MBA in Finance from
Bentley College. There are four other portfolio managers who assist in managing
the fund.

ADDITIONAL INFORMATION ABOUT
THE FUND'S OBJECTIVES, INVESTMENT STRATEGIES AND RISKS

The investment objective of the fund as stated above may be changed by the
fund's trustees without shareholders approval. The investment policies
described below reflect the fund's current practices. In addition to the
principal risks explained above, other risks are explained in some of the
descriptions of the investment policies below:

Stock Index Futures. Stock Index Futures will be used by the fund to equitize
all cash and cash equivalents so that the fund may remain fully invested in the
equity market. This will enable the Fund to facilitate demand for same day
redemptions. A stock index futures contract is a contract to buy or sell
specified units of a stock index at a specified future date at a price agreed
upon when the contract is made. The value of a unit is based on the current
value of the contract index. Under such contracts no delivery of the actual
stocks making up the index takes place. Rather, upon expiration of the
contract, settlement is made by exchanging 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 the fund will honor their futures commitments. Subsequent payments
(called "variation margin") to and from the broker are made on a daily basis as
the price of the underlying investment fluctuates. There are certain investment
risks in using derivatives such as futures contracts and options on futures as
a hedging technique. Loss can result from a lack of correlation between changes
in the value of derivative instruments and the portfolio assets (if any) being
hedged, the potential illiquidity of the markets for derivative instruments, or
risks arising from margin requirements and related leverage factors associated
with such transactions. The use of these management techniques also involves
the risk of loss if the Adviser is incorrect in its expectation of fluctuations
in securities prices, interest rates or currency prices.

American Depository Receipts (ADRs). The common stocks the fund may invest in
include American Depository Receipts (ADRs). 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
securities of foreign issuers, such as; 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 investment in such securities. For purposes of the fund's
investment policies, the fund's investments in ADRs and similar instruments
will be deemed to be investments in the equity securities representing
securities of foreign issuers into which they may be converted. The ADRs chosen
for

5
<PAGE>

investment by the IAM SHARES Fund will either have collective bargaining
agreements with the IAM or affiliated unions or will be constituents of the S&P
500 Index or both.

SHAREHOLDER INFORMATION

Minimum Initial and Subsequent Investments and Account Balance. The fund
requires a minimum initial investment of $1,000, with the exception of IRA
accounts, for which the minimum initial investment is $250. Subsequent
investments must be at least $100. An investment in the account (other than IRA
accounts) may be subject to redemption at the fund's discretion if the account
balance is less than $1,000 as a result of shareholder redemptions. The
Transfer Agent will give shareholders 60 days' notice that the account will be
closed unless an investment is made to increase the account balance to the
$1,000 minimum. Failure to bring the account balance to $1,000 may result in
the Transfer Agent closing the account at the net asset value (NAV) next
determined on the day the account is closed and mailing the proceeds to the
shareholder's address shown on the Transfer Agent's records. The fund reserves
the right to reject any purchase order. If you are purchasing fund assets
through a pension or other participation plan, you should contact your plan
administrator for further information on purchases.

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.

Each fund reserves the right to terminate or modify the exchange privilege in
the future.

Federal Funds Wire. You may make initial or subsequent investments by wiring
federal funds to State Street, as Transfer Agent, by:

1. Telephoning the Customer Service Department at 1-800-647-7327 between 8 a.m.
and 4 p.m. Eastern time, and

6
<PAGE>

stating: (a) your 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 exact amount
being wired.

2. Instructing the wiring bank to wire federal funds to:

1. The investment objective, policies and limitations must match that of the
fund;
2. They must have a readily ascertainable market value;

3. They must be liquid;
4. They must not be subject to restrictions on resale; and
5. The market value of any securities exchanged, plus any cash, must be at
least $25 million; State Street reserves the right to make exceptions to
this minimum at its discretion.

Shares purchased in exchange for securities generally may not be redeemed or
exchanged until the transfer has settled--within 3 business days following the
date of the exchange.

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 your
address of record. Upon request, redemption proceeds will be wire transferred
to your account at a domestic commercial bank that is a member of the Federal
Reserve System. If you purchased fund shares by check or an automatic
investment program (AIP) and you elect to redeem shares within 15 days of the
purchase, you may experience delays in receiving redemption proceeds. In this
case, the fund will generally postpone sending redemption proceeds until it 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.

Redemption requests must be received prior to 4 p.m. Eastern time in order to
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 to receive the net asset value and dividend as of
the prior business day, pursuant to a duly executed Shareholder Servicing
Agreement with the SSgA Funds or the Distributor.

7
<PAGE>

fund, the Distributor nor the Transfer Agent will be responsible for any loss
or expense for executing instructions that are deemed to be authorized and
genuine 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 your address of record, if the address
has not been changed within 60 days of the redemption request. To the extent
the Transfer Agent fails to use reasonable procedures as a basis for its
belief, it and/or its service contractors may be liable for telephone
instructions that prove to be fraudulent or unauthorized. The fund, the
Distributor or the Transfer Agent will be responsible for the authenticity of
terminal access instructions only if it acts with willful misfeasance, bad
faith or gross negligence.

Please note that proceeds from ACH withdrawals will be transmitted to the
investor's bank two days after the withdrawal.

During periods of drastic economic or market changes, shareholders using this
method may encounter delays.

1. Your address of record has changed within the past 60 days;

2. You are redeeming more than $50,000 worth of shares; or

3. You are 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:

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.

8
<PAGE>

<TABLE>
<S> <C>
Owners or trustees of o Letter of instruction, signed
trust accounts by all trustees;
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 o Letter of instruction signed
shareholders whose by surviving tenant(s);
co-tenants are o Certified copy of the death
deceased certificate; and
o Signature guarantee, if
applicable (see above).
</TABLE>

Please contact the Customer Service Department at 1-800-647-7327 for questions
and further instructions.

Distribution Services and
Shareholder Servicing Arrangements

Service organizations providing shareholder services to the fund will be
responsible for prompt transmission of purchase and redemption orders and may
charge you a fee for their services.

Debt obligation securities maturing within 60 days of the valuation date are
valued at amortized cost unless the Board determines that the amortized cost
method does not represent market value.

Dividends and Distributions

The Board of Trustees intends to declare and pay dividends on shares of the
fund quarterly from net investment income. Distributions will be made at least
annually from net short- and long-term capital gains, if any, generally in
mid-October. It is intended that an additional distribution may be declared and
paid in December if required for the fund to avoid the imposition of a 4%
federal excise tax on undistributed capital gains.

Distribution Option. You can choose from four different distribution options as
indicated on the account Application:

9
<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.

Taxes
Dividends from net investment income and distributions of net short-term
capital gains are taxable to you 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
you have held the shares and whether you were paid in cash or additional
shares.

Foreign shareholders invested in any SSgA Fund should consult with their tax
advisors as to if and how the federal income tax and its withholding
requirements applies to them.

10
<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand a fund's
financial performance for the past 5 years (or since inception if a fund has
been offered for less than 5 years). Certain information reflects financial
results for a single fund share. The total return in the table represents the
rate that an investor would have earned (or lost) on an investment in a fund
(assuming reinvestment of all dividends and distributions). This information
has been audited by PricewaterhouseCoopers LLP, whose report, along with the
fund's financial statements, are included in the annual report, which is
available upon request by calling the Distributor at 1-800-647-7327.

<TABLE>
<CAPTION>
Fiscal
Period Ended
August 31,
-------------
1999++
-------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
------
INCOME FROM OPERATIONS:
Net investment income(1) .02
Net realized and unrealized gain (loss) .12
------
Total Income From Operations .14
------
NET ASSET VALUE, END OF PERIOD $10.14
======
TOTAL RETURN (%)(2) 1.40
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period ($000 omitted) 60,316
Ratios to average net assets (%):(3)
Operating expenses, net(4) .65
Operating expenses, gross(4) .67
Net investment income .72
Portfolio turnover (%)(5) --
</TABLE>

- -----------

++ For the period June 2, 1999 (commencement of operations) to August 31, 1999.

(1) Average month-end shares were used for this calculation.

(2) Periods less than one year are not annualized.

(3) The ratios for the period ended august 31, 1999 are annualized.

(4) See Note 4 of the Annual Report for current period amounts.

(5) This rate is not meaningful due to the fund's short period of operation.

11
<PAGE>

(This page has been left blank intentionally.)

<PAGE>

(This page has been left blank intentionally.)

<PAGE>

(This page has been left blank intentionally.)

<PAGE>

SSgA FUNDS

SSgA Money Market Fund

SSgA US Government Money Market Fund

SSgA Tax Free Money Market Fund

SSgA Yield Plus Fund

SSgA Intermediate Fund

SSgA Bond Market Fund

SSgA High Yield Bond Fund

SSgA Growth and Income Fund

SSgA S&P 500 Index Fund

SSgA Matrix Equity Fund

SSgA Small Cap Fund
(Closed to new investors as of August 31, 1998)

SSgA Special Equity Fund

SSgA Tuckerman Active REIT Fund

SSgA Aggressive Equity Fund

SSgA IAM SHARES Fund

SSgA Emerging Markets Fund

SSgA Active International Fund

SSgA International Growth Opportunities Fund

SSgA Life Solutions Growth Fund

SSgA Life Solutions Balanced Fund

SSgA Life Solutions Income and Growth Fund
<PAGE>

ADDITIONAL INFORMATION ABOUT THE FUND

A Statement of Additional Information includes additional information about the
fund. The Statement of Additional Information is incorporated into this
Prospectus by reference.

Russell Fund Distributors, Inc.
One International Place
Boston, Massachusetts 02110
1-800-997-7327

SSgA Funds' Investment Company Act File No. 811-5430.

<PAGE>
Filed Pursuant to Rule 485(b)
File Nos. 33-19229; 811-5430

SSgA FUNDS
One International Place
Boston, Massachusetts 02110
1-800-997-7327
www.ssgafunds.com

MONEY MARKET FUND

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.

PROSPECTUS DATED DECEMBER 17, 1999

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
-----
<S> <C>
Investment Strategies and Principal Risks ............................................ 3
Investment Objective ................................................................ 3
Principal Investment Strategies ..................................................... 3
Principal Risks of Investing in the Fund ............................................ 3
Risk and Return ..................................................................... 4
Fees and Expenses of the Fund ........................................................ 5
Management of the Fund ............................................................... 6
Additional Information about the Fund's Objectives, Investment Strategies and Risks .. 6
Shareholder Information .............................................................. 8
Purchase of Fund Shares ............................................................. 8
Redemption of Fund Shares ........................................................... 9
Distribution Services and Shareholder Servicing Arrangements ........................ 11
Pricing of Fund Shares .............................................................. 11
Dividends and Distributions ......................................................... 11
Taxes ............................................................................... 12
Financial Highlights ................................................................. 13
Additional Information about the Fund ........................................ Back Cover
</TABLE>

2
<PAGE>

INVESTMENT STRATEGIES
AND PRINCIPAL RISKS

Investment Objective

The Money Market Fund's 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.

This objective may be changed by the fund's trustees without shareholder
approval.

Principal Investment Strategies
The fund attempts to meet its investment objective by investing in high quality
money market instruments. There are risks associated with these instruments,
which are described in the section called Principal Risks.

The fund attempts to meet its investment objective by investing in high quality
money market instruments, including: (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 of US and foreign companies; (7) variable and floating rate notes;
and (8) repurchase agreements.

The fund management team bases its decisions on the relative attractiveness of
different money market investments which can vary depending on the general
level of interest rates as well as supply/demand imbalances in the market.

The Money Market Fund has obtained a money market fund rating of Am from
Standard & Poor's. The Am rating indicates that the fund's safety is good and
it has a sound capacity to maintain principal value and limit exposure to loss.
To obtain such rating the fund may be required to adopt additional investment
restrictions, which may affect the fund's performance.

Principal Risks of Investing in the Fund

Money Market Risk. The risk that a fund will not be able to maintain a NAV per
share of $1.00 at all times. Although the fund seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose money by investing
in the fund. An investment in the fund is not a deposit of any bank and is not
insured or guaranteed by the Federal Deposit Insurance Company or any other
government agency.

Interest Rate Risk. The risk that during periods of rising interest rates, a
fund's yield (and the market value of its securities) will tend to be lower
than prevailing market rates; in periods of falling interest rates, a fund's
yield will tend to be higher.

Credit/Default Risk. The risk that an issuer or guarantor of a security, or a
bank or other financial institution that has entered into a repurchase
agreement, may default on its payment obligations.

Foreign Risk. The risk that a foreign security could lose value as a result of
political, financial and economic events in foreign countries, less stringent
foreign securities regulations and accounting and disclosure standards, or
other factors.

Banking Industry Risk. The risk that if a fund invests more than 25% of its
total assets in bank obligations, an adverse development in the banking
industry may affect the value of the fund's investments more than if a fund's
investments were not invested to such a degree in the banking industry.
Normally, the fund intends to invest more than 25% of its total assets in bank
obligations. Banks may be particularly susceptible to certain economic factors
such as interest rate changes, adverse developments in the real estate market,
fiscal and monetary policy and general economic cycles.

Management Risk. The risk that a strategy used by the Advisor may fail to
produce the intended results.

3
<PAGE>

[START BAR CHART]

Annual Total Returns -- Money Market

[END BAR CHART]

Best Quarter--June 30, 1989: 2.36%
Worst Quarter--December 31, 1993: 0.74%
Current Fiscal Quarter--August 31, 1999: 1.19%

The following table further illustrates the risks of investing in the fund by
showing how the fund's average annual returns for 1, 5 and 10 years compare to
the returns of a broad-based securities market index.

Average Annual Total Returns
For the Periods Ended December 31, 1998:

<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
---------- --------- ---------
<S> <C> <C> <C>
Money Market Fund 5.30% 5.12% 5.63%
Salomon Smith Barney 3-month
Treasury bill 5.05 5.10 5.44
Lipper Average -- Money
Market Funds 4.85 4.78 5.22
</TABLE>

7-Day Yields
For the Period Ended December 31, 1998:

<TABLE>
<CAPTION>
Current Effective
--------- ---------
<S> <C> <C>
Money Market Fund 4.84% 4.96%
</TABLE>

Current yield information for the fund is available toll free by calling
1-800-647-7327 or by visiting our web site at www.ssgafunds.com.

4
<PAGE>

FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.

Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
Management Fee .25%
Distribution and Service (12b-1) Fees(1) .08
Other Expenses .07
-----
Total Annual Fund Operating Expenses .40%
=====
</TABLE>

- -----------
(1) The ratio includes .04 for 12b-1 Distribution and .04% for 12b-1 Shareholder
Servicing Fees.

Example
This example is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds.

<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
- -------- --------- --------- ---------
<S> <C> <C> <C>
$ 41 $128 $224 $505
===== ==== ==== ====
</TABLE>

5
<PAGE>

MANAGEMENT OF THE FUND

For these services, the fund pays State Street an annual management fee,
calculated daily and paid monthly, of 0.25% of the average daily net asset
value of the fund.

ADDITIONAL INFORMATION ABOUT THE FUND'S OBJECTIVES, INVESTMENT STRATEGIES AND
RISKS

The investment objective of the fund as stated above may be changed by the
fund's trustees without shareholder approval.

Investment-Grade Securities. 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 at 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 fund's Advisor in accordance
with procedures established by the Board of Trustees. See the Appendix in the
Statement of Additional Information for a description of a NRSRO.

Portfolio Maturity. A money market fund must limit its investments to
securities with remaining maturities determined in accordance with applicable
SEC regulations and must maintain a dollar-weighted average maturity of 90 days
or less. A fund will normally hold portfolio instruments to maturity, but may
dispose of them prior to maturity if the Advisor finds it advantageous or
necessary. Investing in short-term money market instruments will result in high
portfolio turnover. Since the cost of these transactions is small, high
turnover is not expected to adversely affect a fund's price or yield.

Variable and Floating Rate Securities. The fund may purchase variable and
floating rate securities which are instruments issued or guaranteed by entities
such as the: (1) US Government, or an agency or instrumentality thereof, (2)
corporations, (3) financial institutions or (4) insurance companies. A variable
rate security provides for the automatic establishment of a new interest rate on
set dates. Variable rate obligations whose interest is readjusted no less
frequently than annually will be deemed to have a maturity equal to the period
remaining until the next readjustment of the interest rate. The fund may also
purchase floating rate securities. A floating rate security provides for the
automatic adjustment of its interest rate whenever a specified interest rate
changes. Interest rates on these securities are ordinarily tied to, and are a
percentage of, a widely recognized interest rate, such as the yield on 90-day US
Treasury bills or the prime rate of a specified bank. 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.

Securities purchased by the fund may include variable and floating rate
instruments, which may have a stated maturity in excess of the fund's maturity
limitations but which will, except for certain US Government obligations,
permit the fund to demand payment of the principal of the instrument at least
once every thirteen months upon not more than 30 days' notice. Variable and
floating rate instruments may include variable amount master demand notes that
permit the indebtedness thereunder to vary in addition to providing for
periodic adjustments in the interest rate. There may be no active secondary
market with respect to a particular variable or floating rate instrument.
Nevertheless, the periodic readjustments of their interest rates tend to assure
that their value to the fund will approximate their par value. Illiquid
variable and floating rate instruments (instruments which are not payable upon
seven days' notice and do not have an active trading market) that are acquired
by the fund are subject to the fund's percentage limitations regarding
securities that are illiquid or not readily marketable. The fund's investment
advisor will continuously monitor the creditworthiness of issuers of variable
and floating rate instruments in which the Investment Company invests, and
their ability to repay principal and interest.

6
<PAGE>

form of credit enhancement, such as over collateralization, 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.

o Prepayment Risk--Asset-backed securities are often subject to more rapid
repayment than their stated maturity date would indicate as a result of the
pass-through of prepayments of principal on the underlying loans. During
periods of declining interest rates, prepayment of loans underlying
asset-backed securities can be expected to accelerate. Accordingly, a Fund's
ability to maintain positions in such securities will be affected by
reductions in the principal amount of such securities resulting from
prepayments, and its ability to reinvest the returns of principal at
comparable yields is subject to generally prevailing interest rates at that
time. Also, asset-backed securities generally do not have the benefit of a
security interest in collateral that is comparable to mortgage assets. There
is the possibility that, in some cases, recoveries on repossessed collateral
may not be available to support payments on these securities. In the event of
a default, a Fund may suffer a loss if it cannot sell collateral quickly and
receive the amount it is owed.

o Other Risks Associated with Asset-Backed Securities-- Asset-backed securities
generally do not have the benefit of a security interest in collateral that
is comparable to mortgage assets. Collateral types include credit card
receivables and automobile loans that are subject to different laws than
mortgages in the event of default. Credit card receivables are generally
unsecured and the debtors on such receivables are entitled to the protection
of a number of state and federal consumer credit laws, many of which give
such debtors the right to set-off certain amounts owed on the credit cards,
thereby reducing the balance due. Automobile receivables generally are
secured, but by automobiles rather than residential real property. Most
issuers of automobile receivables permit the loan servicers to retain
possession of the underlying obligations. If the servicer were to sell these
obligations to another party, there is a risk that the purchaser would
acquire an interest superior to that of the holders of the asset-backed
securities. In addition, because of the large number of vehicles involved in
a typical issuance and technical requirements under state laws, the trustee
for the holders of the automobile receivables may not have a proper security
interest in the underlying automobiles. Therefore, there is the possibility
that, in some cases, recoveries on repossessed collateral may not be
available to support payments on these securities.

Eurodollar Certificates of Deposit (ECDs), Eurodollar Time Deposits (ETDs) and
Yankee Certificates of Deposit (YCDs). ECDs are US dollar denominated
certificates of deposit issued by a bank outside of the United States. 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. 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. Foreign laws and accounting standards typically are not as strict as
they are in the US and therefore there may be fewer restrictions regarding loan
limitations, less frequent examinations and less stringent requirements
regarding reserve accounting, auditing, recordkeeping and public reporting
requirements.

Section 4(2) Commercial Paper. 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 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. As a result it
suffers from a liquidity risk, the risk that the securities may be difficult to
value because of the absence of an active market and may be disposed of only
after considerable expense and delay. Section 4(2) paper will not be subject to
the fund's 10% limitation on illiquid securities set forth below where the
Board of Trustees of the Investment Company (pursuant to guidelines adopted by
the Board) determines that a liquid trading market exists.

7
<PAGE>

limit repurchase transactions to those member banks of the Federal Reserve
System and broker-dealers whose creditworthiness Advisor considers
satisfactory. If the other party or "seller" defaults, a fund might suffer a
loss to the extent that the proceeds from the sale of the underlying securities
and other collateral held by the fund are less than the repurchase price and
the fund's cost associated with delay and enforcement of the repurchase
agreement. In addition, in the event of bankruptcy of the seller, a fund could
suffer additional losses if a court determines that the fund's interest in the
collateral is not enforceable.

SHAREHOLDER INFORMATION

Minimum Initial and Subsequent Investments and Account Balance. The fund
requires a minimum initial investment of $1,000, with the exception of IRA
accounts, for which the minimum initial investment is $250. Subsequent
investments must be at least $100. An investment in the fund (other than IRA
accounts) may be subject to redemption at the fund's discretion if the account
balance is less than $1,000 as a result of shareholder redemptions. The
Transfer Agent will give shareholders 60 days' notice that the account will be
closed unless an investment is made to increase the account balance to the
$1,000 minimum. Failure to bring the account balance to $1,000 may result in
the Transfer Agent closing the account at the net asset value (NAV) next
determined on the day the account is closed and mailing the proceeds to the
shareholder's address shown on the Transfer Agent's records. The fund reserves
the right to reject any purchase order. If you are purchasing fund assets
through a pension or other participation plan, you should contact your plan
administrator for further information on purchases.

Purchase Dates and Times. Fund shares may be purchased on any business day. A
business day is one on which the New York Stock Exchange or Boston Federal
Reserve are open for regular trading. All purchases must be made in US dollars.
Purchase orders in good form (described below) and payments for fund shares by
check or by wire transfer must be received by the Transfer Agent prior to the
close of the regular trading session of the New York Stock Exchange, which is
ordinarily 4 p.m. Eastern time (the "Pricing Time"), to be effective on the
date received. If an order or payment is received after the Pricing Time, the
order will be effective on the next business day. Orders placed through a
servicing agent or broker-dealer that has a selling agreement with the
Distributor or the SSgA Funds must be received by the servicing agent or
broker-dealer prior to the Pricing Time.

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.

8
<PAGE>

constitutes a sale of shares, which may result in a capital gain or loss.
Please contact your tax advisor.

Each fund reserves the right to terminate or modify the exchange privilege in
the future.

Federal Funds Wire. You may make initial or subsequent investments by wiring
federal funds to State Street, as Transfer Agent, by:

1. Telephoning the Customer Service Department at 1-800-647-7327 between 8
a.m. and 4 p.m. Eastern time, and stating: (a) your 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 exact amount being wired.

2. Instructing the wiring bank to wire federal funds to:

Shares purchased in exchange for securities generally may not be redeemed or
exchanged until the transfer has settled--within 3 business days following the
date of the exchange.

Redemption of Fund Shares

9
<PAGE>

following investments paid by federal funds wire or by bank cashier's check,
certified check or treasurer's check.

Checkwriting Service. If you have authorized the check writing feature on the
Application and have completed the signature card, you may redeem shares in
your account by check, 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 you may write an unlimited number of
checks provided that the account minimum of $1,000 per fund is maintained.

Please note that proceeds from ACH withdrawals will be transmitted to the
investor's bank two days after the withdrawal.

Check. Telephone redemption requests for proceeds less than $50,000 may be sent
by check and 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. All proceeds
by check will normally be sent the following business day. A check is not
available for telephone redemption requests in excess of $50,000. Requests must
be in writing.

During periods of drastic economic or market changes, shareholders using this
method may encounter delays.

1. Your address of record has changed within the past 60 days;
2. You are redeeming more than $50,000 worth of shares; or
3. You are 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;

10
<PAGE>

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.

<TABLE>
<CAPTION>
Seller Requirements for Written Requests
- ------------------------ ----------------------------------
<S> <C>
Owner of individual, o Letter of instruction, signed
joint, sole by all persons authorized to
proprietorship, UGMA/ sign for the account stating
UTMA (custodial general titles/capacity, exactly
accounts for minors) as the account is registered;
or general partner and
accounts
o Signature guarantee, if
applicable (see above).
Owners of corporate or o Letter of instruction signed
association accounts by authorized 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 o Letter of instruction, signed
trust accounts by all trustees;
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 o Letter of instruction signed
shareholders whose by surviving tenant(s);
co-tenants are o Certified copy of the death
deceased certificate; and
o Signature guarantee, if
applicable (see above).
</TABLE>

Please contact the Customer Service Department at 1-800-647-7327 for questions
and further instructions.

Distribution Services and Shareholder
Servicing Arrangements

Service organizations providing shareholder services to the fund will be
responsible for prompt transmission of purchase and redemption orders and may
charge you a fee for their services.

Pricing of Fund Shares
The fund determines the price per share 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). The price is computed by adding the value of all securities
and other assets of the fund, deducting accrued liabilities, dividing by the
number of shares outstanding and rounding to the nearest cent.

The fund seeks to maintain a $1.00 per share net asset value and, accordingly,
uses the amortized cost valuation method to value its portfolio instruments.
The amortized cost valuation method initially prices an instrument at its cost
and thereafter assumes a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument.

11
<PAGE>

Distribution Option. You can choose from four different distribution options as
indicated on the account
Application:

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 of the
month 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.

The Transfer Agent will wire dividends (if that option is elected) to a
pre-designated bank by the first business day of the following month in which
the dividend is payable. Investors are urged to verify with their bank whether
it charges a fee to accept this wire. Direct deposits through ACH are
transmitted to the investor's account two business days after the payable date
of the distributions, and generally are not charged a fee by the bank.

Taxes

Although the sale or exchange of fund shares is a taxable event, no gain or loss
for a sharehholder is anticipated because the fund seeks to maintain a stable
$1.00 per share net asset value.

Foreign shareholders invested in any SSgA Fund should consult with their tax
advisors as to if and how the federal income tax and its withholding
requirements applies to them.

12
<PAGE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
-----------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
------- ------- ------- --------- -------
INCOME FROM OPERATIONS:
Net investment income .0476 .0528 .0516 .0524 .0538
DISTRIBUTIONS:
Dividends from net investment income (.0476) (.0528) (.0516) (.0524) (.0538)
------- ------- ------- --------- -------
NET ASSET VALUE, END OF PERIOD $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
======= ======= ======= ========= =======
TOTAL RETURN (%) 4.86 5.41 5.28 5.36 5.52
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ($000 omitted) 10,084,283 5,477,326 4,278,165 3,475,409 2,752,895
Ratios to average net assets (%):
Operating expenses .40 .41 .39 .39 .39
Net investment income 4.74 5.28 5.17 5.20 5.37
</TABLE>

13
<PAGE>

(This page has been left blank intentionally.)

<PAGE>

SSgA FUNDS

SSgA Money Market Fund

SSgA US Government Money Market Fund

SSgA Tax Free Money Market Fund

SSgA Yield Plus Fund

SSgA Intermediate Fund

SSgA Bond Market Fund

SSgA High Yield Bond Fund

SSgA Growth and Income Fund

SSgA S&P 500 Index Fund

SSgA Matrix Equity Fund

SSgA Small Cap Fund
(Closed to new investors as of August 31, 1998)

SSgA Special Equity Fund

SSgA Tuckerman Active REIT Fund

SSgA Aggressive Equity Fund

SSgA IAM SHARES Fund

SSgA Emerging Markets Fund

SSgA Active International Fund

SSgA International Growth Opportunities Fund

SSgA Life Solutions Growth Fund

SSgA Life Solutions Balanced Fund

SSgA Life Solutions Income and Growth Fund

<PAGE>

ADDITIONAL INFORMATION ABOUT THE FUND

A Statement of Additional Information includes additional information about the
fund. The Statement of Additional Information is incorporated into this
Prospectus by reference.

Russell Fund Distributors, Inc.
One International Place
Boston, Massachusetts 02110
1-800-997-7327

SSgA Funds' Investment Company Act File No. 811-5430.

<PAGE>
Filed Pursuant to Rule 485(b)
File Nos. 33-19229; 811-5430

SSgA FUNDS
One International Place
Boston, Massachusetts 02110
1-800-997-7327
www.ssgafunds.com

PRIME MONEY MARKET FUND

The Prime 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.

PROSPECTUS DATED DECEMBER 17, 1999

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
-----
<S> <C>
Investment Strategies and Principal Risks ............................................ 3
Investment Objective ................................................................ 3
Principal Investment Strategies ..................................................... 3
Principal Risks of Investing in the Fund ............................................ 3
Risk and Return ..................................................................... 4
Fees and Expenses of the Fund ....................................................... 5
Management of the Fund ............................................................... 6
Additional Information about the Fund's Objectives, Investment Strategies and Risks .. 6
Shareholder Information .............................................................. 8
Purchase of Fund Shares ............................................................. 8
Redemption of Fund Shares ........................................................... 9
Distribution Services and Shareholder Servicing Arrangements ........................ 10
Pricing of Fund Shares .............................................................. 10
Dividends and Distributions ......................................................... 10
Taxes ............................................................................... 11
Financial Highlights ................................................................. 12
Additional Information about the Fund ........................................ Back Cover
</TABLE>

2
<PAGE>

INVESTMENT STRATEGIES AND
PRINCIPAL RISKS

Investment Objective

This objective may be changed only with the approval of a majority of the
fund's shareholders as defined in the Investment Company Act of 1940 (the 1940
Act).

Principal Investment Strategies
The Prime Money Market 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 ("ECDs"), Eurodollar
Time Deposits ("ETDs") and Yankee Certificates of Deposit ("YCDs"); (4)
commercial paper of US and foreign companies; (5) asset-backed securities; (6)
corporate obligations of US and foreign companies; (7) variable and floating
rate notes; and (8) repurchase agreements.

Fund managers base their decisions on the relative attractiveness of different
money market investments which can vary depending on the general level of
interest rates as well as supply/demand imbalances in the market.

The Prime Money Market Fund has obtained a money market fund rating of AAm from
Standard & Poor's. The AAm rating indicates that the fund's safety is very
good, and it has a strong capacity to maintain principal value and limit
exposure to loss. To obtain such rating the fund may be required to adopt
additional investment restrictions, which may affect the fund's performance.

Principal Risks of Investing in the Fund

Credit/Default Risk. The risk that an issuer or guarantor of a security, or a
bank or other financial institution that has entered into a repurchase
agreement, may default on its payment obligations.

Management Risk. The risk that a strategy used by the Advisor may fail to
produce the intended results.

3
<PAGE>

[START BAR CHART]

Annual Total Returns -- Prime Money Market

[END BAR CHART]

Best Quarter--June 30, 1995: 1.51%
Worst Quarter--June 30, 1994: 1.00%
Current Fiscal Quarter--August 31, 1999: 1.24%

Average Annual Total Returns
For the Periods Ended December 31, 1998:

<TABLE>
<CAPTION>
1 Year Inception
---------- ----------
<S> <C> <C>
Prime Money Market Fund 5.52% 5.45%
Salomon Smith Barney 3-month
Treasury bill 5.05 5.60
Lipper Average--Institutional
Money Market Funds 5.32 5.18
</TABLE>

7-Day Yields
For the Period Ended December 31, 1998:

<TABLE>
<CAPTION>
Current Effective
--------- ----------
<S> <C> <C>
Prime Money Market Fund 5.13% 5.26%
</TABLE>

Current yield information for the fund is available toll free by calling
1-800-647-7327 or by visiting our web site at www.ssgafunds.com.

4
<PAGE>

FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.

Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
(as a percentage of average daily net assets)
Management Fee(1) .15%
Distribution and Service (12b-1) Fees(2) .06
Other Expenses .05
-----
Gross Expenses .26
-----
Less Contractual Management Fee Reimbursement (.01)
Management Fee Waiver (.05)
-----
Total Net Annual Fund Operating Expenses After Waivers
and Reimbursements .20%
=====
</TABLE>

- -----------
(1) The Advisor has voluntarily agreed to waive .5% of its .15% management fee.
The management fee shown above has been restated to reflect the waiver.
Also, the Advisor has voluntarily agreed to reimburse the fund for all
expenses to the extent that total expenses exceed .20% of average daily net
assets on an annual basis. The waiver and reimbursement will remain in
effect until December 31, 2002. The annual management fee after waiver and
reimbursement is .09%. The total annual expenses shown above have been
restated to reflect the waiver and reimbursement.

(2) The ratio includes .03% for 12b-1 Distribution and .03% for 12b-1
Shareholder Servicing Fees.

Example

This example is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds.

<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
- -------- --------- --------- ---------
<S> <C> <C> <C>
$ 20 $64 $141 $318
===== === ==== ====
</TABLE>

5
<PAGE>

MANAGEMENT OF THE FUND

For these services, the fund pays State Street an annual management fee,
calculated daily and paid monthly, of 0.09%, after fee waiver and
reimbursement, of the average daily net asset value of the fund.

ADDITIONAL INFORMATION ABOUT THE FUND'S OBJECTIVES, INVESTMENT
STRATEGIES AND RISKS

Investment-Grade Securities. 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 at 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 Fund's Advisor in accordance
with procedures established by the Board of Trustees.

6
<PAGE>

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.

o Prepayment Risk--Asset-Backed securities are often subject to more rapid
repayment than their stated maturity date would indicate as a result of the
pass-through of prepayments of principal on the underlying loans. During
periods of declining interest rates, prepayment of loans underlying
asset-backed securities can be expected to accelerate. Accordingly, a Fund's
ability to maintain positions in such securities will be affected by
reductions in the principal amount of such securities resulting from
prepayments, and its ability to reinvest the returns of principal at
comparable yields is subject to generally prevailing interest rates at that
time. Also, asset-backed securities generally do not have the benefit of a
security interest in collateral that is comparable to mortgage assets. There
is the possibility that, in some cases, recoveries on repossessed collateral
may not be available to support payments on these securities. In the event of
a default, a Fund may suffer a loss if it cannot sell collateral quickly and
receive the amount it is owed.

Section 4(2) Commercial Paper. 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 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. As a result it
suffers from a liquidity risk, the risk that the securities may be difficult to
value because of the absence of an active market and may be disposed of only
after considerable expense and delay. Section 4(2) paper will not be subject to
the fund's 10% limitation on illiquid securities set forth below where the
Board of Trustees of the Investment Company (pursuant to guidelines adopted by
the Board) determines that a liquid trading market exists.

7
<PAGE>

that the proceeds from the sale of the underlying securities and other
collateral held by the Fund are less than the repurchase price and the Fund's
cost associated with delay and enforcement of the repurchase agreement. In
addition, in the event of bankruptcy of the seller, a Fund could suffer
additional losses if a court determines that the Fund's interest in the
collateral is not enforceable.

SHAREHOLDER INFORMATION

Purchase of Fund Shares
Distribution and Eligible Investors. Shares of the funds are offered without a
sales commission by Russell Fund Distributors, Inc. (the Distributor), to
institutional investors which invest for their own account or in a fiduciary or
agency capacity.

Minimum Initial Investment and Account Balance. The Prime Money Market Fund
requires a minimum initial investment of $20 million and a minimum account
balance of $15 million. The fund reserves the right to reject any purchase
order.

Purchase Dates and Times. Fund shares may be purchased on any business day. A
business day is one on which the New York Stock Exchange or Boston Federal
Reserve are open for regular trading. All purchases must be made in US dollars.
Payments for fund shares must be received by the Transfer Agent, and the
accompanying payment must be in federal funds or converted into federal funds
by the Transfer Agent before the purchase order can be accepted. Shares of the
fund purchased by orders accepted prior to 3 p.m. Eastern time will earn the
dividend determined on the date of purchase.

Order and Payment Procedures. There are several ways to invest in the fund. The
SSgA Funds requires a purchase order in good form, which consists of a
completed and signed SSgA Funds' Institutional Account Application, regardless
of the investment method. For additional information, additional Applications
or other forms, call the Customer Service Department at (800) 647-7327, or
write: SSgA Funds, 1 International Place, 27th Floor, Boston, MA 02110.

Federal Funds Wire. In order to assure timely processing of purchase orders,
the Investment Company strongly recommends that you make initial or subsequent
investments by wiring federal funds to State Street Bank and Trust Company as
the Transfer Agent by:

1. Completing the SSgA Funds' Institutional Account Application and fax it to
(617) 664-6011. Please confirm that the fax was received by calling (800)
997-7327.

2. Telephoning State Street Bank and Trust Company at (800) 647-7327 and
providing: (1) the investor's account registration number, address and
social security or tax identification number; (2) the name of the fund; (3)
the amount being wired; (4) the name of the wiring bank; and (5) the name
and telephone number of the person at the wiring bank to be contacted in
connection with the order.

3. 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 Prime Money Market Fund
Account Number and Registration

Orders transmitted via this purchase method will be credited when federal funds
are received by State Street. You will not be permitted to redeem shares from
the account until an original completed application has been received. Please
send completed applications to: State Street Bank, attention SSgA Funds, P.O.
Box 8317, Boston, MA 02266-8317. Please reference the account number on the
application.

Mail. To purchase shares by mail, send a check or other negotiable bank draft
payable to: State Street Bank and Trust Company, P.O. Box 8317, Boston, MA
02266-8317, Attention: SSgA Prime Money Market Fund. Third party checks, except
those payable to an existing shareholder (not a corporation or partnership) and
checks drawn on credit card accounts will not be accepted. Certified checks are
not necessary; however, all checks are accepted subject to collection at full
face value in United States funds and must be drawn in United States dollars on
a United States bank. Normally, checks and drafts are converted to federal
funds within two business days following receipt of the check or draft. Initial
investments should be accompanied by a completed Application, and subsequent
investments are to be accompanied by the investor's account number.

1. The investment objective, policies and limitations must match that of the
fund;
2. They must have a readily ascertainable market value;
3. They must be liquid;
4. They must not be subject to restrictions on resale; and 5. The market value
of any securities exchanged, plus any cash, must be at least $25 million;
State Street reserves the right to make exceptions to this minimum at its
discretion.

8
<PAGE>

Shares purchased in exchange for securities generally may not be redeemed or
exchanged until the transfer has settled--within 3 business days following the
date of the exchange.

Exchange Privilege. Subject to the fund's minimum investment requirement,
investors may exchange their fund shares without charge for shares of any other
investment portfolio offered by the Investment Company. 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: (1) by telephone if the registrations of
the two accounts are identical; or (2) in writing addressed to State Street
Bank and Trust Company, P.O. Box 8317, Boston, MA 02266-8317, Attention: SSgA
Prime Money Market Fund. If shares of the fund were purchased by check, the
shares must have been present in an account for 10 days before an exchange is
made. The exchange privilege will only be available in states where the
exchange may legally be made, and may be modified or terminated by the
Investment Company upon 60 days' notice to shareholders.

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. Typically, payment 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. Although the
Investment Company does not currently charge a fee for this service, Investment
Company reserves the right to charge a fee for the cost of wire-transferred
redemptions of less than $1,000. Redemption requests received prior to 3:00
p.m. Eastern time will not be entitled to that day's dividend. 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. An
investor will not be permitted to redeem shares from the account until a
completed Application is on file.

During periods of drastic economic or market changes, shareholders using this
method may encounter delays.

Mail. In certain circumstances, you will need to make a request to sell shares
in writing (please use the address for purchases by mail under "Purchase of
Fund Shares"). The redemption will be processed based on the net asset value
next determined after receipt by State Street of all required documentation in
good order. Good order means that the request must include the following:

1. A clear letter of instruction or a stock assignment stating the fund and
account number that the redemption is to be process from, the dollar amount
to be redeemed and where the proceeds are to be sent. The letter must be
signed by all owners of the shares in the exact names in which they appear
on the account, together with a guarantee of the signature of each owner by
a bank, trust company or member of a recognized stock exchange; and
2. Such other supporting legal documents, if required by applicable law or the
Transfer Agent, in the case of estates, trusts, guardianships,
custodianships, corporations and pension and profit-sharing plans.

The Prime Money Market Fund reserves the right to redeem the shares in any
account with a balance of less than $15 million as a result of shareholder
redemptions. Before shares are redeemed to close an account, you will be
notified in writing and allowed 60 days to purchase additional shares to meet
the minimum account balance.

The Prime Money Market Fund may pay any portion of the redemption amount in
excess of $25 million by a distribution

9
<PAGE>

in kind of readily marketable securities from the portfolio of the fund in lieu
of cash. Investors will incur brokerage charges and may incur other fees on the
sale of these portfolio securities. In addition, you will be subject to the
market risks associated with such securities until such time as you choose to
dispose of the security. 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 determined by the Securities and Exchange
Commission, should exist.

Distribution Services and Shareholder
Servicing Arrangements

Service organizations providing shareholder services to the fund will be
responsible for prompt transmission of purchase and redemption orders and may
charge you a fee for their services.

Pricing of Fund Shares

The price per share for the fund is computed by adding the value of all
securities and other assets of the fund, deducting accrued liabilities,
dividing by the number of shares outstanding and rounding to the nearest cent.
The fund's price is determined as of 3:00 p.m. Eastern time (or as of the close
of the regular trading session of the New York Stock Exchange, if earlier). A
business day is one on which the New York Stock Exchange or Boston Federal
Reserve are open for business. The fund seeks to maintain a $1.00 per share net
asset value and, accordingly, uses the amortized cost valuation method to value
its portfolio instruments. The amortized cost valuation method initially prices
an instrument at its cost and thereafter assumes a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument.

Distribution Option. You can choose from four different distribution options as
indicated on the account Application:

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.

10
<PAGE>

If Cash Option has been selected and the account is closed anytime during the
month, the dividends will automatically be wired the following business day
after the redemption to the bank where the redemption wire was sent. If an
account is closed during the month and dividends were to be reinvested, the
proceeds will automatically be sent by check to the address of record.

Taxes
Dividends from net investment income and distributions of net short-term
capital gains are taxable to you 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
you have held the shares and whether you were paid in cash or additional
shares.

Although the sale or exchange of fund shares is a taxable event, no gain or
loss for a shareholder is anticipated because the fund seeks to maintain a
stable $1.00 per share net asset value.

Foreign shareholders invested in any SSgA Fund should consult with their tax
advisors as to if and how the federal income tax and its withholding
requirements applies to them.

11
<PAGE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
----------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
INCOME FROM OPERATIONS:
Net investment income .0496 .0544 .0528 .0546 .0567
DISTRIBUTIONS:
Dividends from net investment income (.0496) (.0544) (.0528) (.0546) (.0567)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
======= ======= ======= ======= =======
TOTAL RETURN (%) 5.08 5.63 5.52 5.60 5.82
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ($000 omitted) 2,415,231 2,125,020 1,406,263 1,095,631 1,076,630
Ratios to average net assets (%):
Operating expenses, net(1) .20 .20 .20 .20 .14
Operating expenses, gross(1) .26 .28 .28 .25 .27
Net investment income 4.96 5.48 5.40 5.44 5.76
</TABLE>

- -----------
(1) See Note 4 of the Annual Report for current period amounts.

12
<PAGE>

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<PAGE>

(This page has been left blank intentionally.)

<PAGE>

SSgA FUNDS

SSgA Money Market Fund

SSgA US Government Money Market Fund

SSgA Tax Free Money Market Fund

SSgA Yield Plus Fund

SSgA Intermediate Fund

SSgA Bond Market Fund

SSgA High Yield Bond Fund

SSgA Growth and Income Fund

SSgA S&P 500 Index Fund

SSgA Matrix Equity Fund

SSgA Small Cap Fund
(Closed to new investors as of August 31, 1998)

SSgA Special Equity Fund

SSgA Tuckerman Active REIT Fund

SSgA Aggressive Equity Fund

SSgA IAM SHARES Fund

SSgA Emerging Markets Fund

SSgA Active International Fund

SSgA International Growth Opportunities Fund

SSgA Life Solutions Growth Fund

SSgA Life Solutions Balanced Fund

SSgA Life Solutions Income and Growth Fund
<PAGE>

ADDITIONAL INFORMATION ABOUT THE FUND

A Statement of Additional Information includes additional information about the
fund. The Statement of Additional Information is incorporated into this
Prospectus by reference.

Russell Fund Distributors, Inc.
One International Place
Boston, Massachusetts 02110
1-800-997-7327

SSgA Funds' Investment Company Act File No. 811-5430

<PAGE>
Filed Pursuant to Rule 485(b)
File Nos. 33-19229; 811-5430

SSgA FUNDS
One International Place
Boston, Massachusetts 02110
1-800-997-7327
www.ssgafunds.com

SMALL CAP FUND

The Small Cap Fund seeks to maximize total return through investment in equity
securities; under normal market conditions, at least 65% of total assets will
be invested in securities issued by smaller capitalized issuers.

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.

PROSPECTUS DATED DECEMBER 17, 1999

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
-----
<S> <C>
Investment Strategies and Principal Risks ............................................ 3
Investment Objective ................................................................ 3
Principal Investment Strategies ..................................................... 3
Principal Risks of Investing in the Fund ............................................ 3
Risk and Return ..................................................................... 3
Fees and Expenses of the Fund ........................................................ 4
Management of the Fund ............................................................... 5
Additional Information about the Fund's Objectives, Investment Strategies and Risks .. 5
Shareholder Information .............................................................. 6
Purchase of Fund Shares ............................................................. 6
Redemption of Fund Shares ........................................................... 7
Distribution Services and Shareholder Servicing Arrangements ........................ 9
Pricing of Fund Shares .............................................................. 9
Dividends and Distributions ......................................................... 9
Taxes ............................................................................... 10
Financial Highlights ................................................................. 11
Additional Information about the Fund ........................................ Back Cover
</TABLE>

2
<PAGE>

INVESTMENT STRATEGIES
AND PRINCIPAL RISKS

Investment Objective

The fund's 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.

This objective may be changed by the fund's trustees without shareholder
approval.

Principal Investment Strategies

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. Sector and industry
weight are maintained at a similar level to that of the Russell 2000[RegTM]
Index to avoid unintended exposure to factors such as the direction of the
economy, interest rates, energy prices and inflation. The fund will also
utilize futures and options.

Equity securities will be selected for the fund on the basis of proprietary
analytical models of State Street Global Advisors, the fund's Advisor. The fund
management team uses a quantitative approach to investment management, designed
to uncover equity securities which are undervalued, with superior growth
potential. This quantitative investment management approach involves a modeling
process to evaluate vast amounts of financial data and corporate earnings
forecasts. The risks of securities of smaller capitalized companies are
described in Principal Risks.

Principal Risks of Investing in the Fund

Equity Securities. The value of equity securities will rise and fall in
response to the activities of the company that issued the stock, general market
conditions, and/or economic conditions.

Securities of Small Cap Companies. Investments in smaller companies may involve
greater risks because these companies often have narrower markets and more
limited managerial and financial resources than larger, more established
companies. As a result their performance can be more volatile which could
increase the volatility of the fund's portfolio.

Analytical Models. The success of a fund's principal investment strategy
depends on the Advisor's skill in designing and using its analytical model as a
tool for selecting undervalued stocks.

Futures and Options on Futures. A futures contract is an agreement to buy or
sell something in the future. There are certain risks in using futures
contracts. Such risks may include: (1) the inability to close out a future
caused by the non-existence of a liquid secondary market; and (2) an imperfect
correlation between price movements of the futures contracts or option with
price movement of the Portfolio Securities or Securities Index.

[START BAR CHART]

Annual Total Returns -- Money Market

[END BAR CHART]

Best Quarter--December 31, 1998: 19.66%

Worst Quarter--September 30, 1998: (27.21%)

Current Fiscal Quarter--August 31, 1999: 1.89%

Average Annual Total Returns
For the Periods Ended December 31, 1998:

<TABLE>
<CAPTION>
1 Year 5 Years Inception
------------- ----------- ----------
<S> <C> <C> <C>
Small Cap Fund (7.55)% 15.63% 16.29%
Russell 2000[RegTM] Index (2.55) 11.86 14.87
</TABLE>

3
<PAGE>

FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.

Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
Management Fee .75%
Distribution and Service (12b-1) Fees(1) .19
Other Expenses .13
-----
Total Annual Fund Operating Expenses 1.07%
=====
</TABLE>

- -----------
(1) The ratio includes .09% for 12b-1 Distribution and .10% for 12b-1
Shareholder Servicing Fees

Example

This example is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in the fund for the time
periods indicated and then you redeem all of your shares at the end of
those periods. The example also assumes that your investment has a 5%
return each year and that the fund's operating expenses remain the same.
Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:

<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
- -------- --------- --------- ---------
<S> <C> <C> <C>
$ 109 $340 $590 $1,306
====== ==== ==== ======
</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.

4
<PAGE>

MANAGEMENT OF THE FUND

For these services, the fund pays State Street an annual management fee,
calculated daily and paid monthly, of 0.75% of the average daily net asset
value of the fund.

Ms. Jennifer Bardsley, Principal, is the portfolio manager primarily
responsible for investment decisions regarding the fund. Ms. Bardsley joined
State Street in March 1993. Her responsibilities include research, product
development, and portfolio management for the US Active Strategy. She holds BA
degrees in Economics and Russian from Middlebury College, and an MS degree in
Computer Science from Boston College. There are five other portfolio managers
who assist in managing the fund.

ADDITIONAL INFORMATION ABOUT
THE FUND'S OBJECTIVES, INVESTMENT STRATEGIES AND RISKS

The investment objective of the fund as stated above may be changed by the
fund's trustees without shareholder approval. The investment policies described
below reflect the fund's current practices. In addition to the principal risks
explained above, other risks are explained in some of the descriptions of the
investment policies below:

The Russell 2000[RegTM] Index. The fund maintains sector and industry
weightings similar to the Russell 2000 Index. The Russell 2000 Index consists
of the smallest 2,000 companies in the Russell 3000[RegTM] 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.

Options on futures contracts give the purchaser the right to assume a position
at a specified price in a futures contract at any time before expiration of the
option contract. When trading futures contracts, the fund will not commit more
than 5% of the market value of its total assets to initial margin deposits on
futures and premiums paid for options on futures.

There are certain investment risks in using derivatives such as futures
contracts and options on futures as a hedging technique. Loss can result from a
lack of correlation between changes in the value of derivative instruments and
the portfolio assets (if any) being hedged, the potential illiquidity of the
markets for derivative instruments, or risks arising from margin requirements
and related leverage factors associated with such transactions. The use of
these management techniques also involves the risk of loss if the Advisor is
incorrect in its expectation of fluctuations in securities prices, interest
rates or currency prices.

Portfolio Turnover. The fund may experience risk associated with high turnover.
Those risks are 1) increased transaction expenses which will adversely affect
fund performance; and 2) result in increased brokerage commissions and other
transaction costs, and the possibility of realized capital gains.

5
<PAGE>

SHAREHOLDER INFORMATION

Purchase of Fund Shares

Distribution and Eligible Investors. Shares of the funds are offered without a
sales commission by Russell Fund Distributors, Inc. (the Distributor), to
institutional and retail investors which invest for their own account or in a
fiduciary or agency capacity.

Minimum Initial and Subsequent Investments and Account Balance. The fund
requires a minimum initial investment of $1,000, with the exception of IRA
accounts, for which the minimum initial investment is $250. Subsequent
investments must be at least $100. An investment in the account (other than IRA
accounts) may be subject to redemption at the fund's discretion if the account
balance is less than $1,000 as a result of shareholder redemptions. The
Transfer Agent will give shareholders 60 days' notice that the account will be
closed unless an investment is made to increase the account balance to the
$1,000 minimum. Failure to bring the account balance to $1,000 may result in
the Transfer Agent closing the account at the net asset value (NAV) next
determined on the day the account is closed and mailing the proceeds to the
shareholder's address shown on the Transfer Agent's records. The fund reserves
the right to reject any purchase order. If you are purchasing fund assets
through a pension or other participation plan, you should contact your plan
administrator for further information on purchases.

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.

Each fund reserves the right to terminate or modify the exchange privilege in
the future.

Federal Funds Wire. You may make initial or subsequent investments by wiring
federal funds to State Street, as Transfer Agent, by:

1. Telephoning the Customer Service Department at 1-800-647-7327 between 8 a.m.
and 4 p.m. Eastern time, and

6
<PAGE>

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)

Shares purchased in exchange for securities generally may not be redeemed or
exchanged until the transfer has settled--within 3 business days following the
data of the exchange.

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.

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 net asset value and dividend as of
the prior business day, pursuant to a duly executed shareholder servicing
agreement with the SSgA Funds or the Distributor.

7
<PAGE>

nicated by telephone are properly authorized. Neither the fund, the Distributor
nor the Transfer Agent will be responsible for any loss or expense for
executing instructions that are deemed to be authorized and genuine 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 your address of record, if the address has not been changed within 60 days
of the redemption request. To the extent the Transfer Agent fails to use
reasonable procedures as a basis for its belief, it and/or its service
contractors may be liable for telephone instructions that prove to be
fraudulent or unauthorized. The fund, the Distributor or the Transfer Agent
will be responsible for the authenticity of terminal access instructions only
if it acts with willful misfeasance, bad faith or gross negligence.

Please note that proceeds from ACH withdrawals will be transmitted to the
investor's bank two days after the withdrawal.

During periods of drastic economic or market changes, shareholders using this
method may encounter delays.

1. Your address of record has changed within the past 60 days;
2. You are redeeming more than $50,000 worth of shares; or
3. You are 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:

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.

8
<PAGE>

<TABLE>
<S> <C>
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 o Letter of instruction signed
shareholders whose by surviving tenant(s);
co-tenants are o Certified copy of the death
deceased certificate; and
o Signature guarantee, if
applicable (see above).
</TABLE>

Please contact the Customer Service Department at 1-800-647-7327 for questions
and further instructions.

Distribution Services and
Shareholder Servicing Arrangements

Service organizations providing shareholder services to the fund will be
responsible for prompt transmission of purchase and redemption orders and may
charge you a fee for their services.

Pricing of Fund Shares

Debt obligation securities maturing within 60 days of the valuation date are
valued at amortized cost unless the Board determines that the amortized cost
method does not represent market value.

Dividends and Distributions
The Board of Trustees intends to declare and pay dividends on shares of the
fund annually from net investment income. The Board of Trustees intends to
declare distributions annually from net short- and long-term capital gains, if
any, generally in mid-October. It is intended that an additional distribution
may be declared and paid in December if required for the fund to avoid the
imposition of a 4% federal excise tax on undistributed capital gains.

Distribution Option. You 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

9
<PAGE>

shares of the fund. If you do not indicate a choice on the Application, this
option will be automatically assigned.

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.

Taxes
Dividends from net investment income and distributions of net short-term
capital gains are taxable to you 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
you have held the shares and whether you were paid in cash or additional
shares.

Foreign shareholders invested in any SSgA Fund 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 an SSgA 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.

10
<PAGE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995*
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $15.96 $22.11 $17.44 $14.42 $11.88
------ ------ ------ ------ ------
INCOME FROM OPERATIONS:
Net investment income(1) .03 .02 .03 .04 .13
Net realized and unrealized gain (loss) 1.78 (4.54) 5.87 3.25 3.19
------ ------ ------ ------ ------
Total Income From Operations 1.81 (4.52) 5.90 3.29 3.32
------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from net investment income (.02) (.04) (.01) (.07) (.15)
Dividends from net realized gain on investments -- (1.59) (1.22) (.20) (.63)
------ ------ ------ ------ ------
Total Distributions (.02) (1.63) (1.23) (.27) (.78)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $17.75 $15.96 $22.11 $17.44 $14.42
====== ====== ====== ====== ======
TOTAL RETURN (%) 11.35 (22.32) 35.85 23.14 30.04
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period ($000 omitted) 352,013 344,630 149,808 55,208 23,301
Ratios to average net assets (%):
Operating expenses, net 1.07 1.04 1.00 1.00 .97
Operating expenses, gross 1.07 1.04 1.09 1.18 1.58
Net investment income .17 .10 .18 .26 .81
Portfolio turnover (%) 110.82 86.13 143.79 76.85 192.88
</TABLE>

- -----------

* Prior to November 22, 1994, the fund was passively managed, the S&P Midcap
Index. Effective November 23, 1994, the fund increased the management fee
from .20% to .75% of its average daily net assets.

(1) For the period subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.

11
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<PAGE>

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<PAGE>

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<PAGE>

SSgA FUNDS

SSgA Money Market Fund

SSgA US Government Money Market Fund

SSgA Tax Free Money Market Fund

SSgA Yield Plus Fund

SSgA Intermediate Fund

SSgA Bond Market Fund

SSgA High Yield Bond Fund

SSgA Growth and Income Fund

SSgA S&P 500 Index Fund

SSgA Matrix Equity Fund

SSgA Small Cap Fund
(Closed to new investors as of August 31, 1998)

SSgA Special Equity Fund

SSgA Tuckerman Active REIT Fund

SSgA Aggressive Equity Fund

SSgA IAM SHARES Fund

SSgA Emerging Markets Fund

SSgA Active International Fund

SSgA International Growth Opportunities Fund

SSgA Life Solutions Growth Fund

SSgA Life Solutions Balanced Fund

SSgA Life Solutions Income and Growth Fund

<PAGE>

ADDITIONAL INFORMATION ABOUT THE FUND

A Statement of Additional Information includes additional information about the
fund. The Statement of Additional Information is incorporated into this
Prospectus by reference.

Russell Fund Distributors, Inc.
One International Place
Boston, Massachusetts 02110
1-800-997-7327

SSgA Funds' Investment Company Act File No. 811-5430.

<PAGE>
Filed Pursuant to Rule 485(b)
File Nos. 33-19229; 811-5430

SSgA FUNDS
One International Place
Boston, Massachusetts 02110
1-800-997-7327
www.ssgafunds.com

S&P 500 INDEX FUND

The S&P 500 Index Fund seeks to replicate the total return of the Standard &
Poor's 500 Composite Stock Price Index.

"S&P 500" is a trademark of Standard & Poor's Corporation and has been licensed
for use by the SSgA Funds. The fund is not sponsored, endorsed, sold or
promoted by S&P, and S&P makes no representation regarding the advisability of
investing in this fund.

PROSPECTUS DATED DECEMBER 17, 1999

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
-----
<S> <C>
Investment Strategies and Principal Risks ............................................. 3
Investment Objective ................................................................. 3
Principal Investment Strategies ...................................................... 3
Principal Risks of Investing in the Fund ............................................. 3
Risk and Return ...................................................................... 4
Fees and Expenses of the Fund ......................................................... 5
Management of the Fund ................................................................ 6
Additional Information about the Fund's Objectives, Investments Strategies and Risks .. 6
Shareholder Information ............................................................... 7
Purchase of Fund Shares .............................................................. 7
Redemption of Fund Shares ............................................................ 8
Distribution Services and Shareholder Servicing Arrangements ......................... 10
Pricing of Fund Shares ............................................................... 10
Dividends and Distributions .......................................................... 10
Taxes ................................................................................ 11
Financial Highlights .................................................................. 12
Information Regarding Standard & Poor's Corporation ................................... 13
Additional Information about the Fund ......................................... Back Cover
</TABLE>

2
<PAGE>

INVESTMENT STRATEGIES
AND PRINCIPAL RISKS

Investment Objective

The fund's fundamental investment objective is to seek to replicate the total
return of the Standard & Poor's 500 Composite Stock Price Index (the S&P 500
Index).

This objective may be changed only with the approval of a majority of the
fund's shareholders as defined in the Investment Company Act of 1940 (the 1940
Act).

Principal Investment Strategies
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 replicate 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 S&P 500 Index. The fund may also invest in futures
and options. The Index is designed to capture the price performance of a large
cross-section of the US publicly traded stock market. 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.

Principal Risks of Investing in the Fund

Large Capitalization Stocks. The fund's emphasis on large-cap stocks makes it
susceptible to the business risks of larger companies, which usually cannot
change as quickly as smaller companies in response to competitive challenges.
Larger companies also tend not to be able to maintain the high growth rates of
well-managed smaller companies, especially during strong economic periods. A
fund's emphasis on large-cap stocks makes it susceptible to the business risks
of larger companies, which usually cannot change as quickly as smaller companies
in response to competitive challenges.

Equity Securities. The value of equity securities will rise and fall in
response to the activities of the company that issued the stock, general market
conditions, and/or economic conditions.

Tracking Models. The success of a fund's principal investment strategy depends
on the Advisor's skill in designing and using its model to track the S&P 500
Index. The fund is not managed according to traditional methods of "active"
investment management. Instead, the fund attempts to duplicate the investment
performance of its benchmark index through automated statistical analytic
procedures.

Risks of Futures and Options. There are certain investment risks in using
derivatives such as futures contracts and options on futures as a hedging
technique. Loss can result from a lack of correlation between changes in the
value of derivative instruments and the portfolio assets (if any) being hedged,
the potential illiquidity of the markets for derivative instruments or risks
arising from margin requirements and related leverage factors associated with
such transactions. The use of these management techniques also involves the
risk of loss if the Adviser is incorrect in its expectation of fluctuations in
securities prices, interest rates or currency prices.

Index Correlation. The fund's ability to achieve significant correlation
between fund and the S&P 500 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. The fund's management team will
monitor correlation. Should the fund fail to achieve an appropriate level of
correlation, State Street Global Advisors, the fund's Advisor, will report to
the Board of Trustees, which will consider alternative arrangements.

3
<PAGE>

[START BAR CHART]

Annual Total Returns -- S&P 500 Index

[END BAR CHART]

Best Quarter--December 31, 1998: 21.24%
Worst Quarter--September 30, 1998: (9.97%)
Current Fiscal Quarter--August 31, 1999: 1.71%

Average Annual Total Returns
For the Periods Ended December 31, 1998:

<TABLE>
<CAPTION>
1 Year 5 Years Inception
----------- ----------- ----------
<S> <C> <C> <C>
S&P 500 Index Fund 28.35% 23.80% 21.32%
S&P 500 Index 28.58 24.06 20.52
</TABLE>

4
<PAGE>

FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.

Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
Management Fee(1) .10%
Distribution and Service (12b-1) Fees(1,2) .09
Other Expenses(1) .09
-----
Gross Expenses .28
-----
Less Contractual Management Fee Waiver and Reimbursement (.10)
-----
Total Net Annual Fund Operating Expenses(1) .18%
=====
</TABLE>

- -----------
(1) The Advisor has contractually agreed to waive .07% of its .10% advisory fee
for the S&P 500 Index Fund until December 31, 2010. In addition, until
December 31, 2002, the Advisor agrees to reimburse the fund for all expenses
in excess of .18% of average daily net assets on an annual basis. The annual
management after the waiver and reimbursement is .00%. The total annual
expenses shown above have been restated to reflect the waiver and
reimbursement.

(2) The ratio includes .04% for 12b-1 Distribution and .05% for 12b-1
Shareholder Servicing Fees.

Example

This example is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds.

<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
- -------- --------- --------- ---------
<S> <C> <C> <C>
$ 18 $58 $157 $356
===== === ==== ====
</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.

5
<PAGE>

MANAGEMENT OF THE FUND

For these services, the fund pays State Street an annual management fee,
calculated daily and paid monthly, of 0.00% (after fee waiver and
reimbursement) of the average daily net asset value of the fund.

Mr. James B. May, Principal, has been with State Street since 1989. Before
joining the Global Structured Products Group as a portfolio manager in January
1994, Mr. May served as a Senior Investment Support Analyst for the US
Structured Products Group. Mr. May 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 holds a BS in Finance
from Bentley College and his MBA from Boston College. There are five other
members of the team who assist Mr. May with the management of the fund.

ADDITIONAL INFORMATION ABOUT
THE FUND'S OBJECTIVES, INVESTMENT STRATEGIES AND RISKS

S&P 500 Index. The fund attempts to replicate the return of the S&P 500 Index
and invests in all 500 stocks in the 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.

Futures Contracts and Options on Futures. To equitize cash the Fund may enter
into futures contracts that relate to securities in which they may directly
invest and indices comprised of such securities and may purchase and write call
and put options on such contracts. The Fund may also purchase futures and
options if cheaper than the underlying stocks. This will enable the fund to
facilitate demand for same day redemptions.

There are certain investment risks in using futures contracts. Such risks may
include: (1) the inability to close out a futures

6
<PAGE>

contract 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.

American Depository Receipts (ADRs). The common stocks the fund may invest in
include American Depository Receipts (ADRs). 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 securities of
foreign issuers, such as: 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
investment in such securities. For purposes of the fund's investment policies,
the fund's investments in ADRs and similar instruments will be deemed to be
investments in the equity securities representing securities of foreign issuers
into which they may be converted.

SHAREHOLDER INFORMATION

Purchase of Fund Shares

Minimum Initial and Subsequent Investments and Account Balance. The fund
requires a minimum initial investment of $10,000, with the exception of IRA
accounts, for which the minimum initial investment is $250. Subsequent
investments must be at least $100. An investment in the fund (other than IRA
accounts) may be subject to redemption at the fund's discretion if the account
balance is less than $10,000 as a result of shareholder redemptions. The
Transfer Agent will give shareholders 60 days' notice that the account will be
closed unless an investment is made to increase the account balance to the
$10,000 minimum. Failure to bring the account balance to $10,000 may result in
the Transfer Agent closing the account at the net asset value ("NAV") next
determined on the day the account is closed and mailing the proceeds to the
shareholder's address shown on the Transfer Agent's records. Shareholders with
accounts established prior to December 24, 1997 are not subject to the $10,000
minimum requirements. 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.

Purchase Dates and Times. Fund shares may be purchased on any business day. A
business day is one on which the New York Stock Exchange is open for regular
trading. All purchases must be made in US dollars. Purchase orders in good form
(described below) and payments for fund shares by check or by wire transfer
must be received by the Transfer Agent prior to the close of the regular
trading session of the New York Stock Exchange, which is ordinarily 4 p.m.
Eastern time (the "Pricing Time"), to be effective on the date received. If an
order or payment is received after the Pricing Time, the order will be
effective on the next business day. Orders placed through a servicing agent or
broker-dealer that has a selling or service agreement with the Distributor or
the SSgA Funds must be received by the servicing agent or broker-dealer prior
to the Pricing Time.

Mail. For new accounts, please mail the completed Application and check.
Additional investments should also be made by check. You must include the fund
name and account number on your check, 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 State Street Bank. If using a servicing
agent or broker-dealer, please verify with them the proper address or
instructions required before writing and mailing your check. All purchase
requests should be mailed to one of the following addresses:

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.

7
<PAGE>

have been present in your 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. Please contact your tax
advisor.

Each fund reserves the right to terminate or modify the exchange privilege in
the future.

Federal Funds Wire. You may make initial or subsequent investments by wiring
federal funds to State Street, as Transfer Agent, by:

2. Instructing the wiring bank to wire federal funds to:

Shares purchased in exchange for securities generally may not be redeemed or
exchanged until the transfer has settled--within 3 business days following the
date of the exchange.

Redemption of Fund Shares

8
<PAGE>

of the purchase, you may experience delays in receiving redemption proceeds. In
this case, the fund will generally postpone sending redemption proceeds until
it 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.

Redemption requests must be received prior to 4 p.m. Eastern time in order to
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 to receive the net asset value and dividend as of
the prior business day, pursuant to a duly executed Shareholder Servicing
Agreement with the SSgA Funds or the Distributor.

Please note that proceeds from ACH withdrawals will be transmitted to the
investor's bank two days after the withdrawal.

During periods of drastic economic or market changes, shareholders using this
method may encounter delays.

1. Your address of record has changed within the past 60 days;
2. You are redeeming more than $50,000 worth of shares; or
3. You are 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:

9
<PAGE>

Please check with the institution prior to signing to ensure that they are an
acceptable signature guarantor. A NOTARY PUBLIC CANNOT PROVIDE A SIGNATURE
GUARANTEE.

<TABLE>
<CAPTION>
Seller Requirements for Written Requests
- ------------------------ ----------------------------------
<S> <C>
Owner of individual, o Letter of instruction, signed
joint, sole by all persons authorized to
proprietorship, UGMA/ sign for the account stating
UTMA (custodial general titles/capacity, exactly
accounts for minors) as the account is registered; and
or general partner o Signature guarantee, if
accounts applicable (see above).
Owners of corporate or o Letter of instruction signed
association accounts by authorized 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 o Letter of instruction, signed
trust accounts by all trustees;
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 o Letter of instruction signed
shareholders whose by surviving tenant(s);
co-tenants are o Certified copy of the death
deceased certificate; and
o Signature guarantee, if
applicable (see above).
</TABLE>

Please contact the Customer Service Department at 1-800-647-7327 for questions
and further instructions.

Distribution Services and Shareholder
Servicing Arrangements

Service organizations providing shareholder services to the fund will be
responsible for prompt transmission of purchase and redemption orders and may
charge you a fee for their services.

Debt obligation securities maturing within 60 days of the valuation date are
valued at amortized cost unless the Board determines that the amortized cost
method does not represent market value.

Dividends and Distributions
The Board of Trustees intends to declare and pay dividends on shares of the
fund quarterly from net investment income. Distributions will be made at least
annually from net short- and long-term capital gains, if any, generally in
mid-October. It is intended that an additional distribution may be declared and
paid in December if required for the fund to avoid the imposition of a 4%
federal excise tax on undistributed capital gains.

10
<PAGE>

distributions will be reinvested in additional shares of the relevant fund
until you notify the SSgA Funds in writing of the correct address. You must
also request 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 will 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.

Distribution Option. You can choose from four different distribution options as
indicated on the account Application:

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.

Taxes

Foreign shareholders invested in any SSgA Fund should consult with their tax
advisors as to if and how the federal income tax and its withholding
requirements applies to them.

11
<PAGE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
-------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $19.42 $18.96 $14.41 $12.81 $10.89
------ ------ ------ ------ ------
INCOME FROM OPERATIONS:
Net investment income(1) .29 .31 .32 .32 .29
Net realized and unrealized gain (loss) 6.74 1.18 5.22 1.98 1.95
------ ------ ------ ------ ------
Total From Operations 7.03 1.49 5.54 2.30 2.24
------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from net investment income (.29) (.32) (.32) (.31) (.29)
Dividends from net realized gain on investment (2.42) (.71) (.67) (.39) (.03)
------ ------ ------ ------ ------
Total Distributions (2.71) (1.03) (.99) (.70) (.32)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $23.74 $19.42 $18.96 $14.41 $12.81
====== ====== ====== ====== ======
TOTAL RETURN (%) 39.52 7.91 40.30 18.46 21.11
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ($000 omitted) 2,673,963 1,615,913 1,299,571 704,683 545,200
Ratios to average net assets (%):
Operating expenses, net(2) .18 .17 .16 .18 .19
Operating expenses, gross(2) .28 .27 .26 .28 .29
Net investment income 1.29 1.50 2.00 2.32 2.76
Portfolio turnover (%) 13.80 26.17 7.54 28.72 38.56
</TABLE>

- -----------

(1) For the period subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.

(2) See Note 4 of the Annual Report for current period amounts.

12
<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.

13
<PAGE>

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<PAGE>

SSgA FUNDS

SSgA Money Market Fund

SSgA US Government Money Market Fund

SSgA Tax Free Money Market Fund

SSgA Yield Plus Fund

SSgA Intermediate Fund

SSgA Bond Market Fund

SSgA High Yield Bond Fund

SSgA Growth and Income Fund

SSgA S&P 500 Index Fund

SSgA Matrix Equity Fund

SSgA Small Cap Fund
(Closed to new investors as of August 31, 1998)

SSgA Special Equity Fund

SSgA Tuckerman Active REIT Fund

SSgA Aggressive Equity Fund

SSgA IAM SHARES Fund

SSgA Emerging Markets Fund

SSgA Active International Fund

SSgA International Growth Opportunities Fund

SSgA Life Solutions Growth Fund

SSgA Life Solutions Balanced Fund

SSgA Life Solutions Income and Growth Fund

<PAGE>

ADDITIONAL INFORMATION ABOUT THE FUND

A Statement of Additional Information includes additional information about the
fund. The Statement of Additional Information is incorporated into this
Prospectus by reference.

Russell Fund Distributors, Inc.
One International Place
Boston, Massachusetts 02110
1-800-997-7327

SSgA Funds' Investment Company Act File No. 811-5430

<PAGE>
Filed Pursuant to Rule 485(b)
File Nos. 33-19229; 811-5430

SSgA FUNDS
One International Place
Boston, Massachusetts 02110
1-800-997-7327
www.ssgafunds.com

TAX FREE MONEY MARKET FUND

The Tax Free Fund seeks to maximize current income, exempt from federal income
taxes, to the extent consistent with the preservation of capital and liquidity
and the maintenance of a stable $1.00 per share net asset value.

PROSPECTUS DATED DECEMBER 17, 1999

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
-----
<S> <C>
Investment Strategies and Principal Risks ............................................ 3
Investment Objective ................................................................ 3
Principal Investment Strategies ..................................................... 3
Principal Risks of Investing in the Fund ............................................ 3
Risk and Return ..................................................................... 4
Fees and Expenses of the Fund ........................................................ 5
Management of the Fund ............................................................... 6
Additional Information About the Fund's Objectives, Investment Strategies and Risks .. 6
Shareholder Information .............................................................. 7
Purchase of Fund Shares ............................................................. 7
Redemption of Fund Shares ........................................................... 8
Distribution Services and Shareholder Servicing Arrangements ........................ 10
Pricing of Fund Shares .............................................................. 10
Dividends and Distributions ......................................................... 10
Taxes ............................................................................... 11
Financial Highlights ................................................................. 13
Additional Information About the Fund ........................................ Back Cover
</TABLE>

2
<PAGE>

INVESTMENT STRATEGIES
AND PRINCIPAL RISKS

Investment Objective

The Tax Free Money Market Fund seeks to maximize current income, exempt from
federal income taxes, to the extent consistent with the preservation of capital
and liquidity and the maintenance of a stable $1.00 per share net asset value.

This objective may be changed only with the approval of a majority of the
fund's shareholders as defined in the Investment Company Act of 1940 (the 1940
Act).

Principal Investment Strategies
The fund has a fundamental policy of investing at least 80% of its net assets
in federal tax-exempt, high quality and short-term municipal securities of all
types under normal market conditions. These securities are issued by states,
municipalities and their political subdivisions and agencies and certain
territories and possessions of the United States. Investments may include
general obligation bonds and notes, revenue bonds and notes, commercial paper,
private placements, tender option bonds, private activity bonds, industrial
development bonds and municipal lease contracts. Securities purchased may bear
fixed, variable or floating rates of interest or may be zero coupon securities.
The fund may buy or sell securities on a when-issued or forward commitment
basis.

The fund may invest not more than 20% of its assets in federally taxable money
market instruments including securities issued by or guaranteed as to principal
and interest by the US government or its agencies or instrumentalities,
certificates of deposit, commercial paper and repurchase agreements.

The Tax Free Money Market Fund has obtained a money market fund rating of AAm
from Standard & Poor's. The AAm rating indicates that the fund's safety is very
good, and it has a strong capacity to maintain principal value and limit
exposure to loss. To obtain such rating the fund may be required to adopt
additional investment restrictions, which may affect the fund's performance.

Principal Risks of Investing in the Fund
Money Market Risk. The risk that a fund will not be able to maintain a NAV per
share of $1.00 at all times. Although the fund seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose money by investing
in the fund. An investment in the fund is not a deposit of any bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.

Credit/Default Risk. The risk that an issuer or guarantor of a security, or a
bank or other financial institution that has entered into a repurchase
agreement, may default on its payment obligations.

Management Risk. The risk that a strategy used by the Advisor may fail to
produce the intended results.

Risks of Municipal Obligations. Municipal obligations are affected by economic,
business or political developments. These securities may be subject to
provisions of litigation, bankruptcy and other laws affecting the rights and
remedies of creditors, or may become subject to future laws extending the time
for payment of principal and/or interest, or limiting the rights of
municipalities to levy taxes. The Fund may be more adversely impacted by
changes in tax rates and policies than other funds. Because interest income
from municipal securities is normally not subject to regular federal income
taxation, the attractiveness of municipal securities in relation to other
investment alternatives is affected by changes in federal income tax rates
applicable to, or the continuing federal income tax-exempt status of, such
interest income. Any proposed or actual changes in such rates or exempt status,
therefore, can significantly affect the demand for and supply, liquidity and
marketability of municipal securities. This could in turn affect a fund's
ability to acquire and dispose of municipal securities at desirable yield and
price levels.

Concentration of a fund's investments in these municipal obligations will
subject the fund, to a greater extent than if such investment was not so
concentrated, to the risks of adverse economic, business or political
developments affecting the particular state, industry or other area of
concentration.

3
<PAGE>

Risk and Return

The following bar chart illustrates the risks of investing in the fund by
showing changes in the fund's performance from year to year over the life of
the fund. How the fund has performed in the past is not necessarily an
indication of how the fund will perform in the future.

Annual Total Returns

[START BAR CHART]

Annual Total Returns -- Tax Free Money Market

[END BAR CHART]

Best Quarter--June 30, 1995: 0.90%
Worst Quarter--March 31, 1997: 0.68%
Current Fiscal Quarter--August 31, 1999: 0.66%

Average Annual Total Returns
For the Periods Ended December 31, 1998:

<TABLE>
<CAPTION>
1 Year Inception
---------- ----------
<S> <C> <C>
Tax Free Money Market Fund 2.97% 3.10%
IBC Financial Tax-Free Index 2.94 3.04
</TABLE>

7-Day Yields
For the Period Ended December 31, 1998:

<TABLE>
<CAPTION>
Current Effective
--------- ----------
<S> <C> <C>
Tax Free Money Market Fund 3.27% 3.33%
</TABLE>

Current yield information for the fund is available toll free by calling
1-800-647-7327 or by visiting our website at www.ssgafunds.com.

4
<PAGE>

FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.

Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
Management Fee .25%
Distribution and Service (12b-1) Fees(1) .22
Other Expenses .09
-----
Total Annual Fund Operating Expenses .56%
=====
</TABLE>

- -----------
(1) The ratio includes .16% for 12b-1 Distribution and .06% for 12b-1
Shareholder Servicing Fees.

Example
This example is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds.

<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
- -------- --------- --------- ---------
<S> <C> <C> <C>
$ 57 $179 $313 $701
===== ==== ==== ====
</TABLE>

5
<PAGE>

MANAGEMENT OF THE FUND

For these services, the fund pays State Street an annual management fee,
calculated daily and paid monthly, of 0.25% of the average daily net asset
value of the fund.

ADDITIONAL INFORMATION ABOUT
THE FUND'S OBJECTIVES, INVESTMENT
STRATEGIES AND RISKS

The investment objective of the fund as stated above may only be changed with
shareholders approval.

Municipal Securities. The fund may purchase municipal securities issued by or
on behalf of public authorities to obtain funds to be used for various public
purposes, including general purpose financing for state and local governments,
refunding outstanding obligations, and financings for specific projects or
public facilities. General obligations are backed by the full faith and credit
of the issuer. These securities include tax anticipation notes, bond
anticipation notes and general obligation bonds. Revenue obligations are backed
by the revenues generated from a specific project or facility and include
industrial development bonds and private activity bonds. Private activity and
industrial development bonds are dependent on the ability of the facility's
user to meet its financial obligations and the value of any real or personal
property pledged as security for such payment. Private activity and industrial
development bonds, although issued by industrial development authorities, may
be backed only by the assets of the non-governmental users. Municipal notes are
short-term instruments which are issued and sold in anticipation of a bond
sale, collection of taxes or receipt of other revenues.

Some municipal securities are insured by private insurance companies, while
others may be supported by letters of credit furnished by domestic or foreign
banks. In determining the credit quality of insured or letter of credit backed
securities, the Advisor reviews the financial condition and creditworthiness of
such parties including insurance companies, banks and corporations.

Municipal obligations involve possible risks, including being affected by
economic, business and political developments and being subject to provisions
of litigation, bankruptcy and other laws affecting the rights and remedies of
creditors. Future laws may be effected extending the time for payment of
principal and/or interest, or limiting the rights of municipalities to levy
taxes. For instance, legislative proposals are introduced from time to time to
restrict or eliminate the federal income tax exemption for municipal
obligations interest. If such legislation is adopted, the Board of Trustees
will reevaluate the fund's investment objective and may submit possible changes
in the structure of the fund to its shareholders.

Tax Exempt Commercial Paper. Tax exempt commercial paper is a short-term
obligation with a stated maturity of 365 days or less. It is typically issued to
finance seasonal working capital needs or as short-term financing in
anticipation of longer term financing. Each instrument may be backed only by the
credit of the issuer or may be backed by some form of credit enhancement,
typically in the form of a guarantee by a commercial bank. Commercial paper
backed by guarantees of foreign banks may involve additional risk due to the
difficulty of obtaining and enforcing judgments against such banks and the
generally less restrictive regulations to which such banks are subject. The Fund
will only invest in commercial paper rated at the time of purchase not less than
Prime-1 by Moody's Investors Service, Inc., A-1 by Standard & Poor's Rating
Group or F-1 by Fitch's Investor Service.

Variable and Floating Rate Securities. The fund may purchase variable or
floating rate securities which are instruments issued or guaranteed by entities
such as municipalities and other issuers of municipal securities. A variable
rate security provides for the automatic establishment of a new interest rate on
set dates. A floating rate security provides for the automatic adjustment of its
interest rate whenever a specified interest rate changes. Generally, changes in
interest rates

6
<PAGE>

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.

SHAREHOLDER INFORMATION

Minimum Initial and Subsequent Investments and Account Balance. The fund
requires a minimum initial investment of $1,000, with the exception of IRA
accounts, for which the minimum initial investment is $250. Subsequent
investments must be at least $100. An investment in the fund (other than IRA
accounts) may be subject to redemption at the fund's discretion if the account
balance is less than $1,000 as a result of shareholder redemptions. The
Transfer Agent will give shareholders 60 days' notice that the account will be
closed unless an investment is made to increase the account balance to the
$1,000 minimum. Failure to bring the account balance to $1,000 may result in
the Transfer Agent closing the account at the net asset value ("NAV") next
determined on the day the account is closed and mailing the proceeds to the
shareholder's address shown on the Transfer Agent's records. The fund reserves
the right to reject any purchase order. Investors purchasing fund assets
through a pension or other participation plan should contact their plan
administrator for further information on purchases.

Purchase Dates and Times. Fund shares may be purchased on any business day. A
business day is one on which the New York Stock Exchange or Boston Federal
Reserve are open for regular trading. All purchases must be made in US dollars.
Purchase orders in good form (described below) and payments for fund shares by
check or by wire transfer must be received by the Transfer Agent prior to the
close of the regular trading session of the New York Stock Exchange, which is
ordinarily 4 p.m. Eastern time (the "Pricing Time"), to be effective on the
date received. If an order or payment is received after the Pricing Time, the
order will be effective on the next business day. Orders placed through a
servicing agent or broker-dealer that has a selling agreement with the
Distributor or SSgA Funds must be received by the servicing agent or
broker-dealer prior to the Pricing Time. In addition, wire purchase orders
received and accepted prior to 12 noon Eastern time will earn dividends on the
date of the purchase if the wire is received by State Street prior to the close
of the NYSE. All other methods of payment will earn dividends beginning the
following business day after their receipt by the Transfer Agent.

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. You may exchange a minimum of $100 of your shares
for shares of any other SSgA Fund, as long as the minimum investment requirement
is met. The fund offers this service without charge. To use this option, contact
the Customer Service Department at 1-800-647-7327. 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 you purchased shares of the fund by check, the
shares must have been present in your 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. Please contact
your tax advisor.

Management believes that market timing strategies may be disruptive to the
fund. For this reason, the Investment

7
<PAGE>

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 the 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. You may make initial or subsequent investments by wiring
federal funds to State Street, as Transfer Agent, by:

2. Instructing the wiring bank to wire federal funds to:

Shares purchased in exchange for securities generally may not be redeemed or
exchanged until the transfer has settled--within 3 business days following the
date of the exchange.

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. A dividend will be paid according to the
established dividend payment schedule on shares redeemed if the telephone
redemption request is received by State Street after 12 noon Eastern time.
Telephone redemption requests received before 12 noon Eastern time will not be
entitled to that day's dividend. 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

8
<PAGE>

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.

Requests received via telephone prior to 12:00 noon Eastern time, will be sent
after the close of the fund on the same day according to pre-designated
instructions. Requests received after 12:00 noon Eastern time, will be sent the
following business day and will receive that day's interest.

By Wire. Proceeds exceeding $1,000 may be sent via wire transfer to the
investor's pre-designated bank. The shares will be redeemed from the account on
the day the redemption instructions are received and the proceeds wire will be
sent the following business day. Although the fund does not charge a fee for
this feature, the investor's bank may charge a fee for receiving the wire.
Investors are advised to check with their bank before requesting this feature.
Requests received prior to 12:00 noon Eastern time will have the shares
redeemed and the proceeds wired the same day. Requests received on or after
12:00 noon Eastern time will have their shares redeemed and the proceeds wired
the following business day. Redemption requests received before 12:00 noon
Eastern time will not be eligible for that day's interest.

Please note that proceeds from ACH withdrawals will be transmitted to the
investor's bank two days after the withdrawal.

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. All proceeds by check will normally be sent the
following business day. A check is not available for telephone redemption
requests in excess of $50,000. Requests must be received in writing.

During periods of drastic economic or market changes, shareholders using this
method may encounter delays.

9
<PAGE>

which protects them against fraudulent orders. A signature guarantee will be
required if:

1. Your address of record has changed within the past 60 days;
2. You are redeeming more than $50,000 worth of shares; or
3. You are 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:

Please check with the institution prior to signing to ensure that they are an
acceptable signature guarantor. A NOTARY PUBLIC CANNOT PROVIDE A SIGNATURE
GUARANTEE.

<TABLE>
<CAPTION>
Seller Requirements for Written Requests
- ------------------------ ----------------------------------
<S> <C>
Owner of individual, o Letter of instruction, signed
joint, sole by all persons authorized to
proprietorship, UGMA/ sign for the account stating
UTMA (custodial general titles/capacity, exactly
accounts for minors) as the account is registered;
or general partner and
accounts o Signature guarantee, if
applicable (see above).
Owners of corporate or o Letter of instruction signed
association accounts by authorized 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 o Letter of instruction, signed
trust accounts by all trustees;
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 o Letter of instruction signed
shareholders whose by surviving tenant(s);
co-tenants are o Certified copy of the death
deceased certificate; and
o Signature guarantee, if
applicable (see above).
</TABLE>

Please contact the Customer Service Department at 1-800-647-7327 for questions
and further instructions.

Distribution Services and Shareholder
Servicing Arrangements

Service organizations providing shareholder services to the fund will be
responsible for prompt transmission of purchase and redemption orders and may
charge you a fee for their services.

Pricing of Fund Shares

The fund determines the price per share 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). The price is computed by adding the value of all securities and
other assets of the fund, deducting accrued liabilities, dividing by the number
of shares outstanding and rounding to the nearest cent.

Dividends and Distributions

10
<PAGE>

distributions declared and paid in December, if required, for the Fund to avoid
imposition of a 4% federal excise tax on undistributed capital gains. The fund
does not expect any material long-term capital gains or losses.

Distribution Option. You can choose from four different distribution options as
indicated on the account Application:

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.

Taxes
The fund intends to qualify as a regulated investment company (RIC) under
Subchapter M of the Internal Revenue Code of 1986, as amended (the Code). As a
RIC, the fund will not be subject to federal income taxes to the extent it
distributes its net investment income and net capital gain (long-term capital
gains in excess of short-term capital losses) to its shareholders. The Board
intends to distribute each year substantially all of the fund's net investment
income and net capital gain.

Distributions by the fund that are designated as "exempt-interest dividends"
generally may be excluded from the shareholder's gross income. Dividends from
taxable 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 fund may purchase certain private activity securities whose interest is
subject to the federal alternative minimum tax for individuals. If the fund
purchases such securities, investors who are subject to the alternative minimum
tax will be required to report a legally determined portion of the fund's
dividends as a tax preference item in determining their federal tax.

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.

Although the sale or exchange of fund shares is a taxable event, no gain or
loss for a shareholder is anticipated because the fund seeks to maintain a
stable $1.00 per share net asset value.

11
<PAGE>

Foreign shareholders invested in any SSgA Fund should consult with their tax
advisors as to if and how the federal income tax and its withholding
requirements applies to them.

12
<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand a fund's
financial performance for the past 5 years (or since inception if a fund has
been offered for less than 5 years). Certain information reflects financial
results for a single fund share. The total returns in the table represent the
rate that an investor would have earned (or lost) on an investment in a fund
(assuming reinvestment of all dividends and distributions). This information
has been audited by PricewaterhouseCoopers LLP, whose report, along with the
fund's financial statements, are included in the annual report, which is
available upon request by calling the Distributor at 1-800-647-7327.

<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
------------------------------------------------------------------------
1999 1998 1997 1996 1995++
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
------- ------- ------- ------- -------
INCOME FROM OPERATIONS:
Net investment income .0267 .0304 .0295 .0302 .0251
DISTRIBUTIONS:
Dividends from net investment income (.0267) (.0304) (.0295) (.0302) (.0251)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
======= ======= ======= ======= =======
TOTAL RETURN (%)(1) 2.71 3.08 2.99 3.07 2.54
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period ($000 omitted) 262,393 260,084 163,502 45,061 42,607
Ratios to average net assets (%)(2)
Operating expenses, net .56 .56 .58 .57 .59
Operating expenses, gross .56 .56 .58 .57 .60
Net investment income 2.67 3.04 2.98 3.01 3.40
</TABLE>

- -----------

++ For the period December 1, 1994 (commencement of operations) to August 31,
1995.
(1) Periods less than one year are not annualized.
(2) The ratios for the period ended August 31, 1995 are annualized.

<PAGE>

(This page has been left blank intentionally.)

<PAGE>

SSgA FUNDS

SSgA Money Market Fund

SSgA US Government Money Market Fund

SSgA Tax Free Money Market Fund

SSgA Yield Plus Fund

SSgA Intermediate Fund

SSgA Bond Market Fund

SSgA High Yield Bond Fund

SSgA Growth and Income Fund

SSgA S&P 500 Index Fund

SSgA Matrix Equity Fund

SSgA Small Cap Fund
(Closed to new investors as of August 31, 1998)

SSgA Special Equity Fund

SSgA Tuckerman Active REIT Fund

SSgA Aggressive Equity Fund

SSgA IAM SHARES Fund

SSgA Emerging Markets Fund

SSgA Active International Fund

SSgA International Growth Opportunities Fund

SSgA Life Solutions Growth Fund

SSgA Life Solutions Balanced Fund

SSgA Life Solutions Income and Growth Fund

<PAGE>

ADDITIONAL INFORMATION ABOUT THE FUND

A Statement of Additional Information includes additional information about the
fund. The Statement of Additional Information is incorporated into this
Prospectus by reference.

Russell Fund Distributors, Inc.
One International Place
Boston, Massachusetts 02110
1-800-997-7327

SSgA Funds' Investment Company Act File No. 811-5430.

<PAGE>
Filed Pursuant to Rule 485(b)
File Nos. 33-19229; 811-5430

SSgA FUNDS
One International Place
Boston, Massachusetts 02110
1-800-997-7327
www.ssgafunds.com

U.S. GOVERNMENT MONEY MARKET FUND

The US Government 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
obligations of the US Government or its instrumentalities with remaining
maturities of one year or less.

PROSPECTUS DATED DECEMBER 17, 1999

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
-----
<S> <C>
Investment Strategies and Principal Risks ............................................ 3
Investment Objective ................................................................ 3
Principal Investment Strategies ..................................................... 3
Principal Risks of Investing in the Fund ............................................ 3
Risk and Return ..................................................................... 4
Fees and Expenses of the Fund ........................................................ 5
Management of the Fund ............................................................... 6
Additional Information About the Fund's Objectives, Investment Strategies and Risks .. 6
Shareholder Information .............................................................. 6
Purchase of Fund Shares ............................................................. 6
Redemption of Fund Shares ........................................................... 8
Distribution Services and Shareholder Servicing Arrangements ........................ 10
Pricing of Fund Shares .............................................................. 10
Dividends and Distributions ......................................................... 10
Taxes ............................................................................... 11
Financial Highlights ................................................................. 12
Additional Information About the Fund ........................................ Back Cover
</TABLE>

2
<PAGE>

INVESTMENT STRATEGIES
AND PRINCIPAL RISKS

Investment Objective

The US Government Money Market Fund's 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 obligations of the US Government or its
instrumentalities with remaining maturities of one year or less.

This objective may be changed only with the approval of a majority of the
fund's shareholders as defined in the Investment Company Act of 1940 (the 1940
Act).

Principal Investment Strategies

The fund attempts to meet its investment objective by investing in obligations
issued or guaranteed as to principal and interest by the US Government or its
agencies or instrumentalities or in repurchase agreements secured by such
instruments.

The US Government Money Market Fund has obtained a money market fund rating of
AAAm from Standard & Poor's. The AAAm rating indicates that the fund's safety
is excellent, and it has a superior capacity to maintain principal value and
limit exposure to loss. To obtain such rating the fund may be required to adopt
additional investment restrictions, which may affect the fund's performance.

Government Securities Risk. The risk that the U.S. government will not provide
financial support to U.S. government agencies, instrumentalities or sponsored
enterprises if it is not obligated to do so by law. Because the fund may be
100% invested in U.S. government securities, its return may be less than a fund
which can invest without limitation in all types of securities.

Management Risk. The risk that a strategy used by the Advisor may fail to
produce the intended results.

Risks of Repurchase Agreements. Under a repurchase agreement, a bank or broker
sells securities to a fund and agrees to repurchase them at the fund's cost
plus interest. If the value of the securities declines, and the bank or broker
defaults on its repurchase obligation, the fund could incur a loss.

3
<PAGE>

Risk and Return

Annual Total Returns

[START BAR CHART]

Annual Total Returns -- US Government Money Market

[END BAR CHART]

Best Quarter--June 30, 1991: 1.50%
Worst Quarter--December 31, 1993: 0.72%
Current Fiscal Quarter--August 31, 1999: 1.16%

Average Annual Total Returns
For the Periods Ended December 31, 1998:

<TABLE>
<CAPTION>
1 Year 5 Years Inception
---------- --------- ----------
<S> <C> <C> <C>
US Government
Money Market Fund 5.21% 5.03% 4.69%
Salomon Smith Barney
3-month Treasury bill 5.05 5.10 4.70
Lipper Average--US Gov't
Money Market Funds 4.90 4.73 4.33
</TABLE>

7-Day Yields
For the Period Ended December 31, 1998:

<TABLE>
<CAPTION>
Current Effective
--------- ----------
<S> <C> <C>
US Government
Money Market Fund 4.65% 4.76%
</TABLE>

Current yield information for the fund is available toll free by calling
1-800-647-7327 or by visiting our website at www.ssgafunds.com.

4
<PAGE>

FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.

Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
Management Fee .25%
Distribution and Service (12b-1) Fees1 .09
Other Expenses .08
-----
Total Annual Fund Operating Expenses .42%
=====
</TABLE>

- -----------
(1) The ratio includes .02% for 12b-1 Distribution and .07% for 12b-1
Shareholder Servicing Fees.

Example
This example is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds.

<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
- -------- --------- --------- ---------
<S> <C> <C> <C>
$ 43 $135 $235 $530
===== ==== ==== ====
</TABLE>

5
<PAGE>

MANAGEMENT OF THE FUND

For these services, the fund pays State Street an annual management fee,
calculated daily and paid monthly, of 0.25% of the average daily net asset
value of the fund.

ADDITIONAL INFORMATION ABOUT
THE FUND'S OBJECTIVES, INVESTMENT
STRATEGIES AND RISKS

Repurchase Agreements. The fund may enter into repurchase agreements with banks
and other financial institutions, such as broker-dealers. In substance, a
repurchase agreement is a loan for which the fund receives securities as
collateral. Under a repurchase agreement, a fund purchases securities from a
financial institution that agrees to repurchase the securities at the fund's
original purchase price plus interest within a specified time (normally one
business day). The fund will limit repurchase transactions to those member
banks of the Federal Reserve System and broker-dealers whose creditworthiness
Advisor considers satisfactory. If the other party or "seller" defaults, a Fund
might suffer a loss to the extent that the proceeds from the sale of the
underlying securities and other collateral held by the Fund are less than the
repurchase price and the Fund's cost associated with delay and enforcement of
the repurchase agreement. In addition, in the event of bankruptcy of the
seller, a Fund could suffer additional losses if a court determines that the
Fund's interest in the collateral is not enforceable.

The fund will invest no than 10% of its net assets (taken at current market
value) in repurchase agreements maturing in more than seven days.

Variable and Floating Rate Securities. The fund may purchase variable and
floating rate securities which are instruments issued or guaranteed by entities
such as the US Government, or an agency or instrumentality thereof. A variable
rate security provides for the automatic establishment of a new interest rate
on set dates. Variable rate obligations whose interest is readjusted no less
frequently than annually will be deemed to have a maturity equal to the period
remaining until the next readjustment of the interest rate. The fund may also
purchase floating rate securities. A floating rate security provides for the
automatic adjustment of its interest rate whenever a specified interest rate
changes. Interest rates on these securities are ordinarily tied to, and are a
percentage of, a widely recognized interest rate, such as the yield on 90-day
US Treasury bills or the prime rate of a specified bank. 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.

SHAREHOLDER INFORMATION

Purchase of Fund Shares

Distribution and Eligible Investors. Shares of the funds are offered without a
sales commission by Russell Fund Distributors, Inc. (the Distributor), to
institutional and retail

6
<PAGE>

investors which invest for their own account or in a fiduciary or agency
capacity.

Minimum Initial and Subsequent Investments and Account Balance. The fund
requires a minimum initial investment of $1,000, with the exception of IRA
accounts, for which the minimum initial investment is $250. Subsequent
investments must be at least $100. An account in the fund (other than IRA
accounts) may be subject to redemption at the fund's discretion if the account
balance is less than $1,000 as a result of shareholder redemptions. The
Transfer Agent will give shareholders 60 days' notice that the account will be
closed unless an investment is made to increase the account balance to the
$1,000 minimum. Failure to bring the account balance to $1,000 may result in
the Transfer Agent closing the account at the net asset value (NAV) next
determined on the day the account is closed and mailing the proceeds to the
shareholder's address shown on the Transfer Agent's records. The fund reserves
the right to reject any purchase order. If you are purchasing fund assets
through a pension or other participation plan, you should contact your plan
administrator for further information on purchases.

Purchase Dates and Times. Fund shares may be purchased on any business day. A
business day is one on which the New York Stock Exchange or Boston Federal
Reserve are open for regular trading. All purchases must be made in US dollars
and in Federal funds (or converted to Federal funds). Purchase orders which are
accepted: (1) prior to 1 p.m. Eastern time will earn the dividend declared on
the date of purchase; and (2) at or after 1 p.m. Eastern time and before 4 p.m.
Eastern time will not earn the dividend determined on the day of purchase. The
fund reserves the right to reject any purchase order if payment for fund shares
has not been received by the Transfer Agent prior to 4 p.m. Eastern time.

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.

Each fund reserves the right to terminate or modify the exchange privilege in
the future.

Federal Funds Wire. You may make initial or subsequent investments by wiring
federal funds to State Street, as Transfer Agent, by:

1. Telephoning the Customer Service Department at 1-800-647-7327 between 8 a.m.
and 4 p.m. Eastern time, and stating: (a) your 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 exact amount being wired.

7
<PAGE>

2. Instructing the wiring bank to wire federal funds to:

1. The investment objective, policies and limitations must match that of the
fund;

2. They must have a readily ascertainable market value;

3. They must be liquid;

4. They must not be subject to restrictions on resale; and

5. The market value of any securities exchanged, plus any cash, must be at least
$25 million; State Street reserves the right to make exceptions to this
minimum at its discretion.

Shares purchased in exchange for securities generally may not be redeemed or
exchanged until the transfer has settled--within 3 business days following the
date of the exchange.

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. 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. Although the
Investment Company does not currently charge a fee for this service, Investment
Company reserves the right to charge a fee for the cost of wire-transferred
redemptions of less than $1,000. Redemption requests received at or after 1
p.m. Eastern time and before 4 p.m. Eastern time will be entitled to that day's
dividend. Redemption requests received before 1 p.m. Eastern time will not be
entitled to that day's dividend. 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. An investor will not be
permitted to redeem shares from an account until a completed Application is on
file.

Cash Sweep Program. Money managers of master trust clients may participate in a
cash sweep program to

8
<PAGE>

automatically invest excess cash in the fund. 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.

Proceeds from requests received via telephone prior to 1 p.m. Eastern time will
be sent the same day according to pre-designated instructions.

By Wire. Proceeds exceeding $1,000 may be sent via wire transfer to your bank
as previously indicated on your application or letter of instruction in good
order. Redemption proceeds are sent the following business day unless requested
via telephone by 1:00 p.m. Eastern time. Although the fund does not charge a
fee for this feature, your bank may charge a fee for receiving the wire. Please
check with your bank before requesting this feature.

Please note that proceeds from ACH withdrawals will be transmitted to the
investor's bank two days after the withdrawal.

During periods of drastic economic or market changes, shareholders using this
method may encounter delays.

1. Your address of record has changed within the past 60 days;

2. You are redeeming more than $50,000 worth of shares; or

3. You are 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.

9
<PAGE>

<TABLE>
<CAPTION>
Seller Requirements for Written Requests
- ------------------------ -----------------------------------
<S> <C>
Owner of individual, o Letter of instruction, signed by
joint, sole all persons authorized to sign
proprietorship, UGMA/ for the account stating general
UTMA (custodial titles/capacity, exactly as the
accounts for minors) account is registered; and
or general partner o Signature guarantee, if
accounts applicable (see above).
Owners of corporate or o Letter of instruction signed
association accounts by authorized 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 o Letter of instruction, signed
trust accounts by all trustees;
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 o Letter of instruction signed
shareholders whose by surviving tenant(s);
co-tenants are o Certified copy of the death
deceased certificate; and
o Signature guarantee, if
applicable (see above).
</TABLE>

Please contact the Customer Service Department at 1-800-647-7327 for questions
and further instructions.

Distribution Services and Shareholder
Servicing Arrangements

Service organizations providing shareholder services to the fund will be
responsible for prompt transmission of purchase and redemption orders and may
charge you a fee for their services.

Pricing of Fund Shares

The price per share for the fund is computed by adding the value of all
securities and other assets of the fund, deducting accrued liabilities,
dividing by the number of shares outstanding and rounding to the nearest cent.
The fund determines the price per share twice each business day, as of 1 p.m.
Eastern time and 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.
The fund seeks to maintain a $1.00 per share net asset value and, accordingly,
uses the amortized cost valuation method to value its portfolio instruments.
The amortized cost valuation method initially prices an instrument at its cost
and thereafter assumes a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument.

10
<PAGE>

Distribution Option. You can choose from four different distribution options as
indicated on the account Application:

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.

If the cash option is selected and you choose a wire or direct deposit (ACH),
distribution will be sent to a pre-designated bank by the payable date. If you
choose cash option and requested a check, the check will be mailed to you.

Taxes
Dividends from net investment income and distributions of net short-term
capital gains are taxable to you 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
you have held the shares and whether you were paid in cash or additional
shares.

Although the sale or exchange of fund shares is a taxable event, no gain or
loss for a shareholder is anticipated because the fund seeks to maintain a
stable $1.00 per share net asset value.

Foreign shareholders invested in any SSgA Fund should consult with their tax
advisors as to if and how the federal income tax and its withholding
requirements applies to them.

11
<PAGE>

FINANCIAL HIGHLIGHTS

12
<PAGE>

(This page has been left blank intentionally.)

<PAGE>

(This page has been left blank intentionally.)

<PAGE>

SSgA FUNDS

SSgA Money Market Fund

SSgA US Government Money Market Fund

SSgA Tax Free Money Market Fund

SSgA Yield Plus Fund

SSgA Intermediate Fund

SSgA Bond Market Fund

SSgA High Yield Bond Fund

SSgA Growth and Income Fund

SSgA S&P 500 Index Fund

SSgA Matrix Equity Fund

SSgA Small Cap Fund
(Closed to new investors as of August 31, 1998)

SSgA Special Equity Fund

SSgA Tuckerman Active REIT Fund

SSgA Aggressive Equity Fund

SSgA IAM SHARES Fund

SSgA Emerging Markets Fund

SSgA Active International Fund

SSgA International Growth Opportunities Fund

SSgA Life Solutions Growth Fund

SSgA Life Solutions Balanced Fund

SSgA Life Solutions Income and Growth Fund

<PAGE>

ADDITIONAL INFORMATION ABOUT THE FUND

A Statement of Additional Information includes additional information about the
fund. The Statement of Additional Information is incorporated into this
Prospectus by reference.

Russell Fund Distributors, Inc.
One International Place
Boston, Massachusetts 02110
1-800-997-7327

SSgA Funds' Investment Company Act File No. 811-5430.

<PAGE>
Filed Pursuant to Rule 485(b)
File Nos. 33-19229; 811-5430

SSgA FUNDS
One International Place
Boston, Massachusetts 02110
1-800-997-7327
www.ssgafunds.com

U.S. TREASURY MONEY MARKET FUND

The US Treasury 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
obligations that are issued or guaranteed as to principal and interest by the
US Government and repurchase agreements backed by such securities.

PROSPECTUS DATED DECEMBER 17, 1999
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
-----
<S> <C>
Investment Strategies and Principal Risks ............................................ 3
Investment Objective ................................................................ 3
Principal Investment Strategies ..................................................... 3
Principal Risks of Investing in the Fund ............................................ 3
Risk and Return ..................................................................... 4
Fees and Expenses of the Fund ........................................................ 5
Management of the Fund ............................................................... 6
Additional Information about the Fund's Objectives, Investment Strategies and Risks .. 6
Shareholder Information .............................................................. 6
Purchase of Fund Shares ............................................................. 6
Redemption of Fund Shares ........................................................... 8
Distribution Services and Shareholder Servicing Arrangements ........................ 9
Pricing of Fund Shares .............................................................. 9
Dividends and Distributions ......................................................... 9
Taxes ............................................................................... 10
Financial Highlights ................................................................. 11
Additional Information about the Fund ........................................ Back Cover
</TABLE>

2
<PAGE>

INVESTMENT STRATEGIES
AND PRINCIPAL RISKS

Investment Objective

This objective may be changed only with the approval of a majority of the
fund's shareholders as defined in the Investment Company Act of 1940 (the 1940
Act).

Principal Investment Strategies

The US Treasury Money Market Fund's investment policy is to invest its assets
primarily in US Treasury bills, notes and bonds (which are direct obligations
of the US Government) and repurchase agreements backed by such securities.
Under normal market conditions, the US Treasury Money Market Fund will be 100%
invested in such securities.

The US Treasury Money Market Fund has obtained a money market fund rating of
AAAm from Standard & Poor's. The AAAm rating indicates that the fund's safety
is excellent, and it has a superior capacity to maintain principal value and
limit exposure to loss. To obtain such rating the fund may be required to adopt
additional investment restrictions, which may affect the fund's performance.

Principal Risks of Investing in the Fund

MONEY MARKET RISK. Investment in the fund, like any investment, has risks.
Although the fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the fund. There can be no
assurance that the fund will achieve its objective. An investment in the fund is
not a deposit of any bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.

Because the fund intends to meet its investment objective by investing only in
US Treasury bills, notes and bonds, its return may be less than a fund which
can invest without limitation in all types of securities.

INTEREST RATE RISK. The risk that when interest rates increase, securities held
by a fund will decline in value. Long-term fixed-income securities will normally
have more price volatility because of this risk than short-term securities.

MANAGEMENT RISK. The risk that a strategy used by the Investment Advisor may
fail to produce the intended results.

GOVERNMENT SECURITIES RISK. The risk that the U.S. government will not provide
financial support to U.S. government agencies, instrumentalities or sponsored
enterprises if it is not obligated to do so by law. Because the fund may be 100%
investd in U.S. government securities, its return may be less than a fund which
can invest without limitation in all types of securities.

3
<PAGE>

Annual Total Returns

[START BAR CHART]

Annual Total Returns -- US Treasury Money Market

[END BAR CHART]

Best Quarter--June 30, 1995: 1.51%
Worst Quarter--March 31, 1994: 0.79%
Current Fiscal Quarter--August 31, 1999: 1.18%

Average Annual Total Returns
For the Periods Ended December 31, 1998:

<TABLE>
<CAPTION>
1 Year 5 Years Inception
---------- --------- ----------
<S> <C> <C> <C>
US Treasury Money Market Fund 5.36% 5.15% 5.11%
Salomon Smith Barney 3-month
Treasury bill 5.05 5.10 5.07
Lipper Average--Institutional US
Treasury Money Market Funds 5.01 4.92 4.88
</TABLE>

7-Day Yields
For the Period Ended December 31, 1998:

<TABLE>
<CAPTION>
Current Effective
--------- ----------
<S> <C> <C>
US Treasury Money Market Fund 4.67% 4.78%
</TABLE>

Current yield information for the fund is available toll free by calling
1-800-647-7327. This information is also on our website at www.ssgafunds.com.

4
<PAGE>

FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.

Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
Management Fee(1) .25%
Distribution and Service (12b-1) Fees(2) .05
Other Expenses .09
-----
Gross Expenses .39
-----
Less Contractual Management Fee Reimbursement (.04)
Management Fee Waiver (.15)
-----
Total Annual Fund Operating Expenses After Fee Waivers
and Reimbursements .20%
=====
</TABLE>

- -----------
(1) The Advisor has voluntarily agreeed to waive .15% of its .25% management
fee. The management fee shown above has been restated to reflect the waiver.
Also, the Advisor has voluntarily agreed to reimburse the fund for all
expenses to the extent that total expenses exceed .20% of average daily net
assets on an annual basis. The waiver and reimbursement will remain in
effect until December 31, 2002. The annual management fee after waiver and
reimbursement is .06%. The total annual expenses shown above have been
restated to reflect the waiver and reimbursement.

(2) The ratio includes 0.02% for 12b-1 Distribution and 0.03% for 12b-1
Shareholder Servicing Fees.

Example

This example is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds.

<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
- -------- --------- --------- ---------
<S> <C> <C> <C>
$ 20 $64 $141 $318
===== === ==== ====
</TABLE>

5
<PAGE>

MANAGEMENT OF THE FUND

For these services, the fund pays State Street an annual management fee,
calculated daily and paid monthly, of 0.06%, after fee waiver and
reimbursement, of the average daily net asset value of the fund.

ADDITIONAL INFORMATION ABOUT
THE FUND'S OBJECTIVES, INVESTMENT
STRATEGIES AND RISKS

The investment objective of the fund as stated above may only be changed with
shareholder approval.

US Government Securities. US Government securities include US Treasury bills,
notes and bonds and other obligations issued or guaranteed as to interest and
principal by the US Government or its 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.

In evaluating whether to enter into a repurchase agreement, the Advisor will
carefully consider the creditworthiness of the seller. Distributions of the
income from repurchase agreements will be taxable to a fund's shareholders.
Further, the amount realized upon the sale of the securities may be less than
that necessary to fully compensate the fund.

The fund will invest no than 10% of its net assets (taken at current market
value) in repurchase agreements maturing in more than seven days.

SHAREHOLDER INFORMATION

Purchase of Fund Shares
Distribution and Eligible Investors. Shares of the funds are offered without a
sales commission by Russell Fund Distributors, Inc. (the Distributor), to
institutional investors which invest for their own account or in a fiduciary or
agency capacity.

Minimum Initial Investment and Account Balance. The US Treasury Money Market
Fund requires a minimum initial investment of $10 million and a minimum account
balance of $7.5 million. The fund reserves the right to reject any purchase
order.

Purchase Dates and Times. Fund shares may be purchased on any business day. A
business day is one on which the New York Stock Exchange or Boston Federal
Reserve are open for regular trading. All purchases must be made in US dollars
and in Federal funds (or converted to Federal funds). Purchase orders which are
accepted: (1) prior to 1 p.m. Eastern time will earn the dividend declared on
the date of purchase; and (2) at or after 1 p.m. Eastern time and before 4 p.m.
Eastern time will not earn the dividend determined on the day of purchase. The
fund reserves the right to reject any purchase

6
<PAGE>

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 fund. The
SSgA Funds requires a purchase order in good form, which consists of a
completed and signed SSgA Funds' Institutional Account Application, regardless
of the investment method. For additional information, additional Applications
or other forms, call the Customer Service Department at 1-800-647-7327, or
write: SSgA Funds, 1 International Place, 27th Floor, Boston, MA 02110.

1. Completing the SSgA Funds' Institutional Account Application and fax it to
(617) 664-6011. Please confirm that the fax was received by calling
1-800-997-7327.

2. Telephoning State Street Bank and Trust Company at 1-800-647-7327 and
providing: (1) the investor's account registration number, address and social
security or tax identification number; (2) the name of the fund; (3) the
amount being wired; (4) the name of the wiring bank; and (5) the name and
telephone number of the person at the wiring bank to be contacted in
connection with the order.

3. 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 US Treasury Money Market Fund
Account Number and Registration

Mail. To purchase shares by mail, send a check or other negotiable bank draft
payable to: State Street Bank and Trust Company, P.O. Box 8317, Boston, MA
02266-8317, Attention: SSgA US Treasury Money Market Fund. Third party checks
and checks drawn on credit card accounts will not be accepted. Certified checks
are not necessary; however, all checks are accepted subject to collection at
full face value in United States funds and must be drawn in United States
dollars on a United States bank. Normally, checks and drafts are converted to
federal funds within two business days following receipt of the check or draft.
Initial investments should be accompanied by a completed Application, and
subsequent investments are to be accompanied by the investor's account number.

1. The investment objective, policies and limitations must match that of the
fund;

2. They must have a readily ascertainable market value;

3. They must be liquid;

4. They must not be subject to restrictions on resale; and

5. The market value of any securities exchanged, plus any cash, must be at least
$25 million; State Street reserves the right to make exceptions to this
minimum at its discretion.

Shares purchased in exchange for securities generally may not be redeemed or
exchanged until the transfer has settled--within 3 business days following the
date of the exchange.

Exchange Privilege. Subject to the fund's minimum investment requirement,
investors may exchange their fund shares without charge for shares of any other
investment portfolio offered by the Investment Company. 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: (1) by telephone if the registrations of
the two accounts are identical; or (2) in writing addressed to State Street
Bank and Trust Company, P.O. Box 8317, Boston, MA 02266-8317, Attention: SSgA
US Treasury Money Market Fund. If shares of the fund were purchased by check,
the shares must have been present in an account for 10 days

7
<PAGE>

before an exchange is made. The exchange privilege will only be available in
states where the exchange may legally be made, and may be modified or
terminated by the Investment Company upon 60 days' notice to shareholders.

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. 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. Although the
Investment Company does not currently charge a fee for this service, Investment
Company reserves the right to charge a fee for the cost of wire-transferred
redemptions of less than $1,000. Redemption requests received at or after 1
p.m. Eastern time and before 4 p.m. Eastern time will be entitled to that day's
dividend. Redemption requests received before 1 p.m. Eastern time will not be
entitled to that day's dividend. 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. An investor will not be
permitted to redeem shares from an account until a completed Application is on
file.

During periods of drastic economic or market changes, shareholders using this
method may encounter delays.

2. Such other supporting legal documents, if required by applicable law or the
Transfer Agent, in the case of estates, trusts, guardianships,
custodianships, corporations and pension and profit-sharing plans.

The US Treasury Money Market Fund reserves the right to redeem the shares in
any account with a balance of less than $7.5 million as a result of shareholder
redemptions. Before shares are redeemed to close an account, you will be
notified in writing and allowed 60 days to purchase additional shares to meet
the minimum account balance.

The US Treasury Money Market Fund may pay any portion of the redemption amount
in excess of $25 million by a distribution in kind of readily marketable
securities from the portfolio of the fund in lieu of cash. Investors will incur
brokerage charges and may incur other fees on the sale of these portfolio
securities. In addition, you will be subject to the market risks associated
with such securities until such time as you choose to dispose of the security.
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
determined by the Securities and Exchange Commission, should exist.

8
<PAGE>

Distribution Services and Shareholder
Servicing Arrangements

Service organizations providing shareholder services to the fund will be
responsible for prompt transmission of purchase and redemption orders and may
charge you a fee for their services.

Pricing of Fund Shares

The price per share for the fund is computed by adding the value of all
securities and other assets of the fund, deducting accrued liabilities,
dividing by the number of shares outstanding and rounding to the nearest cent.
The fund determines the price per share twice each business day, as of 1 p.m.
Eastern time and 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.
The fund seeks to maintain a $1.00 per share net asset value and, accordingly,
uses the amortized cost valuation method to value its portfolio instruments.
The amortized cost valuation method initially prices an instrument at its cost
and thereafter assumes a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument.

Dividends and Distributions

The Board of Trustees intends to declare dividends on shares of the fund from
net investment income daily and have them payable as of the last business day
of each month. Distributions will be made at least annually from net short- and
long-term capital gains, if any. In most instances, distributions will be
declared and paid in mid-October with additional distributions declared and
paid in December, if required, for the Fund to avoid imposition of a 4% federal
excise tax on undistributed capital gains. The fund does not expect any
material long-term capital gains or losses.

Distribution Option. You can choose from four different distribution options as
indicated on the account Application:

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.

If the cash option is selected and you chose a wire or direct deposit (ACH),
distribution will be sent to a pre-designated bank by the payable date. If you
choose cash option and requested a check, the check will be mailed to you.

If Cash Option has been selected and the account is closed anytime during the
month, the dividends will automatically

9
<PAGE>

be wired the following business day after the redemption to the bank where the
redemption wire was sent. If an account is closed during the month and
dividends were to be reinvested, the proceeds will automatically be sent by
check to the address of record.

Taxes
Dividends from net investment income and distributions of net short-term
capital gains are taxable to you 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
you have held the shares and whether you were paid in cash or additional
shares.

Although the sale or exchange of fund shares is a taxable event, no gain or loss
for a shareholder is anticipated because the fund seeks to maintain a stable
$1.00 per share net asset value.

Foreign shareholders invested in any SSgA Fund should consult with their tax
advisors as to if and how the federal income tax and its withholding
requirements applies to them.

10
<PAGE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
--------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
------- ------- ------- ------- -------
INCOME FROM OPERATIONS:
Net investment income .0473 .0540 .0515 .0529 .0536
DISTRIBUTIONS:
Dividends from net investment income (0473) (.0540) (.0515) (.0529) (.0536)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
======= ======= ======= ======= =======
TOTAL RETURN (%) 4.84 5.53 5.36 5.42 5.48
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ($000 omitted) 1,115,614 1,000,367 916,845 189,004 160,893
Ratios to average net assets (%):
Operating expenses, net(1) .20 .20 .20 .20 .13
Operating expenses, gross(1) .39 .39 .46 .38 .39
Net investment income 4.73 5.40 5.28 5.29 5.38
</TABLE>

- -----------

(1) See Note 4 of the Annual Report for current period amounts.

11
<PAGE>

Russell Fund Distributors, Inc.
One International Place
Boston, Massachusetts 02110
1-800-997-7327

SSgA Funds' Investment Company Act File No. 811-5430

<PAGE>

Filed pursuant to Rule 485(b)
File Nos. 33-19229; 811-5430

SSgA FUNDS
One International Place
Boston, Massachusetts 02110
1-800-997-7327
www.ssgafunds.com

<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
High Yield Bond and Growth
Special Equity
Life Solutions Balanced
Tuckerman Active REIT
Life Solutions Growth
Aggressive Equity

IAM SHARES
</TABLE>

PROSPECTUS DATED DECEMBER 17, 1999

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Investment Strategies and Principal Risks ............................................ 3
Investment Objectives and Principal Investment Strategies ........................... 3
Principal Risks ..................................................................... 7
Risk and Return ..................................................................... 11
Fees and Expenses of the Fund ........................................................ 18
Management of the Fund ............................................................... 21
Portfolio Management ................................................................ 21
Additional Information about the Funds' Objectives, Investment Strategies and Risks .. 23
Shareholder Information .............................................................. 29
Purchase of Fund Shares ............................................................. 29
Redemption of Fund Shares ........................................................... 31
Distribution Services and Shareholder Servicing Arrangements ........................ 32
Pricing of Fund Shares .............................................................. 33
Dividends and Distributions ......................................................... 33
Taxes ............................................................................... 34
Information Regarding Standard & Poor's Corporation .................................. 35
Financial Highlights ................................................................. 36
Money Market Fund ................................................................... 36
Yield Plus Fund ..................................................................... 37
Intermediate Fund ................................................................... 38
Bond Market Fund .................................................................... 39
High Yield Bond Fund ................................................................ 40
Growth and Income Fund .............................................................. 41
S&P 500 Index Fund .................................................................. 42
Matrix Equity Fund .................................................................. 43
Small Cap Fund ...................................................................... 44
Special Equity Fund ................................................................. 45
Tuckerman Active REIT Fund .......................................................... 46
Aggressive Equity Fund .............................................................. 47
IAM SHARES Fund ..................................................................... 48
Emerging Markets Fund ............................................................... 49
Active International Fund ........................................................... 50
International Growth Opportunities Fund ............................................. 51
Life Solutions Income and Growth Fund ............................................... 52
Life Solutions Balanced Fund ........................................................ 53
Life Solutions Growth Fund .......................................................... 54
Additional Information about the SSgA Funds .......................................... Back Cover
</TABLE>

2
<PAGE>

INVESTMENT STRATEGIES
AND PRINCIPAL RISKS

Through this prospectus, the SSgA Funds (the Investment Company) offers shares
in the following separate funds (collectively, the Funds). All of the Funds are
considered diversified as defined in the Investment Company Act of 1940 (the
1940 Act), except the SSgA Tuckerman Active REIT Fund:

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 IAM SHARES Fund ("IAM SHARES 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")
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")

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.

Investment Objectives and Principal Investment Strategies
Money Market Fund. The nonfundamental 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.

There are risks associated with these instruments, which are described in the
section called Principal Risks.

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 high-quality
dollar-denominated investment-grade debt instruments, such as mortgage related
securities, corporate notes, variable and floating rate notes and other
asset-backed securities. Unlike a money market fund, the price of the Yield
Plus Fund will fluctuate because of the fund may invest in securities with
higher levels of risk and different maturities.

- -----------

(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.

3
<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.

In pursuing this goal, the fund normally invests at least 65% of its total
assets in investment-grade debt instruments. Under these conditions, the fund
may be 35% in high-quality, short-term securities and other securities.

The fund management team makes investment decisions to seek to match or exceed
the return of the Lehman Brothers Intermediate Government/Corporate Bond (the
LBIGC Index). The fund seeks to match the Index's duration at all times while
adding value through issue and sector selection. From the fixed-income
securities, including, but not limited to, those represented by the Index, the
fund management team considers interest rate trends to determine what types of
bonds to invest in. Different securities are favored depending on the stability
of interest rates. Fixed-income securities have risks explained in the
Principal Risks section.

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).

Under normal market conditions, the fund attempts to meet its objective by
investing at least 65% of its total assets in investment-grade debt
instruments. Securities may be either fixed, zero coupon, variable or floating
rate and may be denominated in US dollars or selected foreign currencies. The
fund may also invest up to 35% in derivative securities, including futures and
options, interest rate exchange agreements and other swap agreements and
collateralized mortgage obligations.

The fund management team makes investment decisions by seeking to match or
exceed the return of the LBAB Index. The fund seeks to match the Index's
duration at all times while adding value through issue and sector selection.

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
(LBHYB 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
(non-investment grade) debt securities. Securities may be either fixed, zero
coupon, variable or floating rate and may be denominated in US dollars or
selected foreign currencies. The fund may invest in derivative securities,
including futures and options, interest rate exchange agreements and other swap
agreements and collateralized mortgage obligations.

Fund managers make investment decisions seeking to match or exceed the LBHYB
Index by concentrating on industry allocation and securities selection,
deciding on which industries to focus and which bonds to buy within these
industries. In making individual security selections, the Advisor looks for
securities that are undervalued.

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.

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. The fund's portfolio strategy combines
market economics with fundamental research. The Advisor begins by assessing
current economic conditions and forecasting economic expectations. The industry
sectors of the S&P 500 Index are examined to determine the sector's market
capitalized weighting and to estimate 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 and prospects. Risks associated with equity securities are
described in the Principal Risks section.

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 replicate the
investment performance of its benchmark index through automated statistical
analytic procedures.

4
<PAGE>

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 for the fund on the basis of a proprietary,
systematic investment process. The fund management team employs an active
equity strategy using bottom-up, quantitative stock selection from among the
securities included in the S&P 500 Index based upon a multi-factor return
forecasting model, coupled with risk-controlled, benchmark oriented portfolio
construction. This structured and disciplined approach seeks to provide
long-term total returns in excess of the S&P 500 Index over time.

Small Cap Fund. The nonfundamental investment objective is to maximize the
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 for the fund on the basis of proprietary
analytical models of the Advisor. The fund management team uses a quantitative
approach to investment management, designed to uncover equity securities which
are undervalued, with superior growth potential. This quantitative investment
management approach involves a modeling process to evaluate vast amounts of
financial data and corporate earnings forecasts. The risks of securities of
smaller capitalized companies are described in Principal Risks.

Special Equity Fund. The nonfundamental investment objective is to maximize
total return through investment in mid- and small capitalization US equity
securities.

The fund will attempt to meets its objective through the active selection of
equity securities based on fundamental analysis. The investment approach
emphasizes bottom-up stock selection informed by a top-down macroeconomic
outlook. The Advisor focuses on identifying high quality stocks with
sustainable growth prospects, paying particular attention to changes in the
rates of growth of individual companies' earnings. This emphasis on growth
stock selection makes the fund subject to risks associated with stock selection
and the skills of the investment management team.

Active REIT Fund. The nonfundamental investment objective is to provide income
and capital growth by investing primarily in publicly traded securities of real
estate companies. The fund will attempt to meet its objective through the
active selection of Real Estate Investment Trust (REIT) securities, primarily
from those securities in the Wilshire REIT Index[RegTM] and across different
types and regions based on the fundamental research of the Advisor. REIT
securities are investment of real estate investment trusts. REITs invest in
underlying properties and may not have diversified holdings.

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 Russell 3000[RegTM] Index. The
universe is further restricted by keeping 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. Securities are then ranked
using SSgA's proprietary growth and value measures. Each of these measures is
combined to arrive at an overall sentiment for each security. Securities with
aggressive five-year projections are subject to risks associated with rapid
growth.The fund may invest in initial public offerings.

IAM SHARES Fund. The nonfundamental investment objective is to maximize total
return primarily through investments in equity securities of companies that
have entered into collective bargaining agreements with the International
Association of Machinists and Aerospace Workers or affiliated labor unions (IAM
companies).

The purpose of the IAM SHARES Fund is to provide an investment vehicle where
the majority of holdings are securities of IAM companies. Under normal market
conditions, the fund will invest at least 65% of its total assets in equity
securities of IAM companies. As of the date of this prospectus, a universe of
342 IAM-represented companies was developed by the IAM. Based on the current
model environment, nearly half of the 342 IAM-represented companies qualify as
investments by this fund. All investments are publicly traded and sufficiently
capitalized, and the current weighted average capitalization is $99.6 billion.
Investments that are not selected in the current model environment are still
included in the investable universe and may be selected for future investment.

5
<PAGE>

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.

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 fund management team will concentrate
investments in holdings that are composed of, but not limited to, countries
included in the Morgan Stanley Capital International Europe, Australia, Far
East (MSCI EAFE) Index. Through the use of the Advisor's proprietary model, a
quantitative selection process is used to select the best securities within
each underlying country in the Index.

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 based on the fundamental analysis of companies and investment
themes. The Advisor's investment approach is defined predominantly by a
bottom-up stock selection process, informed by a top-down macroeconomic
outlook. Investments will be made in, but not limited to, countries and
securities included in the MSCI EAFE Index.

Life Solutions Funds. The Life Solutions Funds attempt to meet their objectives
by investing in shares of various combinations of the Investment Company's
portfolios (the Underlying Funds) described in this prospectus. The Investment
Company believes that these combinations offer varying degrees of potential
risk and reward. The Life Solutions Funds are designed primarily for
tax-advantaged retirement accounts and other long-term investors. Each Life
Solutions Fund's investment objective is nonfundamental:

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>

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. It also shows the weightings of each Underlying Fund
as of August 31, 1999. 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.

6
<PAGE>

<TABLE>
<CAPTION>
Asset
Class/Underlying Income and
Fund Growth Balanced Growth
- ------------------------------------------ ------------------ ----------------- -----------------
Range of Total Equities 20-60% 40-80% 60-100%
Weightings in each Underlying Fund
as of August 31, 1999 (%)
<S> <C> <C> <C>
US Equities
S&P 500 Index Fund 3.51 7.26 10.68
Matrix Equity Fund 15.63 23.96 32.57
Small Cap Fund 4.43 6.08 8.25
Growth and Income Fund 0.00 0.00 0.00
Special Equity Fund 0.00 0.00 0.00
Tuckerman Active REIT Fund 0.00 0.00 0.00
Aggressive Equity Fund 2.24 3.39 4.79
International Equities(1) 10-15% 15-20% 20-25%
Active International Fund 9.05 13.23 17.74
Emerging Markets Fund 0.91 1.58 2.17
International Growth Opportunities Fund 0.00 0.00 0.00
Range of Bonds 40-80% 20-60% 0-40%
Bond Market Fund 52.74 35.52 18.21
Intermediate Fund 3.33 3.82 2.36
High Yield Bond Fund 6.56 4.45 2.33
SSgA Yield Plus Fund 0.00 0.00 0.00
Range of Short Term Assets 0-20% 0-20% 0-20%
SSgA Money Market Fund 1.60 0.71 0.90
SSgA US Government Money Market Fund(2) 0.00 0.00 0.00
</TABLE>

- ------------------------
(1) International equities are included in the total equity exposure indicated
above and should not exceed the listed percentages.

(2) Information about the SSgA US Government Money Market Fund is contained in
its prospectus, which you may obtain by calling (800) 647-7327 or by
accessing the SSgA Funds online at www.ssgafunds.com.

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 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.

Principal Risks

Investment in the funds, like any investment, has risks. Fund shares will rise
and fall in value and there is a risk you could lose money by investing in a
fund. There can be no assurance that a fund will achieve its objective. An
investment in a fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Money Market Fund seeks to preserve the value of your
investment at $1.00 per share, it is possible to lose money by investing in the
fund.

Each of the funds has risks associated with it, as shown in the matrix below.
Following the matrix is a detailed description of each risk.

7
<PAGE>

<TABLE>
<CAPTION>
High
Money Yield Bond Yield Growth and
Risk Market Plus Intermediate Market Bond Income S&P 500 Matrix
---- ------ ----- ------------ ------ ----- ---------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Industry Concentration X X X X X
Management X X X X X X X X
Market Risk X X X X X X X X
Liquidity X X X X X X X X
Fixed Income Securities X X X X X
Equity Securities X X X
IPOs X
Securities of Small Capitalization
Companies X X
Securities of Large Capitalization
Companies X X X
Non-investment grade fixed-income
securities X X X
Asset-backed securities X X X X X
Instruments of US and foreign banks
and branches and foreign corporations,
including Yankee bonds X X X X X
Variable and Floating Rate Securities X X X X X
Analytical models
Derivatives X X X X X X
Mortgage-backed securities X X X X
</TABLE>

<TABLE>
<CAPTION>
International
Small Special Active Aggressive IAM Emerging Growth Active
Risk Cap Equity REIT Equity SHARES Markets Opportunities International
---- ----- ------- ------ ---------- ------ -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Industry Concentration X X X X X
Management X X X X X X X X
Market Risk X X X X X X X X
Liquidity X X X X X X X X
Fixed Income Securities X X X X X
Equity Securities X X X X X X X X
IPOs X X X X X
Securities of Small Capitalization
Companies X X X X X X
Securities of Large Capitalization
Companies X X X X X
Non-investment grade fixed-income
securities X X X
International Securities X X X
Non-US debt securities X X X
Analytical models X X X X X
Derivatives X X X X X X
Emerging market countries X X X
Foreign currency and exchange rate X X X
</TABLE>

Other risks:

Non-diversified fund (Active REIT Fund). The top five holdings in the Active
REIT Fund portfolio may comprise up to 40% of the fund's total assets. This
investment weighting would cause the fund to be subject to risks associated
with a non-diversified mutual fund. To the extent the Active REIT Fund chooses
to give greater weight to securities of any single issuer, developments
affecting that issuer are likely to have a greater impact on the fund's share
price. Similarly, to the extent the fund chooses to invest in fewer issuers,
the fund's ability to achieve its investment objective will depend on
investment performance of a relatively smaller group of issuers.

REITS (Active REIT Fund). REITs (real estate investment trusts) may be affected
by changes in the value of the underlying properties owned by the REITs and by
the quality of any credit extended. Moreover, the underlying portfolios of
REITs may not be diversified, and therefore are subject to

8
<PAGE>

heavy cash flow dependency, defaults by borrowers, self-liquidation and the
possibility of failing to either qualify for tax-free pass through of income
under federal tax laws or to maintain their exemption from certain federal
securities laws.

Real Estate Securities (Active REIT Fund). Just as real estate values go up and
down, companies involved in the industry, and in which a fund invests, also
fluctuate. Such a fund is subject to risks associated with direct ownership of
real estate. Additional risks include declines in the value of real estate,
changes in general and local economic conditions, increases in property taxes
and changes in tax laws and interest rates. The value of securities of
companies that service the real estate industry may also be affected by such
risks. Values of companies involved in the real estate industry can fluctuate
with the value of the real estate and as a result can be subject to some of the
same risks as a direct real estate investment.

Investments in the Underlying Funds (Life Solutions 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.

Affiliated Persons (Life Solutions Funds). 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 (Life Solutions Funds). 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; 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 securities of international or emerging
markets and thus are subject to additional risks of these investments,
including changes in foreign currency exchange rates and political risk.

Index Correlation (S&P 500 Index Fund). 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. The fund's management team
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.

Information regarding Year 2000 applicable to the SSgA Funds:

The SSgA Funds' operations depend on the smooth functioning of its service
providers' computer systems. The Funds and its shareholders could be adversely
affected if those computer systems do not properly process and calculate date-
related information on or after January 1, 2000. If such an event occurred, the
value of the issuer's securities could be reduced.

Many computer software systems in use today cannot distinguish between the year
2000 and the year 1900. Although year 2000 related computer problems could have
a negative effect on the SSgA Funds and its shareholders, the service providers
have advised the Funds that they are working to avoid such problems and expect
all systems to be adapted in time for the event. Because it is the obligation
of those service providers to ensure the proper functioning of their computer
systems, the Funds do not expect to incur any material expense in connection
with year 2000 preparations.

A fund that invests significantly in non-US issuers may be exposed to a higher
degree of risk from year 2000 issues than other funds. It is generally believed
that non-US governments and issuers are less prepared for year 2000 related
contingencies than the US government and US-based issuers, which could result
in a more significant diminution in value of non-US issuer's securities on or
after January 1, 2000. This risk applies particularly to the Emerging Markets,
Active International and International Growth Opportunities Funds.

Descriptions of Risks:

Industry Concentration Risk. The risk that a fund concentrates its investments
in specific industry sectors that have historically experienced substantial
price volatility. A fund is subject to greater risk of loss as a result of
adverse economic, business or other developments than if its investments were
diversified across different industry sectors. Securities of issuers held by
the funds may lack sufficient market liquidity to enable a fund to sell the
securities at an advantageous time or without a substantial drop in price.

Interest Rate Risk. The risk that when interest rates increase, securities held
by a fund will decline in value. Long-term fixed-income securities will
normally have more price volatility because of this risk than short-term
securities.

9
<PAGE>

Management Risk. The risk that a strategy used by the Adviser may fail to
produce the intended results.

Market Risk. The risk that the value of the securities in which a fund invests
may go up or down in response to the prospects of individual companies and/or
general economic conditions. Price changes may be temporary or last for
extended periods.

Liquidity Risk. The risk that a fund will not be able to pay redemption
proceeds within the time period stated in this Prospectus because of unusual
market conditions, an unusually high volume of redemption requests, or other
reasons. Funds that invest in non-investment grade fixed-income securities,
small capitalization stocks, REITs and emerging country issuers will be
especially subject to the risk that during certain periods the liquidity of
particular issuers or industries, or all securities within these investment
categories, will shrink or disappear suddenly and without warning as a result
of adverse economic, market or political events, or adverse investor
perceptions whether or not accurate.

Fixed Income Securities. Prices of fixed-income securities rise and fall in
response on interest rate changes. Generally, when interest rates rise, prices
of fixed-income securities fall. The longer the duration of the security, the
more sensitive the security is to this risk. A 1% increase in interest rates
would reduce the value of a $100 note by approximately one dollar if it had a
one-year duration, but would reduce its value by approximately fifteen dollars
if it had a 15-year duration. There is also a risk that one or more of the
securities will be downgraded in credit rating or go into default. Lower-rated
bonds generally have higher credit risks. These securities are subject to other
risks including:

o Credit/Default Risk--the risk that an issuer of fixed-income securities
held by a fund (which may have low credit ratings) may default on its
obligation to pay interest and repay principal.

Equity Securities. The value of equity securities will rise and fall in
response to the activities of the company that issued the stock, general market
conditions, and/or economic conditions. With respect to equity securities
purchased by the Emerging Market Fund 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.
These foreign government pooled vehicles are also subject to risks. These
securities could be more expensive because of additional management fees
charged by the underlying pools. In addition, such pools may have restrictions
on redemptions, limiting the liquidity of the investment.

Initial Public Offerings (IPOs). Performance of a fund may be impacted by a
fund's holdings of IPOs. Because an IPO is an equity security that is new to
the public market, the value of IPOs can fluctuate dramatically. Therefore,
IPOs have greater risks than other equity investments.

Securities of Small Capitalization Companies. Investments in smaller companies
may involve greater risks because these companies often have narrower markets
and more limited managerial and financial resources than larger, more
established companies. As a result their performance can be more volatile which
could increase the volatility of the fund's portfolio.

Securities of Large Capitalization Companies. A fund's emphasis on large-cap
stocks makes it susceptible to the business risks of larger companies, which
usually cannot change as quickly as smaller companies in response to
competitive challenges. Larger companies also tend not to be able to maintain
the high growth rates of well-managed smaller companies, especially during
strong economic periods.

Non-Investment Grade Fixed-Income Securities. Although lower-rated debt
securities generally offer a higher yield than higher rated debt securities,
they involve higher risks. They are especially subject to:

o Adverse changes in general economic conditions and in the industries in which
their issuers are engaged;

o Changes in the financial condition of their issuers; and

o Price fluctuations in response to changes in interest rates.

As a result, issuers of lower rated debt securities are more likely than other
issuers to miss principal and interest payments or to default.

Asset-Backed Securities. Asset-Backed securities are often subject to more
rapid repayment than their stated maturity date would indicate as a result of
the pass-through of prepayments of principal on the underlying loans.
Asset-backed securities present certain additional risks because asset-backed
securities generally do not have the benefit of a security interest in
collateral that is comparable to mortgage assets.

Non-US Debt Securities. A fund's foreign debt securities are typically
obligations of sovereign governments. These securities are particularly subject
to a risk of default from political instability and fluctuations in exchange
rates. Significant emerging market debt is considered non-investment grade.

Emerging Market Countries. Investments in emerging or developing markets
involve exposure to economic structures that are generally less diverse and
mature, and to political systems which have less stability than those of more
devel-

10
<PAGE>

oped countries. Emerging market securities are subject to currency transfer
restrictions and may experience delays and disruptions in securities settlement
procedures.

Instruments of US and Foreign Banks and Branches and Foreign Corporations,
Including Yankee Bonds. Non-US corporations and banks issuing
dollar-denominated instruments in the US are not necessarily subject to the
same regulatory requirements that apply to US corporations and banks, such as
accounting, auditing and recordkeeping standards, the public availability of
information and, for banks, reserve requirements, loan limitations and
examinations. This increases the possibility that a non-US corporation or bank
may become insolvent or otherwise unable to fulfill its obligations on these
instruments.

Foreign Currency and Exchange Rate. 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. A fund attempts to buy and sell foreign
currencies on favorable terms. Price spread on currency exchange (to cover
service charges) may be incurred, particularly when a 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 a fund from repatriating
invested capital and dividends, withhold portions of interest and dividends at
the source, or impose other taxes, with respect to a fund's investments in
securities of issuers of that country. Because a fund's securities may 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.

Analytical Models. The success of a fund's principal investment strategy
depends on the Advisor's skill in designing and using its analytical model as a
tool for selecting undervalued stocks.

Derivatives. There are certain investment risks in using derivatives, such as
futures contracts, options on futures, interest rate swaps and structured
notes, as a hedging technique. If a fund incorrectly forecasts interest rates
in using derivatives, a fund could lose money. Price movements of a futures
contract, option or structured notes may not be identical to price movements of
portfolio securities or a securities index, resulting in the risk that, when a
fund buys a futures contract or option as a hedge, the hedge may not be
completely effective. The use of these management techniques also involves the
risk of loss if the advisor is incorrect in the expectation or fluctuations in
securities prices, interest rates or currency prices.

Mortgage-Backed Securities.

o Prepayment Risk--The investment characteristics of adjustable and fixed rate
mortgage-backed securities differ from those of traditional fixed-income
securities. The major differences include the payment of interest and
principal on mortgage-backed securities on a more frequent (usually monthly)
schedule, and the possibility that principal may be prepaid at any time due to
prepayments on the underlying mortgage loans or other assets. These
differences can result in significantly greater price and yield volatility
than is the case with traditional fixed-income securities. As a result, if a
fund purchases mortgage-backed securities at a premium, a faster than expected
prepayment rate will reduce both the market value and the yield to maturity
from those which were anticipated. A prepayment rate that is slower than
expected will have the opposite effect of increasing yield to maturity and
market value. Conversely, if a fund purchase mortgage-backed securities at a
discount, faster than expected prepayments will increase, while slower than
expected prepayments will reduce yield to maturity and market values.

o Call Risk--The risk that an issuer will exercise its right to pay principal on
an obligation held by a fund (such as a mortgage-backed security) earlier than
expected. This may happen when there is a decline in interest rates. Under
these circumstances, a fund may be unable to recoup all of its initial
investment and will also suffer from having to reinvest in lower yielding
securities.

o Extension Risk--The risk that an issuer will exercise its right to pay
principal on an obligation held by a fund (such as a mortgage-backed security)
later than expected. This may happen when there is a rise in interest rates.
Under these circumstances, the value of the obligation will decrease and a
fund will also suffer from the inability to invest in higher yielding
securities.

Risk and Return

The following bar charts illustrate the risks of investing in the each fund by
showing changes in a fund's performance from year to year over the life of the
fund. The accompanying tables further illustrate the risks of investing in a
fund by showing how the fund's average annual returns for 1, 5 and 10 years
(or, if less, since a fund's inception) compare to the returns of a broad-based
securities market index.

How a fund has performed in the past is not necessarily an indication of how it
will perform in the future.

11
<PAGE>

Annual Total Returns--Money Market

[START BAR CHART]

[END BAR CHART]

Best Quarter--June 30, 1989: 2.36%
Worst Quarter--December 31, 1993: 0.74%

Current Fiscal Quarter--August 31, 1999: 1.19%

Average Annual Total Returns
For the Periods Ended December 31, 1998:

<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
------ ------- --------
<S> <C> <C> <C>
Money Market Fund 5.30% 5.12% 5.63%
Salomon Smith Barney
3-month Treasury bill 5.05% 5.10% 5.44%
Lipper Average Money
Market Funds 4.85% 4.78% 5.22%
</TABLE>

7-Day Yields
For the Period Ended December 31, 1998:

<TABLE>
<CAPTION>
Current Effective
------- ---------
<S> <C> <C>
Money Market Fund 4.84% 4.96%
</TABLE>

Current yield information for the fund is available toll free by calling
1-800-647-7327 or by visiting our website at www.ssgafunds.com.

Annual Total Returns--Yield Plus

[START BAR CHART]

[END BAR CHART]

Best Quarter--March 31, 1995: 1.78%

Worst Quarter--September 30, 1993: 0.71%

Current Fiscal Quarter--August 31, 1999: 0.88%

Average Annual Total Returns
For the Periods Ended December 31, 1998:

<TABLE>
<CAPTION>
1 Year 5 Years Inception
------ ------- ---------
<S> <C> <C> <C>
Yield Plus Fund 4.83% 5.30% 4.96%
LIBOR 90-day Index 5.52% 5.53% 5.12%
</TABLE>

30-Day Yields
For the Period Ended December 31, 1998:

<TABLE>
<CAPTION>
Current
-------
<S> <C>
Yield Plus Fund 5.28%
</TABLE>

Current yield information for the fund is available toll free by calling
1-800-647-7327 or by visiting our website at www.ssgafunds.com.

12
<PAGE>

Annual Total Returns--Intermediate

[START BAR CHART]

[END BAR CHART]

Best Quarter--June 30, 1995: 5.57%

Worst Quarter--March 31, 1994: (3.14%)

Current Fiscal Quarter--August 31, 1999: (0.33%)

Average Annual Total Returns
For the Periods Ended December 31, 1998:

<TABLE>
<CAPTION>
1 Year 5 Years Inception
------ ------- ---------
<S> <C> <C> <C>
Intermediate Fund 7.93% 6.04% 5.52%
Lehman Bros. Intermediate
Government Corporate 8.44% 6.60% 6.29%
</TABLE>

30-Day Yields
For the Period Ended December 31, 1998:

<TABLE>
<CAPTION>
Current
-------
<S> <C>
Intermediate Fund 4.74%
</TABLE>

Current yield information for the fund is available toll free by calling
1-800-647-7327 or by visiting our website at www.ssgafunds.com.

Annual Total Returns--Bond Market

[START BAR CHART]

[END BAR CHART]

Best Quarter--September 30, 1998: 4.19%
Worst Quarter--March 31, 1997: (0.53)

Current Fiscal Quarter--August 31, 1999: (1.16%)

Average Annual Total Returns
For the Periods Ended December 31, 1998:

<TABLE>
<CAPTION>
1 Year Inception
------ ---------
<S> <C> <C>
Bond Market Fund 8.36% 6.73%
Lehman Bros. Aggregate Bond Index 8.69% 7.26%
</TABLE>

30-Day Yields
For the Period Ended December 31, 1998:

<TABLE>
<CAPTION>
Current
-------
<S> <C>
Bond Market Fund 5.58%
</TABLE>

Current yield information for the fund is available toll free by calling
1-800-647-7327 or by visiting our website at www.ssgafunds.com.

Annual Total Returns--High Yield Bond Fund

The High Yield Bond Fund has not been is existence for a full calendar year.
Therefore, performance information is not available. The prospectus will be
updated when information is available. This fund began operating in May 1998.

Best Quarter--December 31, 1998: 4.36%
Worst Quarter--September 30, 1998: 0.33%
Current Fiscal Quarter--August 31, 1999: 0.0%

The following table further illustrates the risks of investing in the fund by
showing how the fund's average annual returns since the fund's inception
compare to the returns of a broad-based securities market index.

13
<PAGE>

Average Annual Total Returns
For the Periods Ended December 31, 1998:

<TABLE>
<CAPTION>
1 Year Inception
------ ---------
<S> <C> <C>
High Yield Bond Fund -- 6.19%
Lehman Bros. High Yield Bond Index -- (1.83%)
</TABLE>

30-Day Yields
For the Period Ended December 31, 1998:

<TABLE>
<CAPTION>
Current
-------
<S> <C>
High Yield Bond Fund 7.75%
</TABLE>

Current yield information for the fund is available toll free by calling
1-800-647-7327 or by visiting our website at www.ssgafunds.com.

Annual Total Returns--Growth and Income

[START BAR CHART]

[END BAR CHART]

Best Quarter--December 31, 1998: 23.77%
Worst Quarter--September 30, 1998: (8.12%)
Current Fiscal Quarter -- August 31, 1999: (0.40%)

Average Annual Total Returns
For the Periods Ended December 31, 1998:

<TABLE>
<CAPTION>
1 Year 5 Years Inception
------ ------- ---------
<S> <C> <C> <C>
Growth and Income Fund 34.74% 23.64% 22.30%
S&P 500[RegTM] Index 28.58% 24.06% 22.75%
</TABLE>

Annual Total Returns--S&P 500 Index

[START BAR CHART]

[END BAR CHART]

Best Quarter--December 31, 1998: 21.24%
Worst Quarter--September 30, 1998: (9.97%)
Current Fiscal Quarter--August 31, 1999: 1.71%

Average Annual Total Returns
For the Periods Ended December 31, 1998:

<TABLE>
<CAPTION>
1 Year 5 Years Inception
------ ------- ---------
<S> <C> <C> <C>
S&P 500 Index Fund 28.35% 23.80% 21.32%
S&P 500 Index 28.58% 24.06% 21.62%
</TABLE>

Annual Total Returns--Matrix Equity

[START BAR CHART]

[END BAR CHART]

Best Quarter--December 31, 1998: 22.35%

Worst Quarter--September 30, 1998 (13.89%)
Current Fiscal Quarter -- August 31, 1999: 2.89%

14
<PAGE>

Average Annual Total Returns
For the Periods Ended December 31, 1998:

<TABLE>
<CAPTION>
1 Year 5 Years Inception
------ ------- ---------
<S> <C> <C> <C>
Matrix Equity Fund 21.71% 20.87% 19.15%
S&P 500 Index 28.58% 24.06% 20.52%
</TABLE>

Annual Total Returns--Small Cap

[START BAR CHART]

[END BAR CHART]

Best Quarter--December 31, 1998: 19.66%
Worst Quarter--September 30, 1998: (27.21%)
Current Fiscal Quarter--August 31, 1999: 1.89%

Average Annual Total Returns
For the Periods Ended December 31, 1998:

<TABLE>
<CAPTION>
1 Year 5 Years Inception
------ ------- ---------
<S> <C> <C> <C>
Small Cap Fund (7.55%) 15.63% 16.29%
Russell 2000[RegTM] Index (2.55%) 11.86% 14.87%
</TABLE>

Annual Total Returns--Special Equity Fund

The Special Equity Fund has not been in existence for a full calendar year.
Therefore, performance information is not available. The prospectus will be
updated when information is available. This fund began operating in May 1998.

Best Quarter--December 31, 1998: 21.70%

Worst Quarter--September 30, 1998: (21.42%)
Current Fiscal Quarter--August 31, 1999: 9.43%

Average Annual Total Returns
For the Periods Ended December 31, 1998:

<TABLE>
<CAPTION>
1 Year Inception
------ ---------
<S> <C> <C>
Special Equity Fund -- (8.48%)
Russell Special Small Company[RegTM] Index -- (3.37%)
</TABLE>

Annual Total Returns--Tuckerman Active REIT Fund

The Tuckerman Active REIT Fund has not been in existence for a full calendar
year. Therefore, performance information is not available. The prospectus will
be updated when information is available. This fund began operating in May
1998.

Best Quarter--December 31, 1998: (0.68%)
Worst Quarter--September 30, 1998: (11.58%)
Current Fiscal Quarter--August 31, 1999: (6.02)%

Average Annual Total Returns
For the Periods Ended December 31, 1998:

<TABLE>
<CAPTION>
1 Year Inception
------ ---------
<S> <C> <C>
Active REIT Fund -- (14.23%)
Wilshire REIT Index -- (8.93%)
</TABLE>

Annual Total Returns--Aggressive Equity Fund

The Aggressive Equity Fund has not been in existence for a full calendar year.
Therefore, performance information is not available. The prospectus will be
updated when information is available. This fund began operating in December
1998.

Annual Total Returns--IAM SHARES Fund

The IAM SHARES Fund has not been in existence for a full calendar year.
Therefore, performance information is not available. The prospectus will be
updated when information is available. This fund began operating in June 1999.

Annual Total Returns--Emerging Markets

[START BAR CHART]

[END BAR CHART]

Best Quarter--September 30, 1994: 29.65%
Worst Quarter--December 31, 1997: (21.41%)
Current Fiscal Quarter--August 31, 1999: 10.09%

15
<PAGE>

Average Annual Total Returns
For the Periods Ended December 31, 1998:

<TABLE>
<CAPTION>
1 Year Inception
------ ---------
<S> <C> <C>
Emerging Markets Fund (15.94%) (2.61%)
IFC Investable Composite Index (22.02%) (10.11%)
</TABLE>

Annual Total Returns--Active International

[START BAR CHART]

[END BAR CHART]

Best Quarter--March 31, 1998: 17.88%
Worst Quarter--September 30, 1998: (15.97%)

Current Fiscal Quarter--August 31, 1999: 10.20%
The following table further illustrates the risks of investing in the fund by
showing how the fund's average annual returns for 1 year and since the fund's
inception compare to the returns of a broad-based securities market index.

Average Annual Total Returns
For the Periods Ended December 31, 1998:

<TABLE>
<CAPTION>
1 Year Inception
------ ---------
<S> <C> <C>
Active International Fund 13.54% 4.75%
MSCI EAFE Index 20.00% 11.20%
</TABLE>

Annual Total Returns--International Growth Opportunities Fund
The International Growth Opportunities Fund has not been in existence for a
full calendar year. Therefore, performance information is not available. The
prospectus will be updated when information is available. This fund began
operating in May 1998.

Best Quarter--December 31, 1998: 20.31%
Worst Quarter--September 30, 1998: (17.58%)
Current Fiscal Quarter--August 31, 1999: 10.77%

Average Annual Total Returns
For the Periods Ended December 31, 1998:

<TABLE>
<CAPTION>
1 Year Inception
------ ---------
<S> <C> <C>
International Growth Opportunities Fund -- (0.14%)
MSCI All Country World Index -- (0.27%)
</TABLE>

Annual Total Returns--Life Solutions Income and Growth

[START BAR CHART]

1998

11.02%

[END BAR CHART]

Best Quarter--December 31, 1998: 7.85%

Worst Quarter--September 30, 1998: (3.5%)
Current Fiscal Quarter--August 31, 1999: 1.17%

Average Annual Total Returns
For the Periods Ended December 31, 1998:

<TABLE>
<CAPTION>
1 Year Inception
------ ----------
<S> <C> <C>
Life Solutions Income and
Growth Fund 11.02% 10.70%
Composite Market Index 15.22% 15.40%
Russell 3000[RegTM] Index 24.14% 24.50%
Lehman Bros. Aggregate
Bond Index 8.69% 10.15%
MSCI EAFE Index US 20.33% 6.74%
S&P 500 Index 28.77% 26.44%
</TABLE>

16
<PAGE>

Annual Total Returns--Life Solutions Balanced

[START BAR CHART]

1998

12.30%

[END BAR CHART]

Best Quarter--December 31, 1998: 12.05%

Worst Quarter--September 30, 1998: (7.74%)
Current Fiscal Quarter--August 31, 1999: 2.45%
The following table further illustrates the risks of investing in the fund by
showing how the fund's average annual returns for 1 year and since the fund's
inception compare to the returns of a broad-based securities market index.

Average Annual Total Returns
For the Periods Ended December 31, 1998:

<TABLE>
<CAPTION>
1 Year Inception
------ ---------
<S> <C> <C>
Life Solutions Balanced Fund 12.30% 11.27%
Composite Market Index 18.17% 17.39%
Russell 3000 Index 24.14% 24.50%
Lehman Bros. Aggregate
Bond Index 8.69% 10.15%
MSCI EAFE Index US 20.33% 6.74%
S&P 500 Index 28.77% 26.44%
</TABLE>

Annual Total Returns--Life Solutions Growth

[START BAR CHART]

1998

13.76%

[END BAR CHART]

Best Quarter--December 31, 1998: 16.41%

Worst Quarter--September 30, 1998: (11.56%)
Current Fiscal Quarter--August 31, 1999: 3.76%
The following table further illustrates the risks of investing in the fund by
showing how the fund's average annual returns for 1 year and since the fund's
inception compare to the returns of a broad-based securities market index.

Average Annual Total Returns
For the Periods Ended December 31, 1998:

<TABLE>
<CAPTION>
1 Year Inception
----------- ----------
<S> <C> <C>
Life Solutions Growth Fund 13.76% 12.06%
Composite Market Index 20.94% 19.22%
Russell 3000 Index 24.14% 24.50%
Lehman Bros. Aggregate
Bond Index 8.69% 10.15%
MSCI EAFE Index US 20.33% 6.74%
S&P 500 Index 28.77% 26.44%
</TABLE>

17
<PAGE>

FEES AND EXPENSES OF THE FUNDS

These tables describe the fees and expenses that you may pay if you buy and
hold shares of the funds.

<TABLE>
<S> <C>
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends
or Other Distributions None
Redemption Fee None
Exchange Fee None
Maximum Account Fee None
</TABLE>

Annual Fund Operating Expenses

(expenses that are deducted from fund assets)

<TABLE>
<CAPTION>
Less Contractual Total Annual
Distribution Management Fee Expenses after
Management and Service Other Gross Waivers and Waivers and
Fund Fee (12b-1) Fees(1) Expenses Expenses Reimbursements Reimbursements
---- ---------- ------------- -------- -------- ---------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Money Market .25% .08% .07% .40% -- .40%
Yield Plus .25% .09% .07% .41% -- .41%
Intermediate(2) .80% .10% .21% 1.11% (.51%) .60%
Bond Market(3) .30% .06% .14% .50% -- .50%
High Yield Bond(4) .30% .09% .48% .87% (.12%) .75%
Growth and Income(5) .85% .15% .10% 1.10% -- 1.10%
S&P 500 Index(6) .10% .09% .09% .28% (.10%) .18%
Matrix Equity .75% .13% .06% .94% -- .94%
Small Cap .75% .19% .13% 1.07% -- 1.07%
Special Equity(7) .75% .13% .69% 1.57% (.47%) 1.10%
Active REIT(8) .65% .08% .36% 1.09% (.09%) 1.00%
Aggressive Equity(9) .75% .02% 1.29% 2.06% (.96%) 1.10%
IAM SHARES Fund(10) .25% .04% .38% .67% (.02%) .65%
Emerging Markets(11) .75% .12% .47% 1.34% (.09%) 1.25%
Active International(12) .75% .08% .54% 1.37% (.37%) 1.00%
International Growth Opportunities(13) .75% .08% .45% 1.28% (.18%) 1.10%
</TABLE>

- -----------

(1) The ratio includes a certain percentage for each of 12b-1 Distribution and
Shareholder Servicing Fees, respectively, as follows: Money
Market--.04/.04; Yield Plus--0.4/.05; S&P 500--.04/.05;
Intermediate--.04/.06; Bond Market--.03/.03; High Yield Bond--.07/.02;
Active REIT--.05/.03; Growth and Income--.06/.09; Matrix Equity--.04/.09;
Small Cap--.09/.10; Special Equity--.10/.03; International Growth
Opportunities--.05/.03; Aggressive Equity--.02/.00; IAM Shares--.02/.02;
Active International--.04/.04; Emerging Markets--.09/.03.

(2) The Advisor has contractually agreed to waive .50% of its .80% management
fee for the Intermediate Fund until December 31, 2010. In addition, until
December 31, 2002, the Advisor has voluntarily agreed to reimburse the fund
for all expenses in excess of .60% of average daily net assets on an annual
basis. The annual management fee after the waiver and reimbursement is
.29%. The total annual expenses shown above have been restated to reflect
the waiver and reimbursement.

(3) The Advisor has contractually agreed to reimburse the Bond market Fund for
all expenses in excess of .50% of average daily net assets on an annual
basis until December 31, 2002.

(4) The Advisor has contractually agreed to reimburse the High Yield Bond Fund
for all expenses in excess of .75% of average daily net assets on an annual
basis until December 31, 2002. The annual management fee after the
reimbursement is .18%. The total annual expenses shown above have been
restated to reflect the reimbursement.

(5) The Advisor has contractually agreed to reimburse the Growth and Income
Fund for all expenses in excess of 1.10% of average daily net assets on an
annual basis until December 31, 2002.

(6) The Advisor has contractually agreed to waive .07% of its .10% advisory fee
for the S&P 500 Index Fund until December 31, 2010. In addition, until
December 31, 2002, the Advisor agrees to reimburse the fund for all
expenses in excess of .18% of average daily net assets on an annual basis.
The annual management after the waiver and reimbursement is .00%. The
total annual expenses shown above have been restated to reflect the waiver
and reimbursement.

18
<PAGE>

(7) The Advisor has contractually agreed to reimburse the Special Equity Fund
for all expenses in excess of 1.10% of average daily net assets on an
annual basis until December 31, 2002. The annual management fee after the
reimbursement is .28%. The total annual expenses shown above have been
restated to reflect the reimbursement.

(8) The Advisor has contractually agreed to reimburse the Active REIT Fund to
the extent that total expenses exceed 1.00% of average daily net assets on
an annual basis until December 31, 2002. The annual management fee after
the reimbursement is .56%. The total annual expenses shown above have been
restated to reflect the reimbursement.

(9) The Advisor has contractually agreed to reimburse the Aggressive Equity
Fund for all expenses in excess of 1.10% of average daily net assets on an
annual basis until December 31, 2002. The annual management fee after the
reimbursement is (.00%). Other expenses after the reimbursement are 1.08%.
The total annual expenses shown above have been restated to reflect the
reimbursement.

(10) The Advisor has contractually agreed to reimburse the IAM SHARES Fund for
all expenses in excess of .65% of average daily net assets on an annual
basis until December 31, 2002. The annual management fee after the
reimbursement is .23%. The total annual expenses shown above have been
restated to reflect the reimbursement.

(11) The Advisor has contractually agreed to reimburse the Emerging Markets Fund
for all expenses in excess of 1.25% of average daily net assets on an
annual basis until December 31, 2002. The annual management fee after the
reimbursement is .66%. The total annual expenses shown above have been
restated to reflect the reimbursement.

(12) The Advisor has contractually agreed to reimburse the Active International
Fund for all expenses in excess of 1.00% of average daily net assets on an
annual basis until December 31, 2002. The annual management fee after the
waiver is .38%. The total annual expenses shown above have been restated to
reflect the reimbursement.

(13) The Advisor has contractually agreed to reimburse the International Growth
Opportunities Fund for all expenses in excess of 1.10% of average daily net
assets on an annual basis until December 31, 2002. The annual management
fee after the waiver is .57%. The total annual expenses shown above have
been restated to reflect the reimbursement. Annual Fund Operating Expenses
(expenses that are deducted from fund assets)

<TABLE>
<CAPTION>
Life Solutions Life Solutions Life Solutions
Income and Growth Fund(14) Balanced Fund(14) Growth Fund(14)
-------------------------- ----------------- ---------------
<S> <C> <C> <C>
Management Fee .00% .00% .00%
Distribution and Service (12b-1) Fees(15) .15% .15% .15%
Other Expenses .35% .13% .23%
Gross Expenses .50% .28% .38%
Less Contractual Management Fee Waivers and
Reimbursements (.05%) -- --
Total Annual Expenses after Waivers and
Reimbursements .45% .28% .38%
Average Indirect Expenses Before Waivers and
Reimbursements on Underlying Funds .75% .84% .94%
Average Indirect Expenses After Waivers and
Reimbursements on Underlying Funds .67% .73% .80%
Total Annual Expenses (Including Indirect
Expenses) 1.20% 1.12% 1.32%
Total Annual Expenses (Including Indirect
Expenses) After Waivers and Reimbursements of
Underlying Funds 1.12% 1.01% 1.18%
</TABLE>

- -----------

(14) The Advisor has contractually agreed to reimburse the Life Solutions Funds
to the extent that total expenses (other than distribution and service
fees) exceed .30% until December 31, 2002. The other expenses and total
annual expenses shown above have been restated to reflect the
reimbursement.

(15) The ratio includes a certain percentage for each of 12b-1 Distribution and
Shareholder Servicing Fees, respectively, as follows: Life Solutions
Balanced Fund--.02/.13; Life Solutions Growth Fund--.02/.13; Life Solutions
Income and Growth Fund--.02/.13.

While the Life Solutions Funds are expected to operate at a .30% or lower
expense level prior to 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. Each Life Solutions Fund intends to
invest in some, but not all, of the Underlying Funds. Based on

19
<PAGE>

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>
Average Indirect Expense Ratios Before and
Life Solutions Fund After Fee Waiver and/or Expense Reimbursement (%)
------------------- -------------------------------------------------
Before After
------ -----
<S> <C> <C>
Income and Growth Fund 0.75 0.67
Balanced Fund 0.84 0.73
Growth Fund 0.94 0.80
</TABLE>

Example

These examples are intended to help you compare the cost of investing in a fund
with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in a fund for the time periods
indicated, and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that a
fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions, your costs would be:

<TABLE>
<CAPTION>
Fund 1 year 3 years 5 years 10 years
- ---- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Money Market $ 41 $ 18 $ 224 $ 505
==== ==== ====== ======
Yield Plus $ 42 $132 $ 230 $ 518
==== ==== ====== ======
Intermediate $ 61 $192 $ 340 $1,762
==== ==== ====== ======
Bond Market $ 51 $160 $ 280 $ 629
==== ==== ====== ======
High Yield Bond $ 77 $240 $ 482 $1,073
==== ==== ====== ======
Growth and Income $112 $350 $ 606 $1,340
==== ==== ====== ======
S&P 500 Index $ 18 $ 58 $ 157 $ 356
==== ==== ====== ======
Matrix Equity $ 84 $262 $ 520 $1,155
==== ==== ====== ======
Small Cap $109 $340 $ 590 $1,306
==== ==== ====== ======
Special Equity $112 $350 $ 855 $1,867
==== ==== ====== ======
Active REIT $102 $318 $ 601 $1,329
==== ==== ====== ======
Aggressive Equity $112 $350 $1,114 $2,400
==== ==== ====== ======
IAM SHARES Fund $ 66 $208 $ 373 $ 835
==== ==== ====== ======
Emerging Markets $127 $397 $ 734 $1,613
==== ==== ====== ======
Active International $102 $318 $ 750 $1,646
==== ==== ====== ======
International Growth Opportunities $112 $350 $ 702 $1,545
==== ==== ====== ======
Life Solutions:
Income and Growth $ 46 $144 $ 280 $ 628
==== ==== ====== ======
Balanced $ 29 $157 $ 356 $ 356
==== ==== ====== ======
Growth $ 39 $122 $ 213 $ 480
==== ==== ====== ======
</TABLE>

Long-term shareholders of the funds 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. (not applicable to the Money
Market Fund).

20
<PAGE>

MANAGEMENT OF THE FUND

Investment Advisor. State Street Bank and Trust Company (State Street or
Advisor), One International Place, Boston, Massachusetts 02110, serves as the
investment advisor for the SSgA Funds and directs the investments of each fund
in accordance with their respective investment objectives, policies and
restrictions.

State Street is one of the largest providers of securities processing and
record keeping services for US mutual funds and pension funds. State Street
Global Advisors ("SSgA") is the investment management business of State Street,
a 200-year old pioneer and leader in the world of financial services. State
Street is a wholly-owned subsidiary of State Street Corporation, a publicly
held bank holding company. State Street, with over $582 billion under
management as of October 19, 1999, provides complete global investment
management services from offices in North America, South America, Europe, Asia,
Australia and the Middle East. For its services as the Advisor, each fund in
this prospectus pays State Street an annual management fee, calculated daily
and paid monthly, that is equal to a certain percentage of its average daily
net assets (see the table below). However, the Advisor has voluntarily agreed
to waive or reimburse its fees for certain funds.

<TABLE>
<CAPTION>
Annual Management Fees
(% of Average Daily Net Assets):
--------------------------------
Management Management
Fee After Fee Before
Waivers or Waivers or
Reim- Reim-
Fund bursements (%) bursements (%)
- ---- -------------- --------------
<S> <C> <C>
Money Market 0.25 0.25
Yield Plus 0.25 0.25
Intermediate 0.29 0.80
Bond Market 0.30 0.30
High Yield Bond 0.18 0.30
Growth and Income 0.85 0.85
S&P 500 Index 0.00 0.10
Matrix Equity 0.75 0.75
Small Cap 0.75 0.75
Special Equity 0.28 0.75
Active REIT 0.56 0.65
Aggressive Equity 0.00 0.75
IAM SHARES 0.23 0.25
Emerging Markets 0.66 0.75
Active International 0.38 0.75
International Growth
Opportunities 0.57 0.75
Life Solutions Balanced 0.00 0.00
Life Solutions Growth 0.00 0.00
Life Solutions
Income and Growth 0.00 0.00
</TABLE>

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.

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. 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, Principal, is the lead portfolio
manager primarily responsible for investment decisions regarding the SSgA
Matrix Equity Fund. Mr. Gekas has been with the firm since 1995. At SSgA, he
has managed the Global Enhanced portfolios and led the US Structured Products
Group. 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 portfolio managers assisting with the
management of this fund.

S&P 500 Index Fund. Mr. James B. May, Principal, has been with State Street
since 1989. Before joining the Global Structured Products Group as a portfolio
manager in January

21
<PAGE>

1994, Mr. May served as a Senior Investment Support Analyst for the US
Structured Products Group. Mr. May 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 holds a BS in Finance
from Bentley College and his MBA from Boston College. There are five other
members of the team who assist Mr. May with the management of the fund.

Special Equity Fund. Mr. Guy R. Scott, CFA, Principal, is the lead portfolio
manager primarily responsible for investment decisions regarding the SSgA
Special Equity Fund. Mr. Scott has been with 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 portfolio 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. Her responsibilities include
research, product development, and portfolio management for the US Active
Strategy. She holds BA degrees in Economics and Russian from Middlebury
College, and an MS degree in Computer Science from Boston College. There are
five other portfolio managers who assist in managing the fund.

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. There are two other managers who assist
with the management of this fund.

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 five other portfolio managers who assist
in managing the fund.

IAM SHARES Fund. Mr. Michael J. Feehily, CFA, Principal, is the portfolio
manager primarily responsible for investment decisions regarding the fund. Mr.
Feehily joined State Street Corporation in August 1992 in the Global Operations
area before moving to the Performance & Analytics group. He helped to develop
and work with a proprietary application which is used to analyze venture
capital, real estate, and other private investments. Mr. Feehily holds a BS in
Finance, Investment and Economics from Babson College and an MBA in Finance
from Bentley College. There are four other portfolio managers who assist in
managing the fund.

Growth and Income Fund. Mr. L. Emerson Tuttle, CFA, 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. Brad Aham, CFA, Principal, is the portfolio manager
primarily responsible for investment decisions regarding the fund. He joined
the firm in 1993. Mr. Aham has worked with the Active Emerging Markets product
since its inception, and he manages several institutional funds. In addition to
managing portfolios, he performs quantitative and qualitative research for
SSgA. There are three other portfolio managers who assist 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.

SSgA Life Solutions Growth, Income and Growth, and Balanced Funds. Mr. Heydon
Traub, CFA, Principal, is the lead portfolio manager primarily responsible for
investment decisions regarding the SSgA Life Solutions Funds. He has been with
SSgA since 1987. Mr. Traub is the firmwide head of Global Asset Allocation. He
serves as Vice Chairman of the SSgA Investment Committee and is a member of the
State Street Bank Global Management Forum. He is one of the

22
<PAGE>

developers of the firm's country, stock and currency selection processes and
continues to lead the research effort to enhance the asset allocation
strategies. Mr. Traub holds a BA in Economics from Brandeis University and an
MBA in Finance and Accounting from the University of Chicago. There are six
other portfolio managers assisting with the management of these funds.

ADDITIONAL INFORMATION ABOUT THE FUND'S
OBJECTIVES, INVESTMENT STRATEGIES
AND RISKS

The investment objective of each fund are either fundamental or
non-fundamental, as stated above. A fundamental investment objective may only
be changed with the approval of the fund's shareholders A non-fundamental
investment objective may be changed by the fund's trustees without shareholder
approval. The investment policies described below reflect the fund's current
practices. In addition to the principal risks explained above, other risks are
explained in some of the descriptions of the investment policies below:

US Government Securities (Principal Policy--Money Market, Yield Plus,
Intermediate, Bond Market, High Yield Bond. Not a Principal Policy--Growth and
Income, S&P 500 Index, Matrix Equity, Small Cap, Special Equity, Active REIT,
Aggressive Equity). 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 (Principal Policy--Money Market; Not a Principal
Policy--all other 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. If the other party or "seller" defaults, a fund
might suffer a loss to the extent that the proceeds from the sale of the
underlying securities and other collateral held by the fund are less than the
repurchase price and the fund's cost associated with delay and enforcement of
the repurchase agreement. In addition, in the event of bankruptcy of the seller,
a fund could suffer additional losses if a court determines that the fund's
interest in the collateral is not enforceable.

Section 4(2) Commercial Paper (Principal Policy--Money 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 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. As a result it suffers from a liquidity risk, the risk that the
securities may be difficult to value because of the absence of an active market
and may be disposed of only after considerable expense and delay. 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 (Principal Policy--Yield Plus, Intermediate, High Yield
Bond and Bond Market Not a Principal Policy--Money Market). Asset-backed
securities are securities whose principal and interest payments are
collateralized by pools of assets such as auto loans, credit card receivables,
leases, installment contracts and personal property. 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 over collateralization, 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 a 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.

o Prepayment Risk--Like mortgage-backed securities, asset-backed securities are
often subject to more rapid repayment than their stated maturity date would
indicate as a result of the pass-through of prepayments of principal on the
underlying loans. During periods of declining interest rates, prepayment of
loans underlying asset-backed securities can be expected to accelerate. A
fund's ability to maintain positions in such securities will be affected by
reductions in the principal amount of such securities resulting from
prepayments, and its ability to reinvest the returns of principal at
comparable yields is subject to generally prevailing interest rates at that
time. To the extent

23
<PAGE>

that a fund invests in asset-backed securities, the values of such fund's
portfolio securities will vary with changes in market interest rates generally
and the differentials in yields among various kinds of asset-backed
securities.

o Other Risks Associated with Asset-Backed Securities--Asset-backed securities
present certain additional risks that are not presented by mortgage-backed
securities because asset-backed securities generally do not have the benefit
of a security interest in collateral that is comparable to mortgage assets.
Credit card receivables are generally unsecured and the debtors on such
receivables are entitled to the protection of a number of state and federal
consumer credit laws, many of which give such debtors the right to set-off
certain amounts owed on the credit cards, thereby reducing the balance due.
Automobile receivables generally are secured, but by automobiles rather than
residential real property. Most issuers of automobile receivables permit the
loan servicers to retain possession of the underlying obligations. If the
servicer were to sell these obligations to another party, there is a risk that
the purchaser would acquire an interest superior to that of the holders of the
asset-backed securities. In addition, because of the large number of vehicles
involved in a typical issuance and technical requirements under state laws,
the trustee for the holders of the automobile receivables may not have a
proper security interest in the underlying automobiles. Therefore, there is
the possibility that, in some cases, recoveries on repossessed collateral may
not be available to support payments on these securities.

Mortgage-Backed Securities (Principal Policy--Yield Plus, Intermediate, Bond
Market, High Yield Bond; Not a Principal Policy--Money Market). The funds may
invest in mortgage-backed securities. Each mortgage pool underlying
mortgage-backed securities consists of mortgage loans evidenced by promissory
notes secured by first mortgages or first deeds of trust or other similar
security instruments creating a first lien on owner occupied and non-owner
occupied one-unit to four-unit residential properties, multifamily (i.e., five
or more) properties, agriculture properties, commercial properties and mixed
use properties (the "Mortgaged Properties"). The Mortgaged Properties may
consist of detached individual dwelling units, multifamily dwelling units,
individual condominiums, townhouses, duplexes, triplexes, fourplexes, row
houses, individual units in planned unit developments and other attached
dwelling units. The Mortgaged Properties may also include residential
investment properties and second homes.

o Prepayment Risk--The investment characteristics of adjustable and fixed rate
mortgage-backed securities differ from those of traditional fixed-income
securities. The major differences include the payment of interest and
principal on mortgage-backed securities on a more frequent (usually monthly)
schedule, and the possibility that principal may be prepaid at any time due to
prepayments on the underlying mortgage loans or other assets. These
differences can result in significantly greater price and yield volatility
than is the case with traditional fixed-income securities. As a result, if a
fund purchases mortgage-backed securities at a premium, a faster than expected
prepayment rate will reduce both the market value and the yield to maturity
from those which were anticipated. A prepayment rate that is slower than
expected will have the opposite effect of increasing yield to maturity and
market value. Conversely, if a fund purchases mortgage-backed securities at a
discount, faster than expected prepayments will increase, while slower than
expected prepayments will reduce yield to maturity and market values. To the
extent that a fund invests in mortgage-backed securities, the Advisor may seek
to manage these potential risks by investing in a variety of mortgage-backed
securities and by using certain hedging techniques.

o Call Risk--In addition, a fund is subject to call risk. The risk that an
issuer will exercise its right to pay principal on an obligation held by a
fund (such as a mortgage-backed security) earlier than expected is a call
risk. This may happen when there is a decline in interest rates. Under these
circumstances, a fund may be unable to recoup all of its initial investment
and will also suffer from having to reinvest in lower yielding securities.

o Extension Risk--The fund is also subject to extension risk. The risk that an
issuer will exercise its right to pay principal on an obligation held by a
fund (such as a mortgage-backed security) later than expected is an extension
risk. This may happen when there is a rise in interest rates. Under these
circumstances, the value of the obligation will decrease and a fund will also
suffer from the inability to invest in higher yield securities.

The funds may also invest in mortgage-related securities, including Government
National Mortgage Association ("GNMA") Certificates ("Ginnie Maes"), Federal
Home Loan Mortgage Corporate ("FHLMC"), Mortgage Participation Certificates
("Freddie Macs"), Federal National Mortgage Association ("FNMA"), Guaranteed
Mortgage Certificates ("Fannie Maes") and Commercial Mortgage-Backed Securities
("CMBS"). 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 Mae is a wholly-owned corporate instrumentality of the United States.
Ginnie Mae is authorized to guarantee the timely payment of the principal of and
interest on certificates that are based on and backed by a pool of mortgage
loans insured by the Federal Housing Administration ("FHA Loans"), or guaranteed
by the Veterans Administration ("VA Loans"), or by pools of other eligible
mortgage loans. In order to meet its obligations under any guaranty, Ginnie Mae
is authorized to borrow from the United States Treasury in an unlimited amount.

24
<PAGE>

Fannie Mae is a stockholder-owned corporation chartered under an act of the
United States Congress. Each Fannie Mae Certificate is issued and guaranteed by
Fannie Mac and represents an undivided interest in a pool of mortgage loans (a
"Pool") formed by Fannie Mae.

Fannie Mae has certain contractual responsibilities. The obligations of Fannie
Mae under its guaranty of the Fannie Mae Certificates are obligations solely of
Fannie Mae.

Freddie Mac is a publicly held US government sponsored enterprise. The
principal activity of Freddie Mac currently is the purchase of first lien,
conventional, residential mortgage loans and participation interests in such
mortgage loans and their resale in the form of mortgage securities, primarily
Freddie Mac Certificates.

Variable and Floating Rate Securities (Principal Policy--Money Market, Yield
Plus; Not a Principal Policy--Bond Market, High Yield Bond, Intermediate). The
Funds may purchase variable and floating rate securities which are instruments
issued or guaranteed by entities such as the: (1) US Government, or an agency or
instrumentality thereof, (2) corporations, (3) financial institutions or (4)
insurance companies. A variable rate security provides for the automatic
establishment of a new interest rate on set dates. Variable rate obligations
whose interest is readjusted no less frequently than annually will be deemed to
have a maturity equal to the period remaining until the next readjustment of the
interest rate. The funds may also purchase floating rate securities. A floating
rate security provides for the automatic adjustment of its interest rate
whenever a specified interest rate changes. Interest rates on these securities
are ordinarily tied to, and are a percentage of, a widely recognized interest
rate, such as the yield on 90-day US Treasury bills or the prime rate of a
specified bank. 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.

Securities purchased by the fund may include variable and floating rate
instruments, which may have a stated maturity in excess of the fund's maturity
limitations but which will, except for certain US government obligations,
permit the fund to demand payment of the principal of the instrument at least
once every thirteen months upon not more than 30 days' notice. Variable and
floating rate instruments may include variable amount master demand notes that
permit the indebtedness thereunder to vary in addition to providing for
periodic adjustments in the interest rate. There may be no active secondary
market with respect to a particular variable or gloating rate instrument.
Nevertheless, the periodic readjustments of their interest rates tend to assure
that their value to the fund will approximate their par value. Illiquid
variable and floating rate instruments (instruments which are not payable upon
seven days' notice and do not have an active trading market) that are acquired
by the fund are subject to the fund's percentage limitations regarding
securities that are illiquid or not readily marketable. The Advisor will
continuously monitor the creditworthiness of issuers or variable and floating
rate instruments in which the Investment Company invests, and their ability to
repay principal and interest.

Variable and floating rate securities are subject to interest rate risk, the
risk that, when interest rates increase, fixed-income securities held by a fund
will decline in value. Long-term fixed-income securities will normally have
more price volatility because of this risk than short-term securities.

The Yield Plus Fund will purchase variable and floating rate securities to help
enable the fund to maintain its desired portfolio duration. The Yield Plus
Fund's investments include securities with greater than one year duration and
the reset feature on the variable and/or floating rate note can help to shorten
the duration.

Eurodollar Certificates of Deposit (ECDs), Eurodollar Time Deposits (ETDs) and
Yankee Certificates of Deposit (YCDs) (Principal Policy--Money Market; Not a
Principal Policy--Yield Plus, Bond Market, High Yield Bond, and
Intermediate). ECDs are US dollar denominated certificates of deposit issued by
a bank outside of the United States. 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. The banks issuing these instruments, or their domestic
or foreign branches, are not necessarily subject to the same

25
<PAGE>

regulatory requirements that apply to domestic banks. Foreign laws and
accounting standards typically are not as strict as they are in the US and
therefore there may be fewer restrictions regarding loan limitations, less
frequent examinations and less stringent requirements regarding reserve
accounting, auditing, recordkeeping and public reporting requirements.

Futures Contracts and Options on Futures (Not a Principal Policy--all Funds;
not applicable to 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.

Stock Index Futures may be used by the funds to equitize all cash and cash
equivalents so that the funds may remain fully invested in the equity market.
This will enable the funds to facilitate demand for same day redemptions.

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.

A fund's transactions, if any, in options, futures, options on futures and
equity swaps involve additional risk of loss. Loss can result from a lack of
correlation between changes in the value of derivative instruments and the
portfolio assets (if any) being hedged, the potential illiquidity of the
markets for derivative instruments, or the risks arising from margin
requirements and related leverage factors associated with such transactions.
The use of these management techniques also involves the risk of loss if the
Advisor is incorrect in its expectation of fluctuations in securities prices,
interest rates or currency prices.

Quality of Securities. (Principal Policy--Money Market, Yield Plus,
Intermediate, Bond Market; Not a Principal Policy--all other Funds). The Money
Market 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.

The Bond Market Fund limits its portfolio investments to those 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. 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.

The Yield Plus and Intermediate Funds limit their portfolio investments 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, in accordance with procedures established by the
Board of Trustees.

The Small Cap, Special Equity, Aggressive Equity, Active REIT, Growth and
Income and Matrix Funds may invest temporarily for defensive purposes in
investment-grade securities. The Emerging Markets, Active International and
International Growth Opportunities may invest temporarily for defensive
purposes in non-investment grade securities (see High Risk Bonds below).

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.

High Risk, High Yield Bonds (Principal Policy--High Yield Bond, Emerging
Markets, Active International and International Growth Opportunities). 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 gen-

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erally 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 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." Lower rated debt securities are especially subject
to risk that during certain periods the liquidity of particular issuers or
industries, or all securities within these investment categories, will shrink
or disappear suddenly and without warning as a result of adverse economic,
market or political events, or adverse investor perceptions whether or not
accurate.

Interest Rate Swaps (Principal Policy--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. Like other
derivative investments, interest rate swaps involve the risk that the Advisor
is incorrect in its expectations of fluctutations in interest rates.

Mortgage-Backed Rolls (Principal Policy--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.

Foreign Government Securities (Not a Principal Policy--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. No fund will invest a
material percentage of its assets in sovereign debt. Since these are obligations
of sovereign governments, they are particularly subject to a risk of default
from political instability.

Foreign Issuers (Principal Policy--Yield Plus). Non-US corporations and banks
issuing dollar-denominated instruments in the US are not necessarily subject to
the same regulatory requirements that apply to US corporations and banks, such
as accounting, auditing and recordkeeping standards, the public availability of
information and, for banks, reserve requirements, loan limitations and
examinations. This increases the possibility that a non-US corporation or bank
may become insolvent or otherwise unable to fulfill its obligations on these
instruments. These instruments are also subject to credit/default risk. There
is the risk that an issuer of fixed-income securities held by a fund (which
have low credit ratings) may default on its obligation to pay interest and
repay principal.

Emerging Markets (Principal Policy--Emerging Markets; Not a Principal
Policy--International Growth Opportunities, Active International). The funds
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 funds invest 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

27
<PAGE>

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.

American Depository Receipts (Not a Principal Policy--Growth and Income, S&P
500, Matrix Equity, Small Cap, Special Equity, Aggressive Equity, IAM SHARES,
Emerging Markets, Active International, International Growth Opportunities). The
common stocks that a fund may invest in include American Depository Receipts
(ADRs). ADRs represent the right to received securities of foreign issuers
deposited in a domestic bank or a correspondent bank. ADRs do not eliminate the
risk inherent in investing in securities of foreign issuers, such as: (1) less
publicly available information; (2)lack of uniform accounting, auditing and
financial reporting standards, practices and requirements; (3) lower trading
volume, less liquidity and more volatility for securities; (4) less government
regulation of securities exchanges, brokers and listed companies; (5) political
or social instability; and (6) the possibility of expropriation or confiscatory
taxation, each of which could adversely affect investment in such securities.
For purposes of a fund's investment policies, a fund's investments in ADRs and
similar instruments will be deemed to be investments in the equity securities
representing securities of foreign issues into which they may be converted. The
ADRs chosen for investment by the IAM SHARES Fund will either have collective
bargaining agreements with the IAM or affiliated unions or will be constituents
of the S&P 500 Index, or both. The ADRs chosen for the S&P 500 Index Fund will
be constituents of the S&P 500 Index Fund.

Portfolio Turnover. Because the funds will actively trade to benefit from
short-term yield disparities among different issues of fixed-income securities,
or otherwise to increase its return, the funds may be subject to a greater
degree of portfolio turnover than might be expected from a fund which invests
substantially all of its assets on a long-term basis. The portfolio turnover
rate cannot be predicted, but it is anticipated that certain of a funds' annual
turnover rates generally fall within the range of 100-300% (excluding turnover
of securities having a maturity of one year or less). A high turnover rate
(over 100%) will: (1) increase transaction expenses which will adversely affect
a fund's performance; and (2) result in increased brokerage commissions and
other transaction costs, and the possibility of realized capital gains. The
Aggressive Equity, Special Equity, Small Cap, Matrix Equity, High Yield Bond,
Bond Market, Intermediate and Yield Plus Funds had turnover rates in excess of
100% and are therefore subject to these risks.

Portfolio Duration (Principal Policy--Yield Plus; Not a Principal
Policy--Intermediate, Bond Market and High Yield Bond). 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. The Intermediate, Bond Market and High Yield Bond
Funds have duration targets linked to specific indexes.

Portfolio Maturity (Principal Policy--Money Market, Not a Principal
Policy--Intermediate). The Money Market Fund must limit its investments to
securities with remaining maturities determined in accordance with applicable
SEC regulations and must maintain a dollar-weighted average maturity of 90 days
or less. The Money Market Fund will normally hold portfolio instruments to
maturity, but may dispose of them prior to maturity if the Advisor finds it
advantageous or necessary. Investing in short-term money market instruments
will result in high portfolio turnover. Since the cost of these transactions is
small, high turnover is not expected to adversely affect the fund's price or
yield. The Intermediate Fund has a defined maturity range between three and ten
years.

Real Estate Investment Trusts (Principal Policy--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.

Real Estate-Related Industries (Principal Policy--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.

Banking Industry Risk. (Principal Policy--Money Market Fund) The risk that if a
fund invests more than 25% of its total assets in bank obligations, an adverse
development in the banking industry may affect the value of the fund's
investments more than if a fund's investments were not invested to such a
degree in the banking industry. Normally, the fund intends to invest more than
25% of its total assets in bank obligations. Banks may be particularly
susceptible to certain economic factors such as interest rate changes,

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adverse developments in the real estate market, fiscal and monetary policy and
general economic cycles.

Equity Swaps. (Not a Principal Policy--Emerging Markets) The fund intends to
use equity swaps to preserve a return or spread on an investment and to gain
equity exposure to a market at a lower price. 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 allow the
funds to enter into swap agreements only with counterparties that would be
eligible for consideration as repurchase agreement counterparties under the
SSgA Funds' repurchase agreement guidelines. Swap agreements bear the risk that
the portfolios will not be able to meet their obligation to the counterparty.
This risk will be mitigated by investing the portfolios in the specific asset
for which it is obligated to pay a return.

SHAREHOLDER INFORMATION

Minimum Initial and Subsequent Investments and Account Balance. A 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.(1) 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
($10,000 for 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. The SSgA
funds reserve the right to reject any purchase order. If you are purchasing
fund assets through a pension or other participation plan, you should contact
your plan administrator for further information on purchases.

Purchase Dates and Times. Fund shares may be purchased on any business day. A
business day is one on which the New York Stock Exchange is open for regular
trading. For the Money Market Fund only, a business day is one on which the
NYSE or the Boston Federal Reserve are open. All purchases must be made in US
dollars. Purchase orders in good form (described below) and payments for fund
shares by check or by wire transfer must be received by the Transfer Agent
prior to 4 p.m. Eastern time (the "Pricing Time"), to be effective on the date
received. If an order or payment is received after the Pricing Time, the order
will be effective on the next business day. Orders placed through a servicing
agent or broker-dealer that has a selling or servicing agreement with the SSgA
Funds or the Distributor must be received by the servicing agent or
broker-dealer prior to the Pricing Time. 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.

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 Distributor or 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. You may
also access this information online at www.ssgafunds.com.

To allow the Advisor to manage the Yield Plus and Money Market Funds most
effectively, investors are strongly urged to initiate all trades (investments,
exchanges or redemptions of shares) as early in the day as possible and to
notify the Transfer Agent at least one day in advance of transactions in excess
of $25 million.

Mail. For new accounts, please mail the completed Application and check in the
return envelope provided. Additional investments should also be made by check.
You must include the fund name and account number on your check, 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 State Street
Bank. If using a servicing agent or broker-dealer, please verify with them the
proper address and instructions required before writing or mailing your check.
All purchase requests should be mailed to one of the following addresses:

<TABLE>
<CAPTION>
Regular Mail: Registered, Express or Certified Mail:
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<S> <C>
SSgA Funds SSgA Funds
P.O. Box 8317 2 Heritage Drive
Boston, MA 02266-8317 North Quincy, MA 02171
</TABLE>

- -----------

(1) 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.

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<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. You 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 8 a.m.
and 4 p.m. Eastern time, and stating: (a) your 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 exact amount being wired.

2. Instructing the wiring bank to wire federal funds to:

Automatic Investment Plan. Once the initial investment has been made, you may
make subsequent investments of at least $100 monthly, quarterly or annually by
direct deposit through the Automatic Clearing House (ACH) from your personal
checking account by completing the appropriate section of the Application and
attaching a voided personal check to code your account correctly with the bank
information. 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 $100 or more
exchanged within the SSgA Funds for accounts with identical registrations. You
can choose the date, the frequency (monthly, quarterly or annually) and the
amount. Exchanges may be done among the SSgA Funds once the minimum initial
investment per fund has been satisfied.

1. The investment objective, policies and limitations must match that of the
fund;

2. They must have a readily ascertainable market value;

3. They must be liquid;

4. They must not be subject to restrictions on resale; and

5. The market value of any securities exchanged, plus any cash, must be at least
$25 million; State Street reserves the right to make exceptions to this
minimum or to increase the minimum at its discretion.

Shares purchased in exchange for securities generally may not be redeemed or
exchanged until the transfer has settled-- within 3 business days following the
date of the exchange.

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<PAGE>

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 your
address of record. Upon request, redemption proceeds will be wire transferred
to your account at a domestic commercial bank that is a member of the Federal
Reserve System. If you purchased fund shares by check or an automatic
investment program (AIP) and you elect to redeem shares within 15 days of the
purchase, you may experience delays in receiving redemption proceeds. In this
case, the fund will generally postpone sending redemption proceeds until it 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.

Unless otherwise noted, redemption requests must be received prior to 4 p.m.
Eastern time in order to be effective on the date received. 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.

Checkwriting Service (Money Market Fund only). If you have authorized the check
writing feature on the Application and have completed the signature card, you
may redeem shares in your account by check, 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 you 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 and 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 a management 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. You must complete the appropriate section of the
application and attach a voided check to code your account correctly with the
bank information before utilizing this feature. The SSgA Funds and the Transfer
Agent will employ reasonable procedures to confirm that instructions
communicated by telephone are properly authorized. Neither the SSgA Funds, the
Distributor nor the Transfer Agent will be responsible for any loss or expense
for executing instructions that are deemed to be authorized and genuine 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 your address of record, if the address has not been changed within 60 days
of the redemption request. To the extent the Transfer Agent fails to use
reasonable procedures as a basis for its belief, it and/or its service
contractors may be liable for telephone instructions that prove to be
fraudulent or unauthorized. The funds, the Distributor or the Transfer Agent
will be responsible for the authenticity of terminal access instructions only
if it acts with willful misfeasance, bad faith or gross negligence.

By Wire. Proceeds exceeding $1,000 may be sent via wire transfer to your bank
as previously indicated on your application or letter of instruction in good
order. Proceeds may be sent, depending on the fund, on the same or the next
business day. Although the SSgA Funds do not charge a fee for this feature,
your bank may charge a fee for receiving the wire. Please check with your 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.

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. If your account balance is over $10,000,
you may request periodic cash with-

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drawals automatically be paid to you or any person you designate. If the checks
are returned to the SSgA Funds 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. You may make automatic withdrawals of $100
or more by completing the appropriate sections of the Application and attaching
a voided check to code your account correctly with the bank information. You
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 fund's minimum investment 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. A check is not available for telephone
redemption requests in excess of $50,000. Requests must be in writing.

During periods of drastic economic or market changes, shareholders using this
method may encounter delays.

1. Your address of record has changed within the past 60 days;

2. You are redeeming more than $50,000 worth of shares; or

3. You are 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.

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<CAPTION>
Seller Requirements for Written Requests
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<S> <C>
Owner of individual, o Letter of instruction, signed
joint, sole by all persons authorized to
proprietorship, UGMA/ sign for the account stating
UTMA (custodial general titles/capacity, exactly
accounts for minors) as the account is registered;
or general partner and
accounts
o Signature guarantee, if
applicable (see above).
Owners of corporate or o Letter of instruction signed
association accounts by authorized 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 o Letter of instruction, signed
trust accounts by all trustees;
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 o Letter of instruction signed
shareholders whose by surviving tenant(s);
co-tenants are o Certified copy of the death
deceased 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 $25 million
by a distribution in kind of readily marketable securities from the portfolio
of the fund in lieu of cash. You will incur brokerage charges and may incur
other fees on the sale of these portfolio securities. In addition, you will be
subject to the market risks associated with such securities until such time as
you choose to dispose of the security. The SSgA Funds reserve the right to
suspend the right of redemption or postpone the date of payment if emergency
conditions, as specified in the 1940 Act or as determined by the Securities and
Exchange Commission, should exist.

Distribution Services and Shareholder Servicing
Arrangements

The funds have adopted a distribution plan pursuant to Rule 12b-1 (the Plan)
under the Investment Company Act of 1940.

32
<PAGE>

The Plan allows each fund to pay distribution and other fees for the sale and
distribution of fund shares and for services provided to shareholders. Because
these fees are paid out of fund assets on an ongoing basis, over time these
fees will increase the cost of your investment and may cost you more than
paying other types of sales charges. Payments to the Distributor, as well as
payments from the fund to service organizations providing shareholder services
to the fund, are not permitted by the Plan to exceed .25% of the funds average
net asset value per year. Any payments that are required to be made to the
Distributor or service organization that cannot be made because of the .25%
limitation may be carried forward and paid in the following two fiscal years so
long as the Plan is in effect.

Service organizations providing shareholder services to the fund will be
responsible for prompt transmission of purchase and redemption orders and may
charge you a fee for their services.

Pricing of Fund Shares

All of the funds determine the price per share once each business day at 4 p.m.
Eastern time, or the close of the New York Stock Exchange, if earlier. The
price 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.

All funds but the Money Market Fund value portfolio securities at market value.
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.

Debt obligation securities maturing within 60 days of the valuation date are
valued at amortized cost unless the Board determines that the amortized cost
method does not represent market value.

The Money Market Fund seeks to maintain a $1.00 per share net asset value and,
accordingly, uses the amortized cost valuation method to value its portfolio
instruments. The amortized cost valuation method initially prices an instrument
at its cost and thereafter assumes a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the instrument.

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>
Dividends
Fund Declared Dividends Paid
---- --------- --------------
<S> <C> <C>
Money Market Daily Last business
day of each month
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
IAM
SHARES
Fund Quarterly Quarterly
Special Equity Annually Annually
Small Cap Annually Annually
International
Growth
Opportunities Annually Annually
Emerging
Markets Annually Annually
Active
International Annually Annually
Life Solutions
Income and
Growth Annually Annually
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

33
<PAGE>

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.

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.

If the cash option is selected and you chose a wire or direct deposit (ACH),
the distribution will be sent to a pre-designated bank by the payable date. If
you chose cash option and requested a check, the check will be mailed to you.

For dividends declared daily and paid monthly, the proceeds will be wired (if
that option is elected) to a pre-designated bank on the first business day of
the following month in which the dividend is payable. You should verify with
the receiving bank, as it may charge a fee to accept this wire. Direct deposits
through the 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.

For dividends declared either quarterly or annually, the proceeds may be
transmitted (if that option is elected) by direct deposit through ACH. ACH will
transmit the proceeds to the pre-designated bank account by the payable date.
If you chose Cash Option and requested a check, the check will be mailed to
you. Proceeds from a dividend or capital gains will not be wired in 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.

The sale or exchange 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 long-term capital gain dividends received with
respect to such shares.

With respect to the Money Market Fund, no capital gain or loss for a
shareholder is anticipated because the fund seeks to maintain a stable $1.00
per share net asset value.

34
<PAGE>

Shareholders will be notified after each calendar year of the amount of income
dividends and net capital gains distributed. Shareholders of a 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. Investment income received by a fund from sources within
foreign countries may be subject to foreign income taxes withheld at the
source. The United States has entered into tax treaties with many foreign
countries which would entitle 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.

Foreign shareholders of any SSgA Fund 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 any of the International Growth, Emerging Market,
and Active International Funds' 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.

INFORMATION REGARDING STANDARD & POOR'S CORPORATION

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

35
<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand a fund's
financial performance for the past 5 years (or since inception if a fund has
been offered for less than 5 years). Certain information reflects financial
results for a single fund share. The total returns in the table represent the
rate that an investor would have earned (or lost) on an investment in a fund
(assuming reinvestment of all dividends and distributions). This information
has been audited by PricewaterhouseCoopers LLP, whose reports, along with the
funds' financial statements, are included in the annual reports, which are
available upon request by calling the Distributor at 1-800-647-7327.

Money Market Fund

<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
--------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
---------- --------- --------- --------- ---------
INCOME FROM OPERATIONS:
Net investment income .0476 .0528 .0516 .0524 .0538
DISTRIBUTIONS:
Dividends from net investment income (.0476) (.0528) (.0516) (.0524) (.0538)
---------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
========== ========= ========= ========= =========
TOTAL RETURN (%) 4.86 5.41 5.28 5.36 5.52
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ($000 omitted) 10,084,283 5,477,326 4,278,165 3,475,409 2,752,895
Ratios to average net assets (%):
Operating expenses .40 .41 .39 .39 .39
Net investment income 4.74 5.28 5.17 5.20 5.37
</TABLE>

36
<PAGE>

Yield Plus Fund

<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
-----------------------------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.97 $10.01 $10.00 $10.00 $9.99
------- ------- ------- ------- ---------
INCOME FROM OPERATIONS:
Net investment income(1) .54 .57 .54 .56 .56
Net realized and unrealized gain (loss) (.07) (.04) .01 -- .02
------- ------- ------- ------- ---------
Total From Operations .47 .53 .55 .56 .58
------- ------- ------- ------- ---------
DISTRIBUTIONS:
Dividends from net investment income (.54) (.57) (.54) (.56) (.56)
Dividends from net realized gain on investments -- -- -- -- (.01)
------- ------- ------- ------- ---------
Total Distributions (.54) (.57) (.54) (.56) (.57)
------- ------- ------- ------- ---------
NET ASSET VALUE, END OF PERIOD $9.90 $9.97 $10.01 $10.00 $10.00
======= ======= ======= ======= =========
TOTAL RETURN (%) 4.67 5.40 5.67 5.73 6.01
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ($000 omitted) 525,494 672,465 840,055 933,485 1,447,097
Ratios to average net assets (%):
Operating expenses .41 .41 .38 .36 .38
Net investment income 5.29 5.66 5.42 5.59 5.64
Portfolio turnover rate (%) 167.12 249.10 92.38 97.05 199.69
</TABLE>

- -----------
(1) For the period subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.

37
<PAGE>

Intermediate Fund

<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
-----------------------------------------------------------
1999 1998 1997 1996 1995
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.04 $9.76 $9.57 $9.72 $9.37
------- ------ ------ ------ ------
INCOME FROM OPERATIONS:
Net investment income(1) .49 .53 .54 .53 .56
Net realized and unrealized gain (loss) (.35) .28 .20 (.14) .34
------- ------ ------ ------ ------
Total From Operations .14 .81 .74 .39 .90
------- ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from net investment income (.51) (.53) (.55) (.54) (.55)
Dividends from net realized gain on investments (.16) -- -- -- --
------- ------ ------ ------ ------
Total Distributions (.67) (.53) (.55) (.54) (.55)
------- ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $9.51 $10.04 $9.76 $9.57 $9.72
======= ====== ====== ====== ======
TOTAL RETURN (%) 1.36 8.64 8.00 4.12 10.05
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ($000 omitted) 71,550 76,691 53,834 41,518 33,893
Ratios to average net assets (%):
Operating expenses, net(2) .60 .60 .60 .60 .60
Operating expenses, gross(2) 1.11 1.13 1.30 1.38 1.67
Net investment income 5.02 5.51 5.78 5.57 6.29
Portfolio turnover (%) 304.47 244.58 242.76 221.73 26.31
</TABLE>

- -----------

(1) For the period subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.

(2) See Note 4 of the Annual Report for current period amounts.

38
<PAGE>

Bond Market Fund

<TABLE>
<CAPTION>
Fiscal Years/Period Ended August 31,
-------------------------------------------------
1999 1998 1997 1996++
------- ------- ------ -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.35 $9.97 $9.63 $10.00
------- ------- ------ -------
INCOME FROM OPERATIONS:
Net investment income(1) .54 .55 .53 .27
Net realized and unrealized gain (loss) (.52) .40 .35 (.49)
------- ------- ------ -------
Total Income From Operations .02 .95 .88 (.22)
------- ------- ------ -------
DISTRIBUTIONS:
Dividends from net investment income (.54) (.54) (.54) (.15)
Dividends from net realized gain on investments (.20) (.03) -- --
------- ------- ------ -------
Total Distributions (.74) (.57) (.54) (.15)
------- ------- ------ -------
NET ASSET VALUE, END OF PERIOD $9.63 $10.35 $9.97 $9.63
======= ======= ====== =======
TOTAL RETURN (%)(2) .07 9.86 9.47 (2.19)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period ($000 omitted) 269,284 190,151 87,670 29,015
Ratios to average net assets (%)(3):
Operating expenses, net(4) .50 .48 .50 .63
Operating expenses, gross(4) .50 .52 .74 .93
Net investment income 5.50 5.74 6.05 5.66
Portfolio turnover (%)(3) 327.83 300.77 375.72 253.30
</TABLE>

- -----------
++ For the period February 7, 1996 (commencement of operations) to August 31,
1996.

(1) For the period subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.

(2) Periods less than one year are not annualized.

(3) The ratios for the period ended August 31, 1996 are annualized.

(4) See Note 4 of the Annual Report for current period amounts.

39
<PAGE>

High Yield Bond Fund

<TABLE>
<CAPTION>
Fiscal Years/Periods Ended
August 31,
--------------------------
1999 1998++
------ ------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.90 $10.00
------ ------
INCOME FROM OPERATIONS:
Net investment income(1) .78 .18
Net realized and unrealized gain (loss) .30 (.24)
------ ------
Total Income Investment Operations 1.08 (.06)
------ ------
DISTRIBUTIONS:
Dividends from net investment income (.66) (.04)
------ ------
NET ASSET VALUE, END OF PERIOD $10.32 $9.90
====== ======
TOTAL RETURN (%)(2) 11.21 (.59)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period ($000 omitted) 34,847 11,908
Ratios to average net assets (%)(3):
Operating expenses, net(4) .65 .65
Operating expenses, gross(4) .87 1.66
Net investment income 7.97 6.38
Portfolio turnover (%)(5) 234.31 173.64
</TABLE>

- -----------
++ For the period May 5, 1998 (commencement of operations) to August 31, 1998.

(1) For the period subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.

(2) Periods less than one year are not annualized.

(3) The ratios for the period ended August 31, 1998 are annualized.

(4) See Note 4 of the Annual Report for current period amounts.

(5) The ratio for the period ended August 31, 1998 has not been annualized due
to the fund's short period of operations.

40
<PAGE>

Growth and Income Fund

<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
---------------------------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $18.10 $18.08 $13.36 $11.95 $10.51
------- ------- ------- ------- -------
INCOME FROM OPERATIONS:
Net investment income(1) .09 .11 .12 .15 .18
Net realized and unrealized gain (loss) 6.79 1.83 5.18 1.46 1.44
------- ------- ------- ------- -------
Total Income From Operations 6.88 1.94 5.30 1.61 1.62
------- ------- ------- ------- -------
DISTRIBUTIONS:
Dividends from net investment income (.09) (.11) (.14) (.16) (.18)
Dividends from net realized gain on investments (2.36) (1.81) (.44) (.04) --
------- ------- ------- ------- -------
Total Distributions (2.45) (1.92) (.58) (.20) (.18)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $22.53 $18.10 $18.08 $13.36 $11.95
======= ======= ======= ======= =======
TOTAL RETURN (%) 41.55 10.93 40.95 13.57 15.66
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period ($000 omitted) 291,716 111,626 71,736 55,823 43,884
Ratios to average net assets (%):
Operating expenses, net(2) 1.03 .95 .95 .95 .95
Operating expenses, gross(2) 1.11 1.14 1.21 1.40 1.61
Net investment income .41 .57 .82 1.15 1.72
Portfolio turnover (%) 72.27 66.44 29.88 38.34 39.32
</TABLE>

- -----------

(1) For the period subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.

(2) See Note 4 of the Annual Report for current period amounts.

41
<PAGE>

S&P 500 Index Fund

<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
---------------------------------------------------------------------
1999 1998 1997 1996 1995
--------- --------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $19.42 $18.96 $14.41 $12.81 $10.89
--------- --------- --------- ------- -------
INCOME FROM OPERATIONS:
Net investment income(1) .29 .31 .32 .32 .29
Net realized and unrealized gain (loss) 6.74 1.18 5.22 1.98 1.95
--------- --------- --------- ------- -------
Total From Operations 7.03 1.49 5.54 2.30 2.24
--------- --------- --------- ------- -------
DISTRIBUTIONS:
Dividends from net investment income (.29) (.32) (.32) (.31) (.29)
Dividends from net realized gain on investment (2.42) (.71) (.67) (.39) (.03)
--------- --------- --------- ------- -------
Total Distributions (2.71) (1.03) (.99) (.70) (.32)
--------- --------- --------- ------- -------
NET ASSET VALUE, END OF PERIOD $23.74 $19.42 $18.96 $14.41 $12.81
========= ========= ========= ======= =======
TOTAL RETURN (%) 39.52 7.91 40.30 18.46 21.11
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ($000 omitted) 2,673,963 1,615,913 1,299,571 704,683 545,200
Ratios to average net assets (%):
Operating expenses, net(2) .18 .17 .16 .18 .19
Operating expenses, gross(2) .28 .27 .26 .28 .29
Net investment income 1.29 1.50 2.00 2.32 2.76
Portfolio turnover (%) 13.80 26.17 7.54 28.72 38.56
</TABLE>

- -----------

(1) For the period subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.

(2) See Note 4 of the Annual Report for current period amounts.

42
<PAGE>

Matrix Equity Fund

<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
---------------------------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $15.68 $18.41 $14.13 $13.93 $12.06
------- ------- ------- ------- -------
INCOME FROM OPERATIONS:
Net investment income(1) .09 .17 .21 .24 .28
Net realized and unrealized gain (loss) 4.42 .29 5.43 1.64 1.93
------- ------- ------- ------- -------
Total Income From Operations 4.51 .46 5.64 1.88 2.21
------- ------- ------- ------- -------
DISTRIBUTIONS:
Dividends from net investment income (.10) (.19) (.22) (.24) (.28)
Dividends from net realized gain on investments (2.58) (3.00) (1.14) (1.44) (.06)
------- ------- ------- ------- -------
Total Distributions (2.68) (3.19) (1.36) (1.68) (.34)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $17.51 $15.68 $18.41 $14.13 $13.93
======= ======= ======= ======= =======
TOTAL RETURN (%) 32.83 2.09 42.75 14.67 18.81
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ($000 omitted) 557,029 445,077 429,397 261,888 198,341
Ratios to average net assets (%):
Operating expenses, net(2) .78 .69 .58 .66 .68
Operating expenses, gross(2) .94 .97 .96 1.04 1.06
Net investment income .52 .97 1.33 1.76 2.25
Portfolio turnover (%) 130.98 133.63 117.27 150.68 129.98
</TABLE>

- -----------

(1) For the period subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.

(2) See Note 4 of the Annual Report for current period amounts.

43
<PAGE>

Small Cap Fund

<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
---------------------------------------------------------------
1999 1998 1997 1996 1995*
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $15.96 $22.11 $17.44 $14.42 $11.88
------- ------- ------- ------- ------
INCOME FROM OPERATIONS:
Net investment income(1) .03 .02 .03 .04 .13
Net realized and unrealized gain (loss) 1.78 (4.54) 5.87 3.25 3.19
------- ------- ------- ------- ------
Total Income From Operations 1.81 (4.52) 5.90 3.29 3.32
------- ------- ------- ------- ------
DISTRIBUTIONS:
Dividends from net investment income (.02) (.04) (.01) (.07) (.15)
Dividends from net realized gain on investments -- (1.59) (1.22) (.20) (.63)
Total Distributions (.02) (1.63) (1.23) (.27) (.78)
------- ------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD $17.75 $15.96 $22.11 $17.44 $14.42
======= ======= ======= ======= =======
TOTAL RETURN (%) 11.35 (22.32) 35.85 23.14 30.04
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period ($000 omitted) 352,013 344,630 149,808 55,208 23,301
Ratios to average net assets (%):
Operating expenses, net 1.07 1.04 1.00 1.00 .97
Operating expenses, gross 1.07 1.04 1.09 1.18 1.58
Net investment income .17 .10 .18 .26 .81
Portfolio turnover (%) 110.82 86.13 143.79 76.85 192.88
</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 management
fee from .20% to .75% of its average daily net assets.

(1) For the period subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.

44
<PAGE>

Special Equity Fund

<TABLE>
<CAPTION>
Fiscal Year/Period
Ended August 31,
--------------------
1999 1998++
------ -------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $7.17 $10.00
------ -------
INCOME FROM OPERATIONS:
Net investment income(1) -- .01
Net realized and unrealized gain (loss) 2.01 (2.84)
------ -------
Total Income From Operations 2.01 (2.83)
------ -------
DISTRIBUTIONS
Dividends from net investment income (.01) --
------ -------
NET ASSET VALUE, END OF PERIOD $9.17 $7.17
====== =======
TOTAL RETURN (%)(2) 28.06 (28.30)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period ($000 omitted) 10,621 13,146
Ratios to average net assets (%)(3):
Operating expenses, net(4) 1.10 1.10
Operating expenses, gross(4) 1.57 1.55
Net investment income .01 .24
Portfolio turnover (%)3 211.30 88.36
</TABLE>

- -----------

++ For the period May 1, 1998 (commencement of operations) to August 31, 1998.

(1) For the period subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.

(2) Periods less than one year are not annualized.

(3) The ratios for the period ended August 31, 1998 are annualized.

(4) See Note 4 of the Annual Report for current period amounts.

45
<PAGE>

Tuckerman Active REIT Fund

<TABLE>
<CAPTION>
Fiscal Year/Period
Ended August 31,
--------------------
1999 1998++
------ -------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $8.17 $10.00
------ ------
INCOME FROM OPERATIONS:
Net investment income(1) .50 .15
Net realized and unrealized gain (loss) (.01) (1.94)
------ ------
Total Income From Operations .49 (1.79)
------ ------
DISTRIBUTIONS:
Dividends from net investment income (.58) (.04)
------ ------
NET ASSET VALUE, END OF PERIOD $8.08 $8.17
====== ======
TOTAL RETURN (%)(2) 6.09 (17.99)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period ($000 omitted) 45,528 18,458
Ratios to average net assets (%)(3):
Operating expenses, net(4) 1.00 1.00
Operating expenses, gross(4) 1.09 1.38
Net investment income 6.25 5.21
Portfolio turnover (%)(3) 60.13 17.36
</TABLE>

- -----------

++ For the period May 1, 1998 (commencement of operations) to August 31, 1996.

(1) For the period subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.

(2) Periods less than one year are not annualized.

(3) The ratios for the period ended August 31, 1998 are annualized.

(4) See Note 4 of the Annual Report for current period amounts.

46
<PAGE>

Aggressive Equity Fund

<TABLE>
<CAPTION>
Fiscal
Period Ended
August 31,
1999++
-----------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
------
INCOME FROM OPERATIONS:
Net investment loss(1) (.04)
Net realized and unrealized gain (loss) 2.77
------
Total Income From Operations 2.73
------
NET ASSET VALUE, END OF PERIOD $12.73
======
TOTAL RETURN (%)(2) 27.30
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period ($000 omitted) 7,185
Ratios to average net assets (%)(3):
Operating expenses, net(4) 1.10
Operating expenses, gross(4) 2.07
Net investment loss (.50)
Portfolio turnover rate (%)(2) 179.56
</TABLE>

- -----------

++ For the period December 30, 1998 (commencement of operations) to August 31,
1999.

(1) Average month-end shares outstanding were used for this calculation.

(2) Periods less than one year are not annualized.

(3) The ratios for the period ended August 31, 1999 are annualized.

(4) See Note 4 of the Annual Report for current period amounts.

47
<PAGE>

IAM SHARES Fund

<TABLE>
<CAPTION>
Fiscal
Period Ended
August 31,
1999++
------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
------
INCOME FROM OPERATIONS:
Net investment income(1) .02
Net realized and unrealized gain (loss) .12
------
Total Income From Operations .14
------
NET ASSET VALUE, END OF PERIOD $10.14
======
TOTAL RETURN (%)(2) 1.40
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period ($000 omitted) 60,316
Ratios to average net assets (%)(3):
Operating expenses, net(4) .65
Operating expenses, gross(4) .67
Net investment income .72
Portfolio turnover (%)(5) --
</TABLE>

- -----------
++ For the period June 2, 1999 (commencement of operations) to August 31, 1999.

(1) Average month-end shares were used for this calculation.

(2) Periods less than one year are not annualized.

(3) The ratios for the period ended August 31, 1999 are annualized.

(4) See Note 4 of the Annual Report for current period amounts.

(5) This rate is not meaningful due to the fund's short period of operation.

48
<PAGE>

Emerging Markets Fund

<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
--------------------------------------------------------------
1999 1998 1997 1996 1995
------ ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $6.52 $12.33 $10.87 $10.30 $11.45
------ ------- ------- ------- ------
INCOME FROM OPERATIONS:
Net investment income(1) .15 .18 .12 .11 .14
Net realized and unrealized gain (loss) 4.07 (5.58) 1.51 .68 (1.19)
------ ------- ------- ------- ------
Total From Investment Operations 4.22 (5.40) 1.63 .79 (1.05)
------ ------- ------- ------- ------
DISTRIBUTIONS:
Dividends from net investment income (.27) (.15) (.11) (.12) (.10)
Dividends from net realized gain on investment -- (.26) (.06) (.10) --
------ ------- ------- ------- ------
Total Distributions (.27) (.41) (.17) (.22) (.10)
------ ------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD $10.47 $6.52 $12.33 $10.87 $10.30
====== ======= ======= ======= ======
TOTAL RETURN (%) 66.41 (45.36) 15.12 7.83 (9.28)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period ($000 omitted) 335.655 206,370 252,708 120,216 68,385
Ratios to average net assets (%):
Operating expenses, net(2) 1.25 1.25 1.25 1.28 1.50
Operating expenses, gross 1.34 1.38 1.51 1.67 1.90
Net investment income 1.78 1.85 1.07 1.10 1.74
Portfolio turnover (%) 39.64 38.94 15.00 4.36 19.77
</TABLE>

- -----------

(1) For the period subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.

(2) See Note 4 of the Annual Report for the current period amounts.

49
<PAGE>

Active International Fund

<TABLE>
<CAPTION>
Fiscal Years/Period Ended August 31,
--------------------------------------------------------------
1999 1998 1997 1996 1995++
------ ------ ------ ------- ------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.24 $10.85 $10.96 $10.89 $10.00
------ ------ ------ ------- ------
INCOME FROM OPERATIONS:
Net investment income(1) .12 .16 .10 .36 .03
Net realized and unrealized gain (loss) 2.09 (1.13) .03 .28 .86
------ ------ ------ ------- ------
Total Income From Operations 2.21 (.97) .13 .64 .89
------ ------ ------ ------- ------
DISTRIBUTIONS:
Dividends from net investment income (.39) (.15) (.18) (.57) --
Dividends from net realized gain on investments (.69) (.49) (.06) -- --
------ ------ ------ ------- ------
Total Distributions (1.08) (.64) (.24) (.57) --
------ ------ ------ ------- ------
NET ASSET VALUE, END OF PERIOD $10.37 $9.24 $10.85 $10.96 $10.89
====== ====== ====== ====== ======
TOTAL RETURN (%)(2) 26.88 (9.50) 1.17 6.22 8.90
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period ($000 omitted) 99,916 76,565 83,930 54,595 25,186
Ratios to average net assets (%)(3):
Operating expenses, net(4) 1.00 1.00 1.00 1.00 1.79
Operating expenses, gross(4) 1.37 1.29 1.40 1.47 2.56
Net investment income 1.30 1.23 1.12 1.16 1.11
Portfolio turnover rate (%)(3) 62.02 74.79 48.29 22.02 7.17
</TABLE>

- -----------

++ For the period March 7, 1995 (commencement of operations) to August 31,
1995.

(1) For the period subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.

(2) Periods less than one year are not annualized.

(3) The ratios for the period ended August 31, 1995 are annualized.

(4) See Note 4 of the Annual Report for current period amounts.

50
<PAGE>

International Growth Opportunities Fund

<TABLE>
<CAPTION>
Fiscal Year/Period
Ended August 31,
--------------------
1999 1998++
------ ------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $8.42 $10.00
------ ------
INCOME FROM OPERATIONS:
Net investment income(1) .11 .03
Net realized and unrealized gain (loss) 2.83 (1.61)
------ ------
Total Income From Operations 2.94 (1.58)
------ ------
DISTRIBUTIONS:
Dividends from net investment income (.05) --
------ ------
NET ASSET VALUE, END OF PERIOD $11.31 $8.42
====== ======
TOTAL RETURN (%)(2) 35.08 (15.80)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ($000 omitted) 53,416 22,966
Ratios to average net assets (%)(3):
Operating expenses, net(4) 1.10 1.10
Operating expenses, gross(4) 1.30 1.66
Net investment income 1.16 1.27
Portfolio turnover (%)(3) 39.19 17.24
</TABLE>

- -----------

++ For the period May 1, 1998 (commencement of operations) to August 31, 1998.

(1) For the period subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.

(2) Periods less than one year are not annualized.

(3) The ratios for the period ended August 31, 1996 are annualized.

(4) See Note 4 of the Annual Report for current period amounts.

51
<PAGE>

Life Solutions Income and Growth Fund

<TABLE>
<CAPTION>
Fiscal Years/Period Ended August 31,
------------------------------------
1999 1998 1997++
------ ------ ------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.65 $12.93 $12.68
------ ------ ------
INCOME FROM OPERATIONS:
Net investment income(1) .44 .46 --
Net realized and unrealized gain (loss) .95 (.01) .25
------ ------ ------
Total Income from Operations 1.39 .45 .25
------ ------ ------
DISTRIBUTIONS:
Dividends from net investment income (.61) (.41) --
Dividends from net realized gain on investments (.50) (.32) --
------ ------ ------
Total Distributions (1.11) (.73) --
------ ------ ------
NET ASSET VALUE, END OF PERIOD $12.93 $12.65 $12.93
====== ====== ======
TOTAL RETURN (%)(2) 11.27 3.53 1.97
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ($000 omitted) 25,742 23,771 13,979
Ratios to average net assets (%)(3):
Operating expenses, net(4) .45 .45 .35
Operating expenses, gross(4) .50 .72 1.14
Net investment income 3.37 3.00 .16
Portfolio turnover (%)(3) 93.34 93.28 106.68
</TABLE>

- -----------

++ For the period July 1, 1997 (commencement of operations) to August 31, 1997.

(1) For the periods subsequent to August 31, 1997, average month-end shares
outstanding were used for this calculation.

(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.

52
<PAGE>

Life Solutions Balanced Fund

<TABLE>
<CAPTION>
Fiscal Years/Period Ended August 31,
------------------------------------
1999 1998 1997++
------ ------ ------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.95 $13.98 $13.69
------ ------ ------
INCOME FROM OPERATIONS:
Net investment income(1) .38 .50 --
Net realized and unrealized gain (loss) 1.84 (.45) .29
------ ------ ------
Total Income from Operations 2.22 .05 .29
------ ------ ------
DISTRIBUTIONS:
Dividends from net investment income (.61) (.56) --
Dividends from net realized gain on investments (.76) (.52) --
------ ------ ------
Total Distributions (1.37) (1.08) --
------ ------ ------
NET ASSET VALUE, END OF PERIOD $13.80 $12.95 $13.98
====== ======= ======
TOTAL RETURN (%)(2) 17.89 .33 2.12
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ($000 omitted) 99,092 90,804 47,003
Ratios to average net assets (%)(3):
Operating expenses, net(4) .28 .36 .35
Operating expenses, gross(4) .28 .36 .49
Net investment income 2.83 2.07 .07
Portfolio turnover (%)(3) 51.09 101.40 51.61
</TABLE>

- -----------
++ For the period July 1, 1997 (commencement of operations) to August 31, 1997.

(1) For the periods subsequent to August 31, 1997, average month-end shares
outstanding were used for this calculation.

(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.

53
<PAGE>

Life Solutions Growth Fund

<TABLE>
<CAPTION>
Fiscal Years/Period Ended August 31,
------------------------------------
1999 1998 1997++
------ ------ ------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $13.02 $14.79 $14.44
------ ------ ------
INCOME FROM OPERATIONS:
Net investment income(1) .26 .38 --
Net realized and unrealized gain (loss) 2.81 (.75) .35
------ ------ ------
Total Income from Operations 3.07 (.37) .35
------ ------ ------
DISTRIBUTIONS:
Dividends from net investment income (.55) (.71) --
Dividends from net realized gain on investments (.92) (.69) --
------ ------ ------
Total Distributions (1.47) (1.40) --
------ ------ ------
NET ASSET VALUE, END OF PERIOD $14.62 $13.02 $14.79
====== ====== ======
TOTAL RETURN (%)(2) 24.72 (2.68) 2.42
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period ($000 omitted) 65,018 53,432 43,603
Ratios to average net assets (%)(3):
Operating expenses, net(4) .38 .41 .35
Operating expenses, gross(4) .38 .41 .54
Net investment income 1.89 1.52 .09
Portfolio turnover (%)(3) 43.15 67.66 39.49
</TABLE>

- -----------

++ For the period July 1, 1997 (commencement of operations) to August 31, 1997.

(1) For the periods subsequent to August 31, 1997, average month-end shares
outstanding were used for this calculation.

(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.

54
<PAGE>

(This page has been left blank intentionally.)

<PAGE>

ADDITIONAL INFORMATION ABOUT THE SSgA FUNDS

A Statement of Additional Information includes additional information about
each fund. The Statements of Additional Information are incorporated into this
prospectus by reference.

Additional information about each fund's investments is available in each
fund's annual and semi-annual reports to shareholders. In each fund's annual
report, you will find a discussion of the market conditions and investment
strategies that significantly affected each fund's performance during its last
fiscal year. The Statements of Additional Information and each fund's annual
and semi-annual reports are available, without charge, upon request. To request
a Statement of Additional Information, a fund's annual or semi-annual report,
other information about a fund or to make any shareholder inquiry, please
contact the SSgA Funds at:

Russell Fund Distributors, Inc.
One International Place
Boston, Massachusetts 02110
(800) 997-7327
You also can review and copy information about the fund, including the
Statement of Additional Information, at the Securities and Exchange
Commission's Public Reference Room in Washington, D.C. You can receive
information on the operation of the Public Reference Room by calling (800)
SEC-0330. Copies also may be obtained, upon payment of a duplicating fee, by
writing the Securities and Exchange Commission's Public Reference Section,
Washington, D.C. 20549-6009. The SEC also maintains a website (www.sec.gov)
that contains the Statement of Additional Information and other information
about the Funds. You may also access the SSgA Funds online at
www.ssgafunds.com.

SSgA Funds' Investment Company Act File No. 811-5430
<PAGE>

Filed pursuant to Rule 485(b)
File Nos. 33-19229; 811-5430

SSgA FUNDS
One International Place
Boston, Massachusetts 02110
1-800-997-7327
www.ssgafunds.com

STATEMENT OF ADDITIONAL INFORMATION

YIELD PLUS FUND

DECEMBER 17, 1999

This Statement of Additional Information is not a prospectus. Instead, it
supplements or describes in greater detail the SSgA Funds and the series named
above as contained in the prospectus dated December 17, 1999. You may obtain a
copy of the prospectus by calling 1-800-647-7327.

This statement incorporates by reference the fund's annual report to
shareholders for the fiscal year ended August 31, 1999. A copy of the fund's
annual report accompanies this statement.

-1-
<PAGE>

TABLE OF CONTENTS

FUND HISTORY...................................................................3

DESCRIPTION OF THE FUND AND ITS INVESTMENT RISKS...............................3

INVESTMENT STRATEGIES.......................................................3
HEDGING STRATEGIES AND RELATED INVESTMENT TECHNIQUES........................8
INVESTMENT RESTRICTIONS....................................................10
PORTFOLIO TURNOVER.........................................................12

MANAGEMENT OF THE FUND........................................................12

BOARD OF TRUSTEES AND OFFICERS.............................................12
COMPENSATION...............................................................14
CONTROLLING AND PRINCIPAL SHAREHOLDERS.....................................16

INVESTMENT ADVISORY AND OTHER SERVICES........................................16

ADVISOR....................................................................16
ADMINISTRATOR..............................................................16
CUSTODIAN AND TRANSFER AGENT...............................................17
DISTRIBUTOR................................................................17
DISTRIBUTION PLAN AND SHAREHOLDER SERVICING ARRANGEMENTS...................18
INDEPENDENT ACCOUNTANTS....................................................19
LEGAL COUNSEL..............................................................19

BROKERAGE PRACTICES AND COMMISSIONS...........................................19

PRICING OF FUND SHARES........................................................20

TAXES.........................................................................21

CALCULATION OF PERFORMANCE DATA...............................................22

ADDITIONAL INFORMATION........................................................23

SHAREHOLDER MEETINGS.......................................................23
CAPITALIZATION AND VOTING..................................................23
FEDERAL LAW AFFECTING STATE STREET.........................................24

FINANCIAL STATEMENTS..........................................................24

-2-
<PAGE>

FUND HISTORY

SSgA Funds (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 SSgA Funds was formerly
known as The Seven Seas Series Fund. The name change took effect on December 27,
1996.

DESCRIPTION OF THE FUND AND ITS INVESTMENT RISKS

The SSgA Funds is an open-end, management investment company which offers shares
of beneficial interest in separate portfolios, each of which is referred to as a
fund. The SSgA Funds are diversified(1), in that at least 75% of its total
assets are represented by a variety of instruments including cash, government
securities, securities of other investment companies, and other securities
within the limitations described in the investment restrictions.

INVESTMENT STRATEGIES

To the extent consistent with its investment objective and restrictions, the
fund may invest in the following instruments and use the following investment
techniques:

US Government Obligations. The types of US Government obligations in which the
fund may at times invest include: (1) A variety of US Treasury obligations,
which differ only in their interest rates, maturities and times of issuance; and
(2) obligations issued or guaranteed by US Government agencies and
instrumentalities which are supported by any of the following: (a) the full
faith and credit of the US Treasury, (b) the right of the issuer to borrow an
amount limited to a specific line of credit from the US Treasury, (c)
discretionary authority of the US Government agency or instrumentality or (d)
the credit of the instrumentality (examples of agencies and instrumentalities
are: Federal Land Banks, Federal Housing Administration, Federal Farm Credit
Bank, Farmers Home Administration, Export--Import Bank of the United States,
Central Bank for Cooperatives, Federal Intermediate Credit Banks, Federal Home
Loan Banks, General Services Administration, Maritime Administration, Tennessee
Development Bank, Student Loan Marketing Association, International Bank for
Reconstruction and Development and Federal National Mortgage Association). No
assurance can be given that in the future the US Government will provide
financial support to such US Government agencies or instrumentalities described
in (2)(b), (2)(c) and (2)(d), other than as set forth above, since it is not
obligated to do so by law. The fund may purchase US Government obligations on a
forward commitment basis.

Repurchase Agreements. The fund may enter into repurchase agreements with
financial institutions. Under repurchase agreements, these parties sell
securities to a fund and agree to repurchase the securities at the fund's cost
plus interest within a specified time (normally one day). The securities
purchased by each fund have a total value in excess of the purchase price paid
by the fund and are held by Custodian until repurchased. Repurchase agreements
assist the fund in being invested fully while retaining "overnight" flexibility
in pursuit of investments of a longer-term nature. The fund will limit
repurchase transactions to those member banks of the Federal Reserve System and
broker-dealers whose creditworthiness is continually monitored and found
satisfactory by the Advisor.

Reverse Repurchase Agreements. The fund may enter into reverse repurchase
agreements under the circumstances described in "Investment Restrictions." Under
reverse repurchase agreements, a fund transfers possession of portfolio
securities to financial institutions in return for cash in an amount equal to a
percentage of the portfolio securities' market value and agrees to repurchase
the securities at a future date by repaying the cash with interest. The fund
retains the right to receive interest and principal payments from the securities
while they are in the possession of the financial institutions. Cash or liquid
high quality debt obligations from a fund's portfolio equal in value to the
repurchase price including any accrued interest will be segregated by Custodian
on the fund's records while a reverse repurchase agreement is in effect. Reverse
repurchase agreements involve the risk that the market value of securities sold
by the fund may decline below the price at which it is obligated to repurchase
the securities. Reverse repurchase agreement may be used as a means of borrowing
temporarily for extraordinary or emergency purposes or to facilitate redemptions
and are not used to leverage the fund.

If the other party or "seller" defaults, a fund might suffer a loss to the
extent that the proceeds from the sale of the underlying securities and other
collateral held by the fund are less than the repurchase price and the fund's
cost associates with delay and enforcement of the repurchase agreement. In
addition, in the event of bankruptcy of the seller, a fund could suffer
additional losses if a court determines that the fund's interest in the
collateral is not enforceable.

- ----------
(1) With the exception of the SSga Tuckerman Active REIT Fund, which is
non-diversified.

-3-
<PAGE>

requests. A fund may dispose of a commitment prior to settlement if it is
appropriate to do so and realize short-term profits or losses upon such sale.
When effecting such transactions, cash or liquid high quality debt obligations
held by the fund of a dollar amount sufficient to make payment for the portfolio
securities to be purchased will be segregated on the fund's records at the trade
date and maintained until the transaction is settled. Forward commitments
involve a risk of loss if the value of the security to be purchased declines
prior to the settlement date, or if the other party fails to complete the
transaction.

When-Issued Transactions. New issues of securities are often offered on a
when-issued basis. This means that delivery and payment for the securities
normally will take place several days after the date the buyer commits to
purchase them. The payment obligation and the interest rate that will be
received on securities purchased on a when-issued basis are each fixed at the
time the buyer enters into the commitment.

The fund will make commitments to purchase when-issued securities only with the
intention of actually acquiring the securities, but a fund may sell these
securities or dispose of the commitment before the settlement date if it is
deemed advisable as a matter of investment strategy. Cash or marketable high
quality debt securities equal to the amount of the above commitments will be
segregated on the fund's records. For the purpose of determining the adequacy of
these securities the segregated securities will be valued at market. If the
market value of such securities declines, additional cash or securities will be
segregated on the fund's records on a daily basis so that the market value of
the account will equal the amount of such commitments by the fund. The fund will
not invest more than 25% of its net assets in when-issued securities.

Securities purchased on a when-issued basis and held by the fund are subject to
changes in market value based upon the public's perception of changes in the
level of interest rates. Generally, the value of such securities will fluctuate
inversely to changes in interest rates -- i.e., they will appreciate in value
when interest rates decline and decrease in value when interest rates rise.
Therefore, if in order to achieve higher interest income a fund remains
substantially fully invested at the same time that it has purchased securities
on a "when-issued" basis, there will be a greater possibility of fluctuation in
the fund's net asset value.

When payment for when-issued securities is due, the fund will meet its
obligations from then-available cash flow, the sale of segregated securities,
the sale of other securities or, and although it would not normally expect to do
so, from the sale of the when-issued securities themselves (which may have a
market value greater or less than the fund's payment obligation). The sale of
securities to meet such obligations carries with it a greater potential for the
realization of capital gains, which are subject to federal income taxes.

Illiquid Securities. The fund will not invest more than 15% of its net assets in
illiquid securities or securities that are not readily marketable. These
securities include repurchase agreements and time deposits of more than seven
days' duration and participation interests (including municipal leases),
floating and variable rate demand obligations and tender option bonds as to
which the fund cannot exercise a demand feature in seven or fewer days or for
which there is no secondary market. The absence of a regular trading market for
illiquid securities imposes additional risk on investments in these securities.
Illiquid securities may be difficult to value and may often be disposed of only
after considerable expense and delay.

Securities Lending. A fund may lend portfolio securities with a value of up to
33-1/3% of its 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, and a fund will receive cash or other obligations as
collateral. 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. This strategy is
not used to leverage any fund.

Interfund Lending. The SSgA Funds have sought permission from the SEC to
participate in a joint lending and borrowing facility (the "Credit Facility").
If the SEC grants the SSgA Funds permission to participate in the Credit
Facility, the SSgA Funds may borrow money from the SSgA Money Market Fund for
temporary purposes. All such borrowing and lending will be subject to a
participating fund's fundamental investment limitations. The SSgA Money Market
Fund will lend through the program only when the returns are higher than those
available from an investment in repurchase agreements or short term reserves.
The SSgA Funds will borrow through the program only when the costs are equal to
or lower than the cost of bank loans. Interfund loans and borrowings normally
extend overnight, but can have a maximum duration of seven days. Loans may be
called on one business day's notice. A participating fund

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may have to borrow from a bank at a higher interest rate if an interfund loan is
called or not renewed. Any delay in repayment to the SSgA Money Market Fund
could result in a lost investment opportunity or additional borrowing costs.

Cash Reserves. For defensive purposes, the Fund may temporarily invest, without
limitation, in short-term fixed income securities. High quality,
investment-grade 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.

Section 4(2) Commercial Paper. The fund may invest in commercial paper issued in
reliance on the so-called "private placement" exemption from registration
afforded by Section 4(2) of the Securities Act of 1933 ("Section 4(2) paper").
Section 4(2) paper is restricted as to disposition under the federal securities
laws, and generally is sold to investors who agree that they are purchasing the
paper for an investment and not with a view to public distribution. Any resale
by the purchaser must be in an exempt transaction. Section 4(2) paper is
normally resold to other investors through or with the assistance of the issuer
or investment dealers who make a market in Section 4(2) paper, thus providing
liquidity. Pursuant to guidelines established by the Board of Trustees, the
Advisor may determine that Section 4(2) paper is liquid for the purposes of
complying with the fund's investment restriction relating to investments in
illiquid securities.

Asset-Backed Securities. Asset-backed securities represent undivided fractional
interests in pools of instruments, such as consumer loans, and are similar in
structure to mortgage-related pass-through securities. 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.

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 a 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 which shorten the weighted
average life of asset-backed securities and may lower their return, in the same
manner as described below for prepayments of pools of mortgage loans underlying
mortgage-backed securities.

Mortgage-Related Securities. Mortgage pass-through certificates are issued by
governmental, government-related and private organizations and are backed by
pools of mortgage loans. These mortgage loans are made by savings and loan
associations, mortgage bankers, commercial banks and other lenders to home
buyers throughout the United States. The securities are "pass-through"
securities because they provide investors with monthly payments of principal and
interest that, in effect, are a "pass-through" of the monthly payments made by
the individual borrowers on the underlying mortgage loans, net of any fees paid
to the issuer or guarantor of the pass-through certificates. The principal
governmental issuer of such securities is the Government National Mortgage
Association ("GNMA"), which is a wholly-owned US Government corporation within
the Department of Housing and Urban Development. Government-related issuers
include the Federal Home Loan Mortgage Corporation ("FHLMC"), a corporate
instrumentality of the United States created pursuant to an act of Congress
which is owned entirely by the Federal Home Loan Banks, and the Federal National
Mortgage Association ("FNMA"), a government sponsored corporation owned entirely
by private stockholders. Commercial banks, savings and loan associations,
private mortgage insurance companies, mortgage bankers and other secondary
market issuers also create pass-through pools of conventional residential
mortgage loans. Such issuers may be the originators of the underlying mortgage
loans as well as the guarantors of the mortgage-related securities.

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<PAGE>

of whether the individual mortgagor actually makes the payment.
Because payments are made to certificate holders regardless of
whether payments are actually received on the underlying loans,
Ginnie Maes are of the "modified pass-through" mortgage certificate
type. GNMA is authorized to guarantee the timely payment of
principal and interest on the Ginnie Maes as securities backed by an
eligible pool of mortgage loans. The GNMA guaranty is backed by the
full faith and credit of the United States, and GNMA has unlimited
authority to borrow funds from the US Treasury to make payments
under the guaranty. The market for Ginnie Maes is highly liquid
because of the size of the market and the active participation in
the secondary market by securities dealers and a variety of
investors.

2. FHLMC Mortgage Participation Certificates ("Freddie Macs"). Freddie
Macs represent interests in groups of specified first lien
residential conventional mortgage loans underwritten and owned by
FHLMC. Freddie Macs entitle the holder to timely payment of
interest, which is guaranteed by FHLMC. FHLMC guarantees either
ultimate collection or timely payment of all principal payments on
the underlying mortgage loans. In cases where FHLMC has not
guaranteed timely payment of principal, FHLMC may remit the amount
due on account of its guarantee of ultimate payment of principal at
any time after default on an underlying loan, but in no event later
than one year after it becomes payable. Freddie Macs are not
guaranteed by the United States or by any of the Federal Home Loan
Banks and do not constitute a debt or obligation of the United
States or of any Federal Home Loan Bank. The secondary market for
Freddie Macs is highly liquid because of the size of the market and
the active participation in the secondary market by FHLMC,
securities dealers and a variety of investors.

3. FNMA Guaranteed Mortgage Pass-Through Certificates ("Fannie Maes").
Fannie Maes represent an undivided interest in a pool of
conventional mortgage loans secured by first mortgages or deeds of
trust, on one-family to four-family residential properties. FNMA is
obligated to distribute scheduled monthly installments of principal
and interest on the loans in the pool, whether or not received, plus
full principal of any foreclosed or otherwise liquidated loans. The
obligation of FNMA under its guaranty is solely the obligation of
FNMA and is not backed by, nor entitled to, the full faith and
credit of the United States.

The market value of mortgage-related securities depends on, among other things,
the level of interest rates, the certificates' coupon rates and the payment
history of the underlying borrowers.

Although the mortgage loans in a pool underlying a mortgage pass-through
certificate will have maturities of up to 30 years, the average life of a
mortgage pass-through certificate will be substantially less because the loans
will be subject to normal principal amortization and also may be prepaid prior
to maturity. Prepayment rates vary widely and may be affected by changes in
mortgage interest rates. In periods of falling interest rates, the rate of
prepayment on higher interest mortgage rates tends to increase, thereby
shortening the actual average life of the mortgage pass-through certificate.
Conversely, when interest rates are rising, the rate of prepayment tends to
decrease, thereby lengthening the average life of the mortgage pass-through
certificate. Accordingly, it is not possible to predict accurately the average
life of a particular pool. However, based on current statistics, it is
conventional to quote yields on mortgage pass-through certificates based on the
assumption that they have effective maturities of 12 years. Reinvestment of
prepayments may occur at higher or lower rates than the original yield on the
certificates. Due to the prepayment feature and the need to reinvest prepayments
of principal at current rates, mortgage pass-through certificates with
underlying loans bearing interest rates in excess of the market rate can be less
effective than typical noncallable bonds with similar maturities at "locking in"
yields during periods of declining interest rates, although they may have
comparable risks of declining in value during periods of rising interest rates.

Stripped (Zero Coupon) Securities. The Fund may invest in stripped securities,
which are zero coupon bonds, notes 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. Stripped
securities may exhibit greater price volatility than ordinary debt securities
because of the manner in which their principal securities issued by the US
Treasury and recorded in the Federal Reserve book-entry record-keeping system.
Because stripped securities do not pay current income, their prices can be very
volatile when interest rates change. The Fund may invest no more than 25% of its
assets in stripped securities that have been stripped by their holder, typically
a custodian bank or investment brokerage firm. A number of securities firms and
banks have stripped the interest coupons and resold them in custodian receipt
programs with different names such as Treasury Income Growth Receipts ("TIGRS")
and Certificates of Accrual on Treasuries ("CATS"). Privately-issued stripped
securities such as TIGRS and CATS are not themselves guaranteed by the US
Government, but the future payment of principal or interest on US Treasury
obligations which they represent is so guaranteed.

Variable Amount Master Demand Notes. Variable amount master demand notes are
unsecured obligations that are redeemable upon demand and are typically unrated.
These instruments are issued pursuant to written agreements between their
issuers and holders. The agreements permit the holders to increase (subject to
an agreed maximum) and the holders and issuers to decrease the principal amount
of the notes, and specify that the rate of interest payable on the principal
fluctuates according to an agreed formula.

Generally, changes in interest rates will have a smaller effect on the market
value of these securities than on the market value of comparable fixed income
obligations. Thus, investing in these securities generally allows less
opportunity for capital appreciation and depreciation than investing in
comparable fixed income securities. There may be no active secondary market with
respect to a particular variable rate instrument.

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<PAGE>

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.

International Securities. A fund's return and net asset value may be
significantly affected by political or economic conditions and regulatory
requirements in a particular country. Foreign markets, economies and political
systems may be less stable than US markets, and changes in exchange rates of
foreign currencies can affect the value of a fund's foreign assets. Foreign laws
and accounting standards typically are not as strict as they are in the US and
there may be less public information available about foreign companies.

Foreign Currency Transactions. The fund may engage in foreign currency
transactions as described below. The US dollar value of assets held by the fund
may be affected favorably or unfavorably by changes in foreign currency exchange
rates and exchange control regulations, and the fund may incur costs in
connection with conversions between various currencies. The fund 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 fund 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 the 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 fund 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
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 the fund to lose the premium it paid and its transaction costs.

Interest Rate Swaps. The Fund may enter into interest rate swap transactions
with respect to any security it is entitled to hold. Interest rate swaps involve
the exchange by the Fund with another party of their respective rights to
receive interest, e.g., an exchange of floating rate payments for fixed rate
payments. The Fund expects to enter into these transactions primarily to
preserve a return or spread on a particular investment or portion of its
portfolio and to protect against any increase in the price of securities it
anticipates purchasing at a later date. The Fund intends to use these
transactions as a hedge and not as a speculative investment.

The use of interest rate swaps is a highly specialized activity which involves
investment techniques and risks different from those associated with ordinary
portfolio securities transactions. If an advisor using this technique is
incorrect in its forecast of market values, interest rates and other applicable
factors, the investment performance of a fund would diminish compared to what it
would have been if this investment technique was not used.

A fund may only enter into interest rate swaps to hedge its portfolio. Interest
rate swaps do not involve the delivery of securities or other underlying assets
or principal. Accordingly, the risk of loss with respect to interest rate swaps
is limited to the net amount of interest payments that the funds are
contractually obligated to make. If the other party to an interest rate swap
defaults, the fund's risk of loss consists of the net amount of interest
payments that the fund contractually entitled to receive. Since interest rate
swaps are individually negotiated, the fund expects to achieve an acceptable
degree of correlation between their rights to receive interest on their
portfolio securities and their rights and obligations to receive and pay
interest pursuant to interest rate swaps.

Total Rate of Return Swaps. The Funds 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 Funds' repurchase agreement
guidelines.

Treasury Inflation-Protection Securities. The Fund may invest in
Inflation-Protection Securities ("IPS"), a type of inflation-indexed Treasury
security. IPS provide for semiannual payments of interest and a payment of
principal at maturity. In general, each payment will be adjusted to take into
account any inflation or deflation that occurs between the issue date of the
security and the payment date based on the Consumer Price Index for All Urban
Consumers ("CPI-U").

Each semiannual payment of interest will be determined by multiplying a single
fixed rate of interest by the inflation-adjusted principal amount of the
security for the date of the interest payment. Thus, although the interest rate
will be fixed, the amount of each interest payment will vary with changes in the
principal of the security as adjusted for inflation and deflation.

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<PAGE>

IPS also provide for an additional payment (a "minimum guarantee payment") at
maturity if the security's inflation-adjusted principal amount for the maturity
date is less than the security's principal amount at issuance. The amount of the
additional payment will equal the excess of the security's principal amount at
issuance over the security's inflation-adjusted principal amount for the
maturity date.

Purchase of Other Investment Company 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. These other investment companies may charge management fees which
shall be borne by the fund.

HEDGING STRATEGIES AND RELATED INVESTMENT TECHNIQUES

The fund may seek to hedge against movements in the equity markets, interest
rates and currency exchange rates through the use of options, futures
transactions, options on futures and forward foreign currency exchange
transactions. The fund has authority to write (sell) covered call and put
options on their portfolio securities, purchase put and call options on
securities and engage in transactions in stock index options, stock index
futures and financial futures and related options on such futures. The fund may
enter into such options and futures transactions either on exchanges or in the
over-the-counter ("OTC") markets. Although certain risks are involved in options
and futures transactions (as discussed in the prospectus and below), the Advisor
believes that, because the fund will only engage in these transactions for
hedging purposes, the options and futures portfolio strategies of the fund will
not subject the fund to the risks frequently associated with the speculative use
of options and futures transactions. Although the use of hedging strategies by
the fund is intended to reduce the volatility of the net asset value of the
fund's shares, the fund's net asset value will nevertheless fluctuate. There can
be no assurance that the fund's hedging transactions will be effective.

Writing Covered Call Options. The fund is authorized to write (sell) covered
call options on the securities in which it may invest and to enter into closing
purchase transactions with respect to such options. Writing a call option
obligates a fund to sell or deliver the option's underlying security, in return
for the strike price, upon exercise of the option. By writing a call option, the
fund receives an option premium from the purchaser of the call option. Writing
covered call options is generally a profitable strategy if prices remain the
same or fall. Through receipt of the option premium, the fund would seek to
mitigate the effects of a price decline. By writing covered call options,
however, the fund gives up the opportunity, while the option is in effect, to
profit from any price increase in the underlying security above the option
exercise price. In addition, the fund's ability to sell the underlying security
will be limited while the option is in effect unless the fund effects a closing
purchase transaction.

Writing Covered Put Options. The fund is authorized to write (sell) covered put
options on its portfolio securities and to enter into closing transactions with
respect to such options.

When a fund writes a put option, it takes the opposite side of the transaction
from the option's purchaser. In return for receipt of the premium, the fund
assumes the obligation to pay the strike price for the option's underlying
instrument if the other party to the option chooses to exercise it. The fund may
seek to terminate its position in a put option it writes before exercise by
closing out the option in the secondary market at its current price. If the
secondary market is not liquid for an option the fund has written, however, the
fund must continue to be prepared to pay the strike price while the option is
outstanding, regardless of price changes, and must continue to set aside assets
to cover its position.

The fund may write put options as an alternative to purchasing actual
securities. If security prices rise, the fund would expect to profit from a
written put option, although its gain would be limited to the amount of the
premium it received. If security prices remain the same over time, it is likely
that the fund will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the fund would expect to
suffer a loss. This loss should be less than the loss the fund would have
experienced from purchasing the underlying instrument directly, however, because
the premium received for writing the option should mitigate the effects of the
decline.

Purchasing Put Options. The fund is authorized to purchase put options to hedge
against a decline in the market value of its portfolio securities. By buying a
put option a fund has the right (but not the obligation) to sell the underlying
security at the exercise price, thus limiting the fund's risk of loss through a
decline in the market value of the security until the put option expires. The
amount of any appreciation in the value of the underlying security will be
partially offset by the amount of the premium paid by the fund for the put
option and any related transaction costs. Prior to its expiration, a put option
may be sold in a closing sale transaction and profit or loss from the sale will
depend on whether the amount received is more or less than the premium paid for
the put option plus the related transaction costs. A closing sale transaction
cancels out the fund's position as the purchaser of an option by means of an
offsetting sale of an identical option prior to the expiration of the option it
has purchased. The fund will not purchase put options on securities (including
stock index options discussed below) if as a result of such purchase, the
aggregate cost of all outstanding options on securities held by the fund would
exceed 5% of the market value of the fund's total assets.

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<PAGE>

Purchasing Call Options. The fund is also authorized to purchase call options.
The features of call options are essentially the same as those of put options,
except that the purchaser of a call option obtains the right to purchase, rather
than sell, the underlying instrument at the option's strike price (call options
on futures contracts are settled by purchasing the underlying futures contract).
The fund will purchase call options only in connection with "closing purchase
transactions."

The fund will not purchase put options on securities (including stock index
options) if as a result of such purchase the aggregate cost of all outstanding
options on securities held by the fund would exceed 5% of the market value of
the fund's total assets.

The Fund will not purchase call options if, as a result of such purchase, the
aggregate cost of all outstanding options on securities held by the Fund would
exceed 5% of the market value of the Fund's total assets.

Interest Rate and Financial Futures Options. The Fund may invest in interest
rate futures contracts, foreign currency futures contracts, and options thereon
that are traded on a US or foreign exchange or board of trade, as specified in
the Prospectuses. An interest rate, foreign currency or index futures contract
provides for the future sale by one party and purchase by another party of a
specified quantity of a financial instruments (such as GNMA certificates or
Treasury bonds) or foreign currency or the cash value of an index at a specified
price at a future date. A futures contract on an index is an agreement between
two parties (buyer and seller) to take or make delivery of an amount of cash
equal to the difference between the value of the index at the close of the last
trading day of the contract and the price at which the index contract was
originally written. In the case of futures contracts traded on US exchanges, the
exchange itself or an affiliated clearing corporation assumes the opposite side
of each transaction (i.e., as buyer or seller). A futures contract may be
satisfied or closed out by delivery or purchase, as the case may be, of the
financial instrument or by payment of the change in the cash value of the index.
Frequently, using futures to effect a particular strategy instead of using the
underlying or related security or index will result in lower transaction costs
being incurred. Although the value of an index may be a function of the value of
certain specified securities, no physical delivery of these securities is made.
A public market exists in futures contracts covering interest rates, several
indexes and a number of financial instruments and foreign currencies. For
example: US Treasury bonds; US Treasury notes; three-month US Treasury bills;
Eurodollar certificates of deposit. It is expected that other futures contracts
will be developed and traded in the future.

Each Fund may also purchase and write call and put options on futures contracts.
Options on futures contracts possess many of the same characteristics as options
on securities and indexes (discussed above). A futures option gives the holder
the right, in return for the premium paid, to assume a long position (in the
case of a call) or short position (in the case of a put) in a futures contract
at a specified exercise price at any time during the period of the option. Upon
exercise of a call option, the holder acquires a long position in the futures
contract and the writer is assigned the opposite short position. In the case of
a put option, the opposite is true. An option on a futures contract may be
closed out (before exercise or expiration) by an offsetting purchase or sale of
an option on a futures contract of the same series.

As long as required by regulatory authorities, each Fund will limit its use of
futures contracts and options on futures contracts to hedging transactions. For
example, a Fund might use futures contracts to hedge against anticipated changes
in interest rates that might adversely affect either the value of the Fund's
securities or the price of the securities which the Fund intends to purchase.
Additionally, a Fund may use futures contracts to create equity exposure for its
cash reserves for liquidity purposes.

A Fund will only enter into futures contracts and options on futures contracts
which are standardized and traded on a US or foreign exchange, board of trade,
or similar entity, or quoted on an automated quotation system. A Fund will enter
into a futures contract only if the contract is "covered" or if the Fund at all
times maintains with the Custodian liquid assets equal to or greater than the
fluctuating value of the contract (less any margin or deposit). A Fund will
write a call or put option on a futures contract only if the option is
"covered."

Restrictions on the Use of Futures Transactions. The purchase or sale of a
futures contract differs from the purchase or sale of a security in that no
price or premium is paid or received. Instead, an amount of cash or securities
acceptable to the broker and the relevant contract market, which varies, but is
generally about 5% of the contract amount, must be deposited with the broker.
This amount is known as "initial margin" and represents a "good faith" deposit
assuring the performance of both the purchaser and seller under the futures
contract. Subsequent payments to and from the broker, called "variation margin,"
are required to be made on a daily basis as the price of the futures contract
fluctuates making the long and short positions in the futures contracts more or
less valuable, a process known as "marking to market." At any time prior to the
settlement date of the futures contract, the position may be closed out by
taking an opposite position which will operate to terminate the position in the
futures contract. A final determination of variation margin is then made,
additional cash is required to be paid to or released by the broker and the
purchaser realizes a loss or gain. In addition, a nominal commission is paid on
each completed sale transaction.

Regulations of the CFTC applicable to the fund require that all of the fund's
futures and options on futures transactions constitute bona fide hedging
transactions and that the fund not enter into such transactions if, immediately
thereafter, the sum of the amount of initial margin deposits on the fund's
existing futures positions and premiums paid for related options would exceed 5%
of the market value of the fund's total assets.

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<PAGE>

Restrictions on OTC Options. The fund will engage in OTC options, including OTC
foreign security and currency options and options on foreign security and
currency futures, only with member banks of the Federal Reserve System and
primary dealers in US Government securities or with affiliates of such banks or
dealers which have capital of at least $50 million or whose obligations are
guaranteed by an entity having capital of at least $50 million. The fund will
acquire only those OTC options for which Advisor believes the fund can receive
on each business day at least two independent bids or offers (one of which will
be from an entity other than a party to the option).

The Staff of the SEC has taken the position that purchased OTC options and the
assets used as cover for written OTC options are illiquid securities. Therefore,
the fund has adopted an operating policy pursuant to which it will not purchase
or sell OTC options (including OTC options on futures contracts) if, as a result
of such transaction, the sum of: (1) the market value of outstanding OTC options
held by the fund; (2) the market value of the underlying securities covered by
outstanding OTC call options sold by the fund; (3) margin deposits on the fund's
existing OTC options on futures contracts; and (4) the market value of all other
assets of the fund that are illiquid or are not otherwise readily marketable,
would exceed 10% of the net assets of the fund, taken at market value. However,
if an OTC option is sold by the fund to a primary US Government securities
dealer recognized by the Federal Reserve Bank of New York and the fund has the
unconditional contractual right to repurchase such OTC option from the dealer at
a predetermined price, then the fund will treat as illiquid such amount of the
underlying securities as is equal to the repurchase price less the amount by
which the option is "in-the-money" (current market value of the underlying
security minus the option's strike price). The repurchase price with primary
dealers is typically a formula price which is generally based on a multiple of
the premium received for the option plus the amount by which the option is
"in-the-money."

Asset Coverage for Futures and Options Positions. The fund will not use leverage
in its options and futures strategies. Such investments will be made for hedging
purposes only. The fund will hold securities or other options or futures
positions whose values are expected to offset its obligations under the hedge
strategies. The fund will not enter into an option or futures position that
exposes the fund to an obligation to another party unless it owns either: (1) an
offsetting position in securities or other options or futures contracts; or (2)
cash, receivables and short-term debt securities with a value sufficient to
cover its potential obligations. The fund will comply with guidelines
established by the SEC with respect to coverage of options and futures
strategies by mutual funds, and if the guidelines so require will set aside cash
and high grade liquid debt securities in a segregated account with its custodian
bank in the amount prescribed. The fund's custodian shall maintain the value of
such segregated account equal to the prescribed amount by adding or removing
additional cash or liquid securities to account for fluctuations in the value of
securities held in such account. Securities held in a segregated account cannot
be sold while the futures or option strategy is outstanding, unless they are
replaced with similar securities. As a result, there is a possibility that
segregation of a large percentage of a fund's assets could impede portfolio
management or the fund's ability to meeting redemption requests or other current
obligations.

Risk Factors in Options, Futures, Forward and Currency Transactions. The use of
options and futures transactions to hedge the fund's portfolios involves the
risk of imperfect correlation in movements in the price of options and futures
and movements in the price of securities or currencies which are the subject of
the hedge. If the price of the options or futures moves more or less than the
price of hedged securities or currencies, the fund will experience a gain or
loss which will not be completely offset by movements in the price of the
subject of the hedge. The successful use of options and futures also depends on
Advisor's ability to correctly predict price movements in the market involved in
a particular options or futures transaction. To compensate for imperfect
correlations, the fund may purchase or sell stock index options or futures
contracts in a greater dollar amount than the hedged securities if the
volatility of the hedged securities is historically greater than the volatility
of the stock index options or futures contracts. Conversely, the fund may
purchase or sell fewer stock index options or futures contracts, if the
historical price volatility of the hedged securities is less than that of the
stock index options or futures contracts. The risk of imperfect correlation
generally tends to diminish as the maturity date of the stock index option or
futures contract approaches. Options are also subject to the risks of an
illiquid secondary market, particularly in strategies involving writing options,
which the fund cannot terminate by exercise. In general, options whose strike
prices are close to their underlying instruments' current value will have the
highest trading volume, while options whose strike prices are further away may
be less liquid.

The fund intends to enter into options and futures transactions, on an exchange
or in the OTC market, only if there appears to be a liquid secondary market for
such options or futures or, in the case of OTC transactions, the Advisor
believes the fund can receive on each business day at least two independent bids
or offers. However, there can be no assurance that a liquid secondary market
will exist at any specific time. Thus, it may not be possible to close an
options or futures position. The inability to close options and futures
positions also could have an adverse impact on a fund's ability to effectively
hedge its portfolio. There is also the risk of loss by a fund of margin deposits
or collateral in the event of bankruptcy of a broker with whom the fund has an
open position in an option, a futures contract or related option.

-10-
<PAGE>

the same or different exchanges or are held or written in one or more accounts
or through one or more brokers). "Trading limits" are imposed on the maximum
number of contracts which any person may trade on a particular trading day.

INVESTMENT RESTRICTIONS

The Fund is subject to the following investment restrictions, restrictions 1
through 11 are fundamental and restrictions 12 through 15 are nonfundamental.
Unless otherwise noted, these restrictions apply at the time an investment is
made. The Fund will not:

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
investments once borrowed funds (including reverse repurchase
agreements) exceed 5% of its total assets.

3. Pledge, mortgage or hypothecate its assets. However, the Fund may
pledge securities having a market value at the time of the pledge
not exceeding 33-1/3% of the value of the Fund's total assets to
secure borrowings permitted by paragraph (2) above.

4. With respect to 75% of its total assets, invest in securities of any
one issuer (other than securities issued by the US Government, its
agencies, and instrumentalities), if immediately after and as a
result of such investment the current market value of the Fund's
holdings in the securities of such issuer exceeds 5% of the value of
the Fund's assets and to not more than 10% of the outstanding voting
securities of such issuer.

6. Purchase or sell commodities or commodity futures contracts except
that the Fund may enter into futures contracts and options thereon
to the extent provided in its Prospectus.

7. Purchase or sell real estate or real estate mortgage loans;
provided, however, the Fund may invest in securities secured by real
estate or interests therein or issued by companies which invest in
real estate or interests therein.

8. Engage in the business of underwriting securities issued by others,
except that the Fund will not be deemed to be an underwriter or to
be underwriting on account of the purchase of securities subject to
legal or contractual restrictions on disposition.

9. Issue senior securities, except as permitted by its investment
objective, policies and restrictions, and except as permitted by the
1940 Act.

10. Purchase or sell puts, calls or invest in straddles, spreads or any
combination thereof, if as a result of such purchase the value of
the Fund's aggregate investment in such securities would exceed 5%
of the Fund's total assets.

11. Make short sales of securities or purchase any securities on margin,
except for such short-term credits as are necessary for the
clearance of transactions. The Fund may make initial margin deposits
and variation margin payments in connection with transactions in
futures contracts and related options.

12. Purchase from or sell portfolio securities to its officers or
directors or other interested persons (as defined in the 1940 Act)
of the Fund, including their investment advisors and affiliates,
except as permitted by the 1940 Act and exemptive rules or orders
thereunder.

13. Invest in securities issued by other investment companies except in
connection with a merger, consolidation, acquisition of assets, or
other reorganization approved by the Fund's shareholders, except
that the Fund may invest in such securities to the extent permitted
by the 1940 Act.

14. Invest more than 15% of its net assets in the aggregate, on an
ongoing basis, in illiquid securities or securities that are not
readily marketable, including repurchase agreements and time
deposits of more than seven days' duration.

-11-
<PAGE>

15. Make investments for the purpose of gaining control of an issuer's
management.

With respect to the industry concentration outlined in Investment Restriction
No. 1, the Advisor treats US domestic banks and foreign branches of US banks as
a separate industry from foreign banks. To the extent these restrictions reflect
matters of operating policy which may be changed without shareholder vote, these
restrictions may be amended upon approval by the Board of Trustees and notice to
shareholders. If a percentage restriction is adhered to at the time of
investment, a subsequent increase or decrease in a percentage resulting from a
change in the values of assets will not constitute a violation of that
restriction, except as otherwise noted.

PORTFOLIO TURNOVER

Generally, securities are purchased for the fund for investment income and/or
capital appreciation and not for short-term trading profits. The Advisor's sell
discipline for the fund's 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 the assumed time
horizon. Liquidity, volatility, and overall risk of a position are other factors
considered by the Advisor in determining the appropriate investment horizon.
Therefore, the fund may dispose of securities without regard to the time they
have been held when such action, for defensive or other purposes, appears
advisable.

The portfolio turnover rate for the fund is calculated by dividing the lesser of
purchases or sales of portfolio securities for the particular year, by the
monthly average value of the portfolio securities owned by the fund during the
year. For purposes of determining the rate, all short-term securities, including
options, futures, forward contracts and repurchase agreements, are excluded. A
high turnover rate (over 100%) will: (1): increase transactions expenses which
will adversely affect a fund's performance; and (2) result in increased
brokerage commissions and other transaction costs, and the possibility of
realized capital gains.

The following were the portfolio turnover rates for the fund for the fiscal
years ended August 31:

-----------------------------------------------------------------------
1999 1998 1997
-----------------------------------------------------------------------
167.12% 249.10% 92.38%
-----------------------------------------------------------------------

The higher turnover in 1998 was the result of a portfolio manager change and the
volatility of the fund's asset base.

MANAGEMENT OF THE FUND

BOARD OF TRUSTEES AND OFFICERS

The Board of Trustees is responsible for overseeing generally the management,
activities and affairs of each fund and has approved contracts with various
financial organizations to provide, among other services, day-to-day management
required by the SSgA funds (see the section called "Investment Advisory and
Other Services."). Trustees hold office until they resign or are removed by, in
substance, a vote of two-thirds of Investment Company shares outstanding. The
officers, all of whom are employed by the Administrator or its affiliates, are
responsible for the day-to-day management and administration of the SSgA Funds'
operations.

The following lists the SSgA Funds' trustees and officers, their mailing
addresses and ages, their positions with the SSgA funds and their present and
principal occupations during the past five years.

-12-
<PAGE>

- --------------------------------------------------------------------------------
Name, Address and Age Position(s) with Principal Occupation(s)
SSgA funds During Past 5 Years
- --------------------------------------------------------------------------------
Lynn L. Anderson Trustee (Interested o Vice Chairman, Frank
909 A Street Person of the SSgA Russell Company;
Tacoma, WA 98402 funds as defined in o Chairman of the
Age 60 the 1940 Act), Board and Chief
Chairman of the Executive Officer,
Board, President and Frank Russell
Treasurer Investment
Management Company
and Russell Fund
Distributors, Inc.;
o Chairman of the
Board, Frank Russell
Trust Company;
o Trustee, President
and Chief Executive
Officer, Frank
Russell Investment
Company and Russell
Insurance Funds; and
o Director, Russell
Insurance Agency,
Inc., Frank Russell
Investments
(Ireland) Limited,
Frank Russell
Investment Company
plc; Frank Russell
Institutional Funds
plc, Frank Russell
Qualifying Investor
Fund, and Frank
Russell Investments
(Cayman) Ltd.
- --------------------------------------------------------------------------------
William L. Marshall Trustee o Chief Executive
33 West Court Street Officer and
Doylestown, PA 18901 President, Wm. L.
Age 57 Marshall Associates,
Inc. (a registered
investment advisor
and provider of
financial and
related consulting
services);
o Certified Financial
Planner and Member,
Institute of
Certified Financial
Planners;
o Member, Registry of
Financial Planning
Practitioners and
Advisory Committee,
International
Association for
Financial Planning
Broker-Dealer
Program;
o Registered
Representative for
Securities with FSC
Securities Corp.,
Marietta, Georgia.
- --------------------------------------------------------------------------------
Steven J. Mastrovich Trustee o President, Key
176 Federal Street, 3rd Floor Global Capital,
Boston, MA 02110 Inc.;
Age 43 o From 1997 to 1998,
Partner, Squire,
Sanders & Dempsey
(law firm);
o From 1994 to 1997,
Partner, Brown,
Rudnick, Freed &
Gesmer (law firm);
and
o From 1990 to 1994,
Partner, Warner &
Stackpole (law
firm).
- --------------------------------------------------------------------------------
Patrick J. Riley Trustee o Partner, Riley,
One Corporate Place Burke & Donahue,
55 Ferncroft Road L.L.P. (law firm).
Danvers, MA 01923
Age 51
- --------------------------------------------------------------------------------
Richard D. Shirk Trustee o President and Chief
3350 Peachtree Road, N.E. Executive Officer,
Atlanta, GA 30326 Blue Cross/Blue
Age 54 Shield of Georgia.
- --------------------------------------------------------------------------------
Bruce D. Taber Trustee o Consultant, Computer
Simulation, General
Electric
- --------------------------------------------------------------------------------

-13-
<PAGE>

- --------------------------------------------------------------------------------
26 Round Top Road Industrial Control
Boxford, MA 01921 Systems.
Age 56
- --------------------------------------------------------------------------------
Henry W. Todd Trustee o President and
111 Commerce Drive Director, Zink &
Montgomeryville, PA 18936 Triest Co., Inc.
Age 52 (dealer in vanilla
flavor materials);
and
o Director, Executive
Vice President, A.M.
Todd Group, Inc. and
Flavorite
Laboratories.
- --------------------------------------------------------------------------------
J. David Griswold Vice President and o Assistant Secretary
909 A Street Secretary and Associate
Tacoma, WA 98402 General Counsel,
Age 42 Frank Russell
Investment
Management Company,
Russell Fund
Distributors, Inc.,
Frank Russell
Capital Inc., Frank
Russell Company and
Frank Russell
Investments
(Delaware), Inc.;
o Director, Secretary
and Associate
General Counsel,
Frank Russell
Securities, Inc.;
o Secretary, Frank
Russell Canada
Limited/Limitee.
- --------------------------------------------------------------------------------
Mark E. Swanson Assistant o Director - Funds
909 A Street Secretary, Assistant Administration,
Tacoma, WA 98402 Treasurer and Frank Russell
Age 36 Principal Accounting Investment
Officer Management Company
and Frank Russell
Trust Company; and
o Treasurer and Chief
Accounting Officer,
Frank Russell
Investment Company
and Russell
Insurance Funds.
- --------------------------------------------------------------------------------
Rick J. Chase Assistant Secretary o Manager, Fund
909 A Street Administration,
Tacoma, WA 98402 Frank Russell
Age 34 Investment
Management Company;
and
o Assistant Treasurer,
Frank Russell
Investment Company
and Russell
Insurance Funds.
- --------------------------------------------------------------------------------
Deedra S. Walkey Assistant Secretary o Associate General
909 A Street Counsel and
Tacoma, WA 98402 Assistant Secretary,
Age 35 Frank Russell
Company, Frank
Russell Investment
Management Company,
Frank Russell Trust
Company, Frank
Russell Investment
Company, Russell
Insurance Funds, and
Russell Insurance
Agency.
- --------------------------------------------------------------------------------
Carla L. Anderson Assistant Secretary o Paralegal and
909 A Street Assistant Secretary,
Tacoma, WA 98402 Frank Russell
Age 34 Company, Frank
Russell Investment
Management Company,
Frank Russell
Securities, Inc.,
Russell Fund
Distributors, Inc.,
Frank Russell
Capital Inc., Frank
Russell
International
Services Company
Inc., Russell Real
Estate Advisors Inc.
and A Street
Investment
Associates, Inc.
- --------------------------------------------------------------------------------

COMPENSATION

Trustees who are not officers or employees of Frank Russell Investment
Management Company, State Street Bank and Trust Company or their affiliates are
paid $63,000 each fiscal year and are reimbursed for travel and other expenses
they incur in attending Board meetings. As of the date of this SAI, the Trustees
were not paid pension or retirement benefits as part of Investment Company
expenses. However, the Trustees have approved a deferred compensation plan by
which they would be allowed to invest a portion of their annual trustee fee in
shares of the SSgA Funds. The Investment Company has obtained an exemptive order
from the SEC to

-14-
<PAGE>

enable it to offer this benefit. Participation by the Trustees is optional. To
date, none of the Trustees have used the deferred compensation plan. The
Investment Company's officers and employees are compensated by the Administrator
or its affiliates.

--------------------------------------------------
Trustee Total Annual Compensation
from Investment Company per
Fiscal Year
--------------------------------------------------
Lynn L. Anderson $0
--------------------------------------------------
William L. Marshall $63,000
--------------------------------------------------
Steven J. Mastrovich $63,000
--------------------------------------------------
Patrick J. Riley $63,000
--------------------------------------------------
Richard D. Shirk $63,000
--------------------------------------------------
Bruce D. Taber $63,000
--------------------------------------------------
Henry W. Todd $63,000
--------------------------------------------------

---------------------------------------------------------------------
Name of SSgA Fund Amount of Total Annual Trustee
Compensation (Including Out of
Pocket Expenses) Attributable to
Each Fund For the Fiscal Year
Ended August 31, 1999
---------------------------------------------------------------------
Money Market $148,616
---------------------------------------------------------------------
US Government Money Market 26,152
---------------------------------------------------------------------
Matrix Equity 11,327
---------------------------------------------------------------------
S&P 500 Index 47,343
---------------------------------------------------------------------
Small Cap 8,227
---------------------------------------------------------------------
Yield Plus 14,754
---------------------------------------------------------------------
Bond Market 4,966
---------------------------------------------------------------------
Emerging Markets 6,022
---------------------------------------------------------------------
US Treasury Money Market 20,386
---------------------------------------------------------------------
Growth & Income 5,267
---------------------------------------------------------------------
Intermediate 2,187
---------------------------------------------------------------------
Prime Money Market 50,634
---------------------------------------------------------------------
Tax Free Money Market 6,081
---------------------------------------------------------------------
Active International 2,582
---------------------------------------------------------------------
International Growth Opportunities 1,494
---------------------------------------------------------------------
Tuckerman Active REIT 1,473
---------------------------------------------------------------------
High Yield Bond 1,191
---------------------------------------------------------------------
Special Equity 1,531
---------------------------------------------------------------------
Aggressive Equity(1) 839
---------------------------------------------------------------------
IAM SHARES(1) 430
---------------------------------------------------------------------
All Life Solutions Funds 0
---------------------------------------------------------------------

- ----------
(1) The fund did not operate a full year during fiscal 1999.

-15-
<PAGE>

CONTROLLING AND PRINCIPAL SHAREHOLDERS

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 November 30, 1999, State Street
held of record less than 25% of the issued and outstanding shares of Investment
Company in connection with its discretionary accounts. Consequently, State
Street is not deemed to be a controlling person of Investment Company for
purposes of the 1940 Act.

The Trustees and officers of Investment Company, as a group, own less than 1% of
Investment Company's voting securities.

As of November 30, 1999, the following shareholders owned of record 5% or more
of the issued and outstanding shares of the fund. Such shares may be held
pursuant to a shareholder servicing arrangement in omnibus accounts for
underlying shareholders:

o SSgA CM18, 225 Franklin Street, Boston, MA 02110-2804--55%;

o State Street Bank and Trust Company, State Street Solutions, 200 Newport
Avenue JQ3N, North Quincy, MA 02171-2145--11%; and

o Louisiana State Employees LR53, 8401 United Plaza Blvd., Baton Rouge, LA
70809-7017--5%.

o Colonial Williamsburg FN18, Goodwin Building, Williamsburg, VA 23187--5%.

INVESTMENT ADVISORY AND OTHER SERVICES

ADVISOR

State Street Bank and Trust Company serves as the SSgA Funds' Investment Advisor
pursuant to an Advisory Agreement dated April 12, 1988. State Street is a wholly
owned subsidiary of State Street Corporation, a publicly held bank holding
company. State Street's address is 225 Franklin Street, Boston, MA 02110. State
Street also serves as the Investment Company's Custodian and Transfer Agent (see
below).

The Advisory Agreement will continue from year to year provided that a majority
of the Trustees who are not interested persons of the fund and either a majority
of all Trustees or a majority of the shareholders of the fund approve its
continuance. The Agreement may be terminated by the Advisor or a fund without
penalty upon sixty days' notice and will terminate automatically upon its
assignment.

Under the Advisory Agreement, the Advisor directs each fund's investments in
accordance with its investment objective, policies and limitations. For these
services, the fund pays an annual management fee to the Advisor at the rate
stated in the fund's prospectus. The management fee rate is a percentage of the
average daily net asset value of the fund, calculated daily and paid monthly.

State Street's Code of Ethics. 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.

The fund accrued the following expenses to Advisor for the fiscal years ended
August 31:

-----------------------------------------------------------------------
1999 1998 1997
-----------------------------------------------------------------------
$1,590,264 $1,562,490 $2,310,253
-----------------------------------------------------------------------

ADMINISTRATOR

Frank Russell Investment Management Company serves as the Investment Company's
Administrator, pursuant to an Administration Agreement dated April 12, 1988.

-16-
<PAGE>

The Administrator is a wholly owned subsidiary of Frank Russell Company. Frank
Russell Company was founded in 1936 and has provided comprehensive asset
management consulting services since 1969 for institutional pools of investment
assets, principally those of large corporate employee benefit plans. Frank
Russell Company and its affiliates have offices in Tacoma, Winston-Salem, New
York City, Toronto, London, Tokyo, Sydney, Paris, Singapore and Auckland, and
have approximately 1,400 officers and employees. The Administrator's and Frank
Russell Company's mailing address is 909 A Street, Tacoma, WA 98402. Frank
Russell Company is an independently operated subsidiary of The Northwestern
Mutual Life Insurance Company.

Pursuant to the Administration Agreement with Investment Company, the
Administrator will: (1) supervise all aspects of the fund's operations; (2)
provide the fund with administrative and clerical services, including the
maintenance of certain of the fund's books and records; (3) arrange the periodic
updating of the fund's prospectuses and any supplements thereto; (4) provide
proxy materials and reports to fund shareholders and the Securities and Exchange
Commission; and (5) provide the fund with adequate office space and all
necessary office equipment and services, including telephone service, heat,
utilities, stationery supplies and similar items. For these services, the fund
and Investment Company's other domestic investment portfolios pay the
Administrator a combined fee that on an annual basis is equal to the following
percentages of their average aggregate daily net assets: $0 to and including
$500 million -- .06%; over $500 million to and including $1 billion -- .05%; and
over $1 billion -- .03%. The percentage of the fee paid by a particular fund is
equal to the percentage of average aggregate daily net assets that are
attributable to that fund. The Administrator will also receive reimbursement of
expenses it incurs in connection with establishing new investment portfolios.
The Administration Agreement will continue from year to year provided that a
majority of the Trustees and a majority of the Trustees who are not interested
persons of each fund and who have no direct or indirect financial interest in
the operation of the Distribution Plan described below or the Administration
Agreement approve its continuance. The Agreement may be terminated by the
Administrator or any fund without penalty upon sixty days' notice and will
terminate automatically upon its assignment.

The Administrator's Code of Ethics. 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.

The fund accrued the following expenses to Administrator for the fiscal years
ended August 31:

-----------------------------------------------------------------------
1999 1998 1997
-----------------------------------------------------------------------
$197,686 $188,882 $290,411
-----------------------------------------------------------------------

CUSTODIAN AND TRANSFER AGENT

State Street serves as the Custodian and Transfer Agent for the Investment
Company. State Street also provides the basic portfolio recordkeeping required
by the Investment Company for regulatory and financial reporting purposes. For
its services as Custodian, State Street is paid an annual fee in accordance with
the following: custody services--a fee payable monthly on a pro rata basis,
based on the following percentages of average daily net assets of each fund: $0
up to $1.5 billion--0.02%, over $1.5 billion--0.015% (for purposes of
calculating the break point, the assets of all domestic funds are aggregated);
securities transaction charges from $6.00 to $25.00 per transaction; Eurodollar
transaction fees ranging from $110.00 to $125.00 per transaction; monthly
pricing fees of $375.00 per investment portfolio and from $4.00 to $16.00 per
security, depending on the type of instrument and the pricing service used; and
yield calculation fees of $350.00 per non-money market portfolio per year. For
Transfer and Dividend Disbursing Agent services, State Street is paid the
following annual account services fees: $9.00 open account fee; $1.50 closed
account fee; fund minimum per portfolio for one to four portfolios--$36,000,
five to six portfolios--$24,000, and over six portfolios $18,000. Portfolio fees
are allocated to each fund based on the average net asset value of each fund and
are billable on a monthly basis at the rate of 1/12 of the annual fee. State
Street will apply a $5.00 fee to each telephone transaction (purchase or
redemption), which is applied against the monthly billing. State Street is
reimbursed by each fund for supplying certain out-of-pocket expenses including
postage, transfer fees, stamp duties, taxes, wire fees, telexes, and freight.

DISTRIBUTOR

Russell Fund Distributors, Inc. serves as the Distributor of fund shares
pursuant to a Distribution Agreement dated April 12, 1988 ("Distribution
Agreement"). The Distributor is a wholly owned subsidiary of the Administrator.
The Distributor's mailing address is One International Place, Boston, MA 02110.

-17-
<PAGE>

DISTRIBUTION PLAN AND SHAREHOLDER SERVICING ARRANGEMENTS

Distribution Plan. Under the 1940 Act, the Securities and Exchange Commission
has adopted Rule 12b-1, which regulates the circumstances under which a fund
may, directly or indirectly, bear distribution and shareholder servicing
expenses. Rule 12b-1 provides that a fund may pay for such expenses only
pursuant to a plan adopted in accordance with the Rule. Accordingly, each fund
has adopted an active distribution Plan providing for reimbursement for
distribution expenses up to the plan limit.

In connection with the Trustees' consideration of whether to adopt the
Distribution Plan, the Distributor, as the funds' principal underwriter,
represented to the Trustees that the Distributor believes that the Distribution
Plan should result in increased sales and asset retention for the funds by
enabling the funds to reach and retain more investors and servicing agents (such
as brokers, banks, financial planners, investment advisors and other financial
institutions), although it is impossible to know for certain in the absence of a
Distribution Plan or under an alternative distribution arrangement, the level of
sales and asset retention that a fund would have.

The Plan provides that a fund may spend annually, directly or indirectly, up to
0.25% of the value of its average net assets for distribution and shareholder
servicing services. The Plan does not provide for a fund to be charged for
interest, carrying or any other financing charges on any distribution expenses
carried forward to subsequent years. A quarterly report of the amounts expended
under the Plan, and the purposes for which such expenditures were incurred, must
be made to the Trustees for their review. The Plan may not be amended without
shareholder approval to increase materially the distribution or shareholder
servicing costs that the fund may pay. The Plan and material amendments to it
must be approved annually by all of the Trustees and by the Trustees who are
neither "interested persons" (as defined in the 1940 Act) of the fund nor have
any direct or indirect financial interest in the operation of the Plan or any
related agreements.

Distribution and Shareholder Servicing. 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 and/or the Distributor may also enter into Service
Agreements with financial institutions, which may include the 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 and or the Distributor, 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, 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.

The fund accrued expenses in the following amounts to Distributor for the fiscal
years ended August 31:

-----------------------------------------------------------------------
1999 1998 1997
-----------------------------------------------------------------------
$248,774 $240,957 $274,801
-----------------------------------------------------------------------

-18-
<PAGE>

For fiscal 1999, these amounts are reflective of the following individual
payments:

Advertising $ 30,359
Printing of Prospectuses 15,757
Compensation to Dealers 31,565
Compensation to Sales Personnel 70,615
Other(1) 100,478
--------

The fund accrued expenses in the following amounts to Advisor, under Service
Agreements pursuant to Rule 12b-1, for fiscal years ended August 31:

-----------------------------------------------------------------------
1999 1998 1997
-----------------------------------------------------------------------
$294,682 $270,457 $255,201
-----------------------------------------------------------------------

INDEPENDENT ACCOUNTANTS

PricewaterhouseCoopers LLP serves as the Investment Company's independent
accountants. PricewaterhouseCoopers LLP is responsible for performing annual
audits of the financial statements and financial highlights in accordance with
generally accepted auditing standards, a review of federal tax returns, and,
pursuant to Rule 17f-2 of the 1940 Act, three security counts. The mailing
address of PricewaterhouseCoopers LLP is 160 Federal Street, Boston, MA 02110.

LEGAL COUNSEL

Goodwin, Procter & Hoar LLP, Exchange Place, Boston, MA 02109, provides legal
services to the SSgA Funds.

BROKERAGE PRACTICES AND COMMISSIONS

All portfolio transactions are placed on behalf of each fund by Advisor. Advisor
ordinarily pays commissions when it executes transactions on a securities
exchange. In contrast, there is generally no stated commission on the purchase
or sale of securities traded in the over-the-counter markets, including most
debt securities and money market instruments. Rather, the price of such
securities includes an undisclosed commission in the form of a mark-up or
mark-down. The cost of securities purchased from underwriters includes an
underwriting commission or concession.

Subject to the arrangements and provisions described below, the selection of a
broker or dealer to execute portfolio transactions is usually made by Advisor.
The Advisory Agreement provides, in substance and subject to specific directions
from officers of Investment Company, that in executing portfolio transactions
and selecting brokers or dealers, the principal objective is to seek the best
overall terms available to a fund. Ordinarily, securities will be purchased from
primary markets, and Advisor shall consider all factors it deems relevant in
assessing the best overall terms available for any transaction, including the
breadth of the market in the security, the price of the security, the financial
condition and execution capability of the broker or dealer, and the
reasonableness of the commission, if any, for the specific transaction and other
transactions on a continuing basis.

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(1) Other expenses may include such items as compensation for travel,
conferences and seminars for staff, subscriptions, office charges and
professional fees.

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effecting that transaction. Each fund or the Advisor, as appropriate, must
determine in good faith that such commission was reasonable in relation to the
value of the brokerage and research services provided--viewed in terms of that
particular transaction or in terms of all the accounts over which Advisor
exercises investment discretion. Any commission, fee or other remuneration paid
to an affiliated broker-dealer is paid in compliance with the fund's procedures
adopted in accordance with Rule 17e-1 of the 1940 Act.

The Advisor arranges for the purchase and sale of fund securities and selects
brokers and dealers (including affiliates), which in its best judgment provide
prompt and reliable execution at favorable prices and reasonable commission
rates. The Advisor may select brokers and dealers which provide it with research
services and may cause a fund to pay such brokers and dealers commissions which
exceed those other brokers and dealers may have charged, if it views the
commissions as reasonable in relation to the value of the brokerage and/or
research services. In selecting a broker, including affiliates, for a
transaction, the primary consideration is prompt and effective execution of
orders at the most favorable prices. Subject to that primary consideration,
dealers may be selected for research, statistical or other services to enable
the fund to supplement its own research and analysis. Research services
generally include services which assist investment professionals in their
investment decision-making process, including information concerning securities
or indexes, performance, technical market action, pricing, risk measurement,
corporate responsibility and proxy issues, in addition to political and economic
developments.

With respect to brokerage commissions, if commissions are generated by a fund,
the Board reviews, at least annually, the commissions paid by a fund to evaluate
whether the commissions paid over representative periods of time were reasonable
in relation to commissions being charged by other brokers and the benefits to a
fund.

The Trustees periodically review Advisor's performance of its responsibilities
in connection with the placement of portfolio transactions on behalf of each
fund and review the prices paid by the fund over representative periods of time
to determine if such prices are reasonable in relation to the benefits provided
to the fund. Certain services received by Advisor attributable to a particular
fund transaction may benefit one or more other accounts for which Advisor
exercises investment discretion, or an investment portfolio other than that for
which the transaction was effected. Advisor's fees are not reduced by Advisor's
receipt of such brokerage and research services.

During the fiscal year ended August 31, 1999, the fund purchased securities
issued by the following regular brokers or dealers, as defined by Rule 10b-1 of
the 1940 Act, each of which is one of the fund's ten largest brokers or dealers
by dollar amounts of securities executed or commissions received on behalf of
the fund. The value of broker-dealer securities held and the commissions paid
(if any) as of August 31, 1999, are as follows:

($000)
--------------
Warburg Dillon Read LLC(1) 0
State Street Brokerage Services, Inc.(1) 0
Prudential Securities Inc.(1) 0
Societe Generale Securities(1) 0
Lehman Brothers Inc.(1) 20,621
Morgan Stanley & Co., Inc.(1) 0
Goldman Sachs & Co.(1) 4,957
Merrill Lynch, Inc.(1) 0
Swiss Bank Corp.(1) 0
Salomon Smith Barney Inc.(1) 0

The Yield Plus Fund normally does not pay a stated brokerage commission on
transactions.

PRICING OF FUND SHARES

Shares of the funds are offered without a sales commission by Russell Fund
Distributors, Inc. (the Distributor), to institutional and retail investors
which invest for their own account or in a fiduciary or agency capacity. The
fund determines the price per share once each business day at 4:00 p.m. Eastern
time. A business day is one on which the New York Stock Exchange is open for
regular

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(1) Broker principal transaction only.

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<PAGE>

trading. Currently, the New York Stock Exchange is open for trading every
weekday except New Year's Day, Martin Luther King, Jr., Day, President's Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day.

Trading may occur in debt securities and in foreign securities at times when the
New York Stock Exchange is closed (including weekends and holidays or after 4:00
p.m. Eastern time on a regular business day). The trading of portfolio
securities at such times may significantly increase or decrease the net asset
value of fund shares when the shareholder is not able to purchase or redeem fund
shares. Further, because foreign securities markets may close prior to the time
the fund determines net asset value, events affecting the value of the portfolio
securities occurring between the time prices are determined and the time the
fund calculates net asset value may not be reflected in the calculation of net
asset value unless the Board of Trustees determine that a particular event would
materially affect the net asset value. If such an event occurs, these securities
will be valued at their fair value following procedures approved by the
Trustees.

With the exceptions noted below, the fund values portfolio securities at market
value. This generally means that equity securities and fixed income securities
listed and traded principally on any national securities exchange are valued on
the basis of the last sale price or, lacking any sales, at the closing bid
price, on the primary exchange on which the security is traded. United States
equity and fixed-income securities traded principally over-the-counter and
options are valued on the basis of the last reported bid price. Futures
contracts are valued on the basis of the last reported sales price.

Because many fixed income securities do not trade each day, last sale or bid
prices are frequently not available. Therefore, fixed income securities may be
valued using prices provided by a pricing service when such prices are believed
to reflect the market value of such securities.

International securities traded on a national securities exchange are valued on
the basis of the last sale price. International securities traded
over-the-counter are valued on the basis of best bid or official bid, as
determined by the relevant securities exchange. In the absence of a last sale or
best or official bid price, such securities may be valued on the basis of prices
provided by a pricing service if those prices are believed to reflect the fair
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.

The fund values securities maturing within 60 days of the valuation date at
amortized cost unless the Board determines that the amortized cost method does
not represent fair value. This method involves valuing an instrument at its cost
and thereafter assuming a constant amortization to maturity of any discount or
premium, even though the portfolio security may increase or decrease in market
value generally in response to changes in interest rates. While this method
provides certainty in valuation, it may result in periods during which value, as
determined by amortized cost, is higher or lower than the price a fund would
receive if it sold the instrument.

For example, in periods of declining interest rates, the daily yield on fund
shares computed by dividing the annualized daily income on the fund's portfolio
by the net asset value based upon the amortized cost valuation technique may
tend to be higher than a similar computation made by using a method of valuation
based upon market prices and estimates. In periods of rising interest rates, the
daily yield on fund shares computed the same way may tend to be lower than a
similar computation made by using a method of calculation based upon market
prices and estimates.

The Investment Company filed an exemption from Section 18(f) of the 1940 Act on
Form N-18-F on December 29, 1987, which may enable it to redeem securities in
kind. Therefore, a fund may pay any portion of the redemption amount (in excess
of $25 million) by a distribution in kind of readily marketable securities from
its portfolio instead of cash.

TAXES

Each fund intends to qualify for treatment as a regulated investment company
("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As a RIC, each fund will not be liable for federal income taxes on
taxable net investment income and net capital gain (long-term capital gains in
excess of short-term capital losses) that it distributes to its shareholders,
provided that the fund distributes annually to its shareholders at least 90% of
its net investment income and net short-term capital gain for the taxable year
("Distribution Requirement"). For a fund to qualify as a RIC it must abide by
all of the following requirements: (1) at least 90% of the fund's gross income
each taxable year must be derived from dividends, interest, payments with
respect to securities loans, gains from the sale or other disposition of stock
or securities or foreign currencies, or other income (including gains from
options, futures or forward contracts) derived with respect to its business of
investing in such stock, securities or currencies ("Income Requirement"); (2) at
the close of each quarter of the fund's taxable year, at least 50% of the value
of its total assets must be represented by cash and cash items, US Government
securities, securities of other RICs, and other securities, with such other
securities limited, in respect of any one issuer, to an amount that does not
exceed 5% of the total assets of the fund or that does not represent more than
10% of the outstanding voting securities of any one issuer; and (3) at the close
of each quarter of the fund's

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taxable year, not more than 25% of the value of its assets may be invested in
securities (other than US Government securities or the securities of other RICs)
of any one issuer.

Each fund will be subject to a nondeductible 4% excise tax to the extent it
fails to distribute by the end of any calendar year an amount at least equal to
the sum of: (1) 98% of its ordinary income for that year; (2) 98% of its capital
gain net income for the one-year period ending on October 31 of that year; and
(3) certain undistributed amounts from the preceding calendar year. For this and
other purposes, dividends declared in October, November or December of any
calendar year and made payable to shareholders of record in such month will be
deemed to have been received on December 31 of such year if the dividends are
paid by the fund subsequent to December 31 but prior to February 1 of the
following year.

If a shareholder receives a distribution taxable as a long-term gain with
respect to shares of a fund and redeems or exchanges the shares, and has held
the shares for six months or less, then any loss on the redemption or exchange
will be treated as a long-term loss to the extent of the respective capital gain
distribution.

As of August 31, 1999, the fund had net tax basis capital loss carryovers of
$1,086,432 and $1,891,302, which may be applied against any realized net taxable
gains in each succeeding year until their expiration dates of August 31, 2004,
and August 31, 2007, respectively, whichever occurs first. As permitted by tax
regulations, the fund intends to defer a net realized capital loss of $68,543
incurred from November 1, 1998 to August 31, 1999 and treat it as arising in
fiscal year 2000.

Issues Related to Hedging and Option Investments. A fund's ability to make
certain investments may be limited by provisions of the Code that require
inclusion of certain unrealized gains or losses in the fund's income for
purposes of the Income Requirement and the Distribution Requirement, and by
provisions of the Code that characterize certain income or loss as ordinary
income or loss rather than capital gain or loss. Such recognition,
characterization and timing rules will affect investments in certain futures
contracts, options, foreign currency contracts and debt securities denominated
in foreign currencies.

Foreign Income Taxes. Investment income received by the fund from sources within
foreign countries may be subject to foreign income taxes withheld at the source.
The United States has entered into tax treaties with many foreign countries
which would entitle the fund to a reduced rate of such taxes or exemption from
taxes on such income. It is impossible to determine the effective rate of
foreign tax for a fund in advance since the amount of the assets to be invested
within various countries is not known.

If the fund invests in an entity that is classified as a passive foreign
investment company ("PFIC") for federal income tax purposes, the application of
certain provisions of the Code applying to PFICs could result in the imposition
of certain federal income taxes on the fund. The fund can elect to
mark-to-market its PFIC holdings in lieu of paying taxes on gains or
distributions therefrom.

Foreign shareholders should consult with their tax advisors as to if and how the
federal income tax and its withholding requirements applies to them.

State and Local Taxes. Depending upon the extent of each fund's activities in
states and localities in which its offices are maintained, its agents or
independent contractors are located or it is otherwise deemed to be conducting
business, the fund may be subject to the tax laws of such states or localities.

The foregoing discussion is only a summary of certain federal income tax issues
generally affecting the fund and its shareholders. Circumstances among investors
may vary and each investor is encouraged to discuss investment in the fund with
the investor's tax advisor.

CALCULATION OF PERFORMANCE DATA

The fund computes average annual total return by using a standardized method of
calculation required by the Securities and Exchange Commission. Average annual
total return is computed by finding the average annual compounded rates of
return on a hypothetical initial investment of $1,000 over the one-year,
five-year and ten-year periods (or life of the funds as appropriate), that would
equate the initial amount invested to the ending redeemable value, according to
the following formula:

P(1+T)^n = ERV

where: P = a hypothetical initial payment of $1,000

T = average annual total return

n = number of years

ERV = ending redeemable value of a $1,000 payment made at the
beginning of the

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1-year, 5-year and 10-year periods at the end of the year
or period

The calculation assumes that all dividends and distributions of the fund are
reinvested at the price stated in the Prospectus on the dividend dates during
the period, and includes all recurring and nonrecurring fees that are charged to
all shareholder accounts.

Total returns and other performance figures are based on historical earnings and
are not indicative of future performance.

The average annual total return for the fund is as follows:

--------------------------------------------------------
One Year Ending Five years Ending Inception to
August 31, 1999 August 31, 1999 August 31, 1999(1)
--------------------------------------------------------
4.67% 5.50% 4.99%
--------------------------------------------------------

Yields are computed by using standardized methods of calculation required by the
Securities and Exchange Commission. Yields are calculated by dividing the net
investment income per share earned during a 30-day (or one-month) period by the
maximum offering price per share on the last day of the period, according to the
following formula:

YIELD = 2[(((a-b)/Cd)+1)^6-1]

where: A = dividends and interests earned during the period

B = expenses accrued for the period (net of reimbursements);

C = average daily number of shares outstanding during the period
that were entitled to receive dividends; and

D = the maximum offering price per share on the last day of the
period.

The yield quoted is not indicative of future results. Yields will depend on the
type, quality, maturity and interest rate of instruments held by the Fund. Total
return and other performance figures are based on historical earnings and are
not indicative of future performance.

The current 30-day yield (annualized) for the fund for the period ended August
31, 1999 was 5.14%.

ADDITIONAL INFORMATION

SHAREHOLDER MEETINGS

Investment Company will not have an annual meeting of shareholders. Special
meetings may be convened: (1) by the Board of Trustees; (2) upon written request
to the Board by the holders of at least 10% of the outstanding shares; or (3)
upon the Board's failure to honor the shareholders' request described above, by
holders of at least 10% of the outstanding shares giving notice of the special
meeting to the shareholders.

CAPITALIZATION AND VOTING

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(1) Periods less than one year are not annualized. The Fund commenced
operations on November 9, 1992.

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<PAGE>

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.

FEDERAL LAW AFFECTING STATE STREET

Federal laws may prohibit state chartered banks such as State Street from
engaging in the business of certain kinds of underwriting and other activities
and may impact the services provided by State Street. SSgA Funds shares are not
endorsed or guaranteed by State Street or its affiliates, are not deposits or
obligations of State Street or its affiliates, and are not insured by the
Federal Deposit Insurance Corporation or any other governmental agency.

Changes in federal or state statutes and regulations relating to the permissible
activities of banks and their affiliates, as well as judicial or administrative
decisions or interpretations of such or future statutes and regulations, could
prevent the Advisor from continuing to perform all or a part of the above
services for its customers and/or the fund. If the 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 the 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.

FINANCIAL STATEMENTS

The 1999 fiscal year-end financial statements for the fund, including notes to
the financial statements and financial highlights and the Report of Independent
Accountants, are included in the fund's Annual Report to shareholders. A copy of
the Annual Report accompanies this Statement of Additional Information and is
incorporated herein by reference.

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Filed pursuant to Rule 485(b)
File Nos. 33-19229; 811-5430

SSgA FUNDS
One International Place
Boston, Massachusetts 02110
1-800-997-7327
www.ssgafunds.com

STATEMENT OF ADDITIONAL INFORMATION

EMERGING MARKETS FUND

DECEMBER 17, 1999

This statement incorporates by reference the fund's annual report to
shareholders for the fiscal year ended August 31, 1999. A copy of the fund's
annual report accompanies this statement.

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<PAGE>

TABLE OF CONTENTS

FUND HISTORY...................................................................3

DESCRIPTION OF THE FUND AND ITS INVESTMENT RISKS...............................3

INVESTMENT STRATEGIES........................................................3
HEDGING STRATEGIES AND RELATED INVESTMENT TECHNIQUES.........................6
INVESTMENT RISKS.............................................................9
INVESTMENT RESTRICTIONS.....................................................10
PORTFOLIO TURNOVER..........................................................11

MANAGEMENT OF THE FUND........................................................12

BOARD OF TRUSTEES AND OFFICERS..............................................12
COMPENSATION................................................................14
CONTROLLING AND PRINCIPAL SHAREHOLDERS......................................15

INVESTMENT ADVISORY AND OTHER SERVICES........................................16

ADVISOR.....................................................................16
ADMINISTRATOR...............................................................16
CUSTODIAN AND TRANSFER AGENT................................................17
DISTRIBUTOR.................................................................17
DISTRIBUTION PLAN AND SHAREHOLDER SERVICING ARRANGEMENTS....................17
INDEPENDENT ACCOUNTANTS.....................................................19
LEGAL COUNSEL...............................................................19

BROKERAGE PRACTICES AND COMMISSIONS...........................................19

PRICING OF FUND SHARES........................................................21

TAXES.........................................................................21

CALCULATION OF PERFORMANCE DATA...............................................22

ADDITIONAL INFORMATION........................................................23

SHAREHOLDER MEETINGS........................................................23
CAPITALIZATION AND VOTING...................................................23
FEDERAL LAW AFFECTING STATE STREET..........................................23

FINANCIAL STATEMENTS..........................................................24

APPENDIX - DESCRIPTION OF SECURITIES RATINGS..................................25

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FUND HISTORY

DESCRIPTION OF THE FUND AND ITS INVESTMENT RISKS

INVESTMENT STRATEGIES

To the extent consistent with its fundamental investment objective and
restrictions, the fund may invest in the following instruments and utilize the
following investment techniques:

Warrants. The fund may invest in warrants which entitle the holder to buy equity
securities at a specific price for a specific period of time. Warrants may be
considered more speculative than certain other types of investments in that they
do not entitle a holder to dividends or voting rights with respect to the
securities which may be purchased nor do they represent any rights in the assets
of the issuing company. Also, the value of the warrant does not necessarily
change with the value of the underlying securities and a warrant ceases to have
value if it is not exercised prior to the expiration date. The fund will not
invest more than 5% of the value of its net assets in warrants, or more than 2%
in warrants which are not listed on the New York or American Stock Exchanges.

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(1) With the exception of the SSgA Tuckerman Active REIT Fund, which is
non-diversified.

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<PAGE>

Forward Commitments. The fund may contract to purchase securities for a fixed
price at a future date beyond customary settlement time consistent with the
fund's ability to manage its investment portfolio, maintain a stable net asset
value and meet redemption requests. A fund may dispose of a commitment prior to
settlement if it is appropriate to do so and realize short-term profits or
losses upon such sale. When effecting such transactions, cash or liquid high
quality debt obligations held by the fund of a dollar amount sufficient to make
payment for the portfolio securities to be purchased will be segregated on the
fund's records at the trade date and maintained until the transaction is
settled. Forward commitments involve a risk of loss if the value of the security
to be purchased declines prior to the settlement date, or if the other party
fails to complete the transaction.

Special Situations and Illiquid Securities. 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
currently does not intend to invest more than 5% of its net assets in all types
of illiquid securities or securities that are not readily marketable, including
special situations. In no case will the Fund invest more than 15% of its net
assets in illiquid securities. 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.

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<PAGE>

Marketing Association, International Bank for Reconstruction and Development and
Federal National Mortgage Association). No assurance can be given that in the
future the US Government will provide financial support to such US Government
agencies or instrumentalities described in (2)(b), (2)(c) and (2)(d), other than
as set forth above, since it is not obligated to do so by law. The fund may
purchase US Government obligations on a forward commitment basis.

American Depository Receipts (ADRs). The fund may invest in ADRs under certain
circumstances as an alternative to directly investing in foreign securities.
Generally, ADRs, in registered form, are designed for use in the US securities
markets. ADRs are receipts typically issued by a US bank or trust company
evidencing ownership of the underlying securities. ADRs represent the right to
receive securities of foreign issuers deposited in a domestic bank or a
correspondent bank. ADRs do not eliminate the risk inherent in investing in the
securities of foreign issuers. However, by investing in ADRs rather than
directly in a foreign issuer's stock, the fund can avoid currency risks during
the settlement period for either purchases or sales. In general, there is a
large liquid market in the US for many ADRs. The information available for ADRs
is subject to the accounting, auditing and financial reporting standards of the
domestic market or exchange on which they are traded, which standards are more
uniform and more exacting than those to which many foreign issuers are subject.

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.

Equity Swaps. Equity swap agreements are contracts between parties in which one
party agrees to make payments to the other party based on the change in market
value of a specified index or asset. In return, the other party agrees to make
payments to the first party based on the return of a different specified index
or asset. Although swap agreements entail the risk that a party will default on
its payment obligations, the portfolios will minimize this risk by entering into
agreements only with counterparties that the Advisor deems creditworthy. The
Advisor will allow the funds to enter into swap agreements only with
counterparties that would be eligible for consideration as repurchase agreement
counterparties under the SSgA Funds' repurchase agreement guidelines. Swap
agreements bear the risk that the portfolios will not be able to meet their
obligation to the counterparty. This risk will be mitigated by investing the
portfolios in the specific asset for which it is obligated to pay a return.

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<PAGE>

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.

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. No 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.

Risks of Foreign Currency. The 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 attempts to buy and sell foreign
currencies on favorable terms. 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.

Convertible Securities. The fund may invest in convertible securities of foreign
or domestic issues. A convertible security is a fixed-income security (a bond or
preferred stock) which may be converted at a stated price within a specified
period of time into a certain quantity of the common stock of the same or a
different issuer. Convertible securities are senior to common stocks in a
corporation's capital structure but are usually subordinated to similar
nonconvertible securities. Convertible securities provide, through their
conversion feature, an opportunity to participate in capital appreciation
resulting from a market price advance in a convertible security's underlying
common stock. The price of a convertible security is influenced by the market
value of the underlying common stock and tends to increase as the market value
of the underlying stock rises, whereas it tends to decrease as the market value
of the underlying stock declines.

Debt Securities. The Fund may also invest in debt securities, including
instruments issued by emerging market companies, governments and their agencies.
Other debt will typically represent less than 5% of the Fund's 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 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." Please see the Appendix for a description of securities ratings.

HEDGING STRATEGIES AND RELATED INVESTMENT TECHNIQUES

-6-
<PAGE>

Writing Covered Put Options. The fund is authorized to write (sell) covered put
options on its portfolio securities and to enter into closing transactions with
respect to such options.

-7-
<PAGE>

the premium paid, to assume a long position (in the case of a call) or short
position (in the case of a put) in a futures contract at a specified exercise
price at any time during the period of the option. Upon exercise of a call
option, the holder acquires a long position in the futures contract and the
writer is assigned the opposite short position. In the case of a put option, the
opposite is true. An option on a futures contract may be closed out (before
exercise or expiration) by an offsetting purchase or sale of an option on a
futures contract of the same series.

-8-
<PAGE>

adding or removing additional cash or liquid securities to account for
fluctuations in the value of securities held in such account. Securities held in
a segregated account cannot be sold while the futures or option strategy is
outstanding, unless they are replaced with similar securities. As a result,
there is a possibility that segregation of a large percentage of a fund's assets
could impede portfolio management or the fund's ability to meeting redemption
requests or other current obligations.

The exchanges on which options on portfolio securities and currency options are
traded have generally established limitations governing the maximum number of
call or put options on the same underlying security or currency (whether or not
covered) which may be written by a single investor, whether acting alone or in
concert with others (regardless of whether such options are written on the same
or different exchanges or are held or written in one or more accounts or through
one or more brokers). "Trading limits" are imposed on the maximum number of
contracts which any person may trade on a particular trading day.

INVESTMENT RISKS

Investors should consider carefully the substantial risks involved in securities
of companies and governments of foreign nations, which are in addition to the
usual risks inherent in domestic investments. 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.

-9-
<PAGE>

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.

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.

The fund may be affected either favorably or unfavorably by fluctuations in the
relative rates of exchange between the currencies of differentiations, exchange
control regulations and indigenous economic and political developments.

INVESTMENT RESTRICTIONS

The fund is subject to the following investment restrictions. Restrictions 1
through 11 are fundamental, and restrictions 12 through 15 are nonfundamental.
These restrictions apply at the time an investment is made. The fund will not:

1. Invest 25% or more of the value of its total assets in securities of
companies primarily engaged in any one industry (other than the US
Government, emerging market governments, their agencies and
instrumentalities). Concentration may occur as a result of changes
in the market value of portfolio securities, but may not result from
investment.

2. Borrow money, except as a temporary measure for extraordinary or
emergency purposes or to facilitate redemptions (not for leveraging
or investment), provided that borrowings do not exceed an amount
equal to 33-1/3% of the current value of the fund's assets taken at
market value, less liabilities other than borrowings. If at any time
a fund's borrowings exceed this limitation due to a decline in net
assets, such borrowings will within three days be reduced to the
extent necessary to comply with this limitation. A fund will not
purchase investments once borrowed funds exceed 5% of its total
assets.

3. Pledge, mortgage, or hypothecate its assets. However, the fund may
pledge securities having a market value (on a daily marked-to-market
basis) at the time of the pledge not exceeding 33-1/3% of the value
of the fund's total assets to secure borrowings permitted by
paragraph (2) above.

4. With respect to 75% of its total assets, invest in securities of any
one issuer (other than securities issued by the US Government,
emerging markets governments, their agencies and instrumentalities),
if immediately after and as a result of such investment the current
market value of the fund's holdings in the securities of such issuer
exceeds 5% of the value of the fund's assets and to not more than
10% of the outstanding voting securities of such issuer.

5. Make loans to any person or firm; provided, however, that the making
of a loan shall not include (i) the acquisition for investment of
bonds, debentures, notes or other evidences of indebtedness of any
corporation or government which are publicly distributed or of a
type customarily purchased by institutional investors, or (ii) the
entry into "repurchase agreements" or "reverse repurchase
agreements." A fund may lend its portfolio securities to
broker-dealers or other institutional investors if the aggregate
value of all securities loaned does not exceed 33-1/3% of the value
of the fund's total assets. Portfolio securities may be loaned if
collateral values are continuously maintained at no less than 100%
by "marking to market" daily.

6. Purchase or sell commodities or commodity futures contracts or
option on a futures contract except that the fund may enter into
futures contracts and options thereon to the extent provided in its
Prospectus, and if, as a result thereof, more than 10% of the fund's
total assets (taken at market value at the time of entering into the
contract) would be committed to initial deposits and premiums on
open futures contracts and options on such contracts.

7. Purchase or sell real estate or real estate mortgage loans;
provided, however, that the fund may invest in securities secured by
real estate or interests therein or issued by companies which invest
in real estate or interests therein (including real estate

-10-
<PAGE>

investment trusts), and may purchase or sell currencies (including
forward currency exchange contracts), futures contracts and related
options generally as described in the Prospectus and Statement of
Additional Information.

8. Except as required in connection with permissible financial options
activities and futures contracts, purchase securities on margin or
underwrite securities issued by others, except that a fund will not
be deemed to be an underwriter or to be underwriting on account of
the purchase of securities subject to legal or contractual
restrictions on disposition. This restriction does not preclude the
fund from obtaining such short-term credit as may be necessary for
the clearance of purchases and sales of its portfolio securities.

9. Issue senior securities, except as permitted by its investment
objective, policies and restrictions, and except as permitted by the
1940 Act. This restriction shall not be deemed to prohibit the fund
from (i) making any permitted borrowings, mortgages or pledges, or
(ii) entering into repurchase transactions.

10. Purchase or sell puts, calls or invest in straddles, spreads or any
combination thereof, except as described herein and in the fund's
Prospectus, and subject to the following conditions: (i) such
options are written by other persons and (ii) the aggregate premiums
paid on all such options which are held at any time do not exceed 5%
of the fund's total assets.

11. Make short sales of securities or purchase any securities on margin,
except for such short-term credits as are necessary for the
clearance of transactions. The fund may make initial margin deposits
and variation margin payments in connection with transactions in
futures contracts and related options.

12. Purchase from or sell portfolio securities to its officers or
directors or other "interested persons" (as defined in the 1940 Act)
of the fund, including their investment advisors and affiliates,
except as permitted by the 1940 Act and exemptive rules or orders
thereunder.

13. Invest more than 15% of its net assets in the aggregate, on an
ongoing basis, in illiquid securities or securities that are not
readily marketable, including repurchase agreements and time
deposits of more than seven days' duration.

14. Make investments for the purpose of gaining control of an issuer's
management.

15. Invest in warrants, valued at the lower of cost or market, in excess
of 5% of the value of the fund's net assets. Included in such
amount, but not to exceed 2% of the value of the fund's net assets,
may be warrants which are not listed on the New York Stock Exchange
or American Stock Exchange. Warrants acquired by the fund in units
or attached to securities may be deemed to be without value.

With respect to the industry concentration outlined in Investment Restriction
No. 1, the Advisor treats US domestic banks and foreign branches of US banks as
a separate industry from foreign banks.

To the extent these restrictions reflect matters of operating policy which may
be changed without shareholder vote, these restrictions may be amended upon
approval by the Board of Trustees and notice to shareholders. The fund currently
does not intend to invest in the securities of any issuer that would qualify as
a real estate investment trust under federal tax law.

Except with respect to Investment Restriction Nos. 2 and 13, if a percentage
restriction is adhered to at the time of investment, a subsequent increase or
decrease in a percentage resulting from a change in the values of assets will
not constitute a violation of that restriction, except as otherwise noted.

PORTFOLIO TURNOVER

In addition, the fund trades more actively to realize gains and/or to increase
yields on investments by trading to take advantage of short-term market
variations. This policy is expected to result in higher portfolio turnover for
the fund. However, the fund does not

-11-
<PAGE>

give significant weight to attempting to realize long-term, rather than
short-term, capital gains when making portfolio management decisions.

The portfolio turnover rate for the fund for each of the fiscal years ended
August 31 was:

----------------------------------------------------------------
1999 1998 1997
----------------------------------------------------------------
39.64% 38.94% 15.00%
----------------------------------------------------------------

MANAGEMENT OF THE FUND

BOARD OF TRUSTEES AND OFFICERS

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Name, Address and Age Position(s) with Principal Occupation(s) During Past 5 Years
SSgA funds
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Lynn L. Anderson Trustee (Interested Person o Vice Chairman, Frank Russell Company;
909 A Street of the SSgA funds as defined
Tacoma, WA 98402 in the 1940 Act), Chairman of o Chairman of the Board and Chief Executive Officer,
Age 60 the Board, President and Frank Russell Investment Management Company and Russell
Treasurer Fund Distributors, Inc.;

o Chairman of the Board, Frank Russell Trust Company;

o Trustee, President and Chief Executive Officer, Frank
Russell Investment Company and Russell Insurance Funds;
and

o Director, Russell Insurance Agency, Inc., Frank Russell
Investments (Ireland) Limited, Frank Russell Investment
Company plc; Frank Russell Institutional Funds plc, Frank
Russell Qualifying Investor Fund, and Frank Russell
Investments (Cayman) Ltd.
- ----------------------------------------------------------------------------------------------------------------------------------
William L. Marshall Trustee o Chief Executive Officer and President, Wm. L. Marshall
33 West Court Street Associates, Inc. (a registered investment advisor and
Doylestown, PA 18901 provider of financial and related consulting services);
Age 57
o Certified Financial Planner and Member, Institute of
Certified Financial Planners;

o Member, Registry of Financial Planning Practitioners and
Advisory Committee, International Association for
Financial Planning Broker-Dealer Program;

o Registered Representative for Securities with FSC
Securities Corp., Marietta, Georgia.
- ----------------------------------------------------------------------------------------------------------------------------------
Steven J. Mastrovich Trustee o President, Key Global Capital, Inc.;
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

-12-
<PAGE>

<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
176 Federal Street, 3rd Floor
Boston, MA 02110 o From 1997 to 1998, Partner, Squire, Sanders & Dempsey
Age 43 (law firm);

o From 1994 to 1997, Partner, Brown, Rudnick, Freed &
Gesmer (law firm); and

o From 1990 to 1994, Partner, Warner & Stackpole (law
firm).
- ----------------------------------------------------------------------------------------------------------------------------------
Patrick J. Riley Trustee o Partner, Riley, Burke & Donahue, L.L.P. (law firm).
One Corporate Place
55 Ferncroft Road
Danvers, MA 01923
Age 51
- ----------------------------------------------------------------------------------------------------------------------------------
Richard D. Shirk Trustee o President and Chief Executive Officer, Blue Cross/Blue
3350 Peachtree Road, N.E. Shield of Georgia.
Atlanta, GA 30326
Age 54
- ----------------------------------------------------------------------------------------------------------------------------------
Bruce D. Taber Trustee o Consultant, Computer Simulation, General Electric
26 Round Top Road Industrial Control Systems.
Boxford, MA 01921
Age 56
- ----------------------------------------------------------------------------------------------------------------------------------
Henry W. Todd Trustee o President and Director, Zink & Triest Co., Inc. (dealer
111 Commerce Drive in vanilla flavor materials); and
Montgomeryville, PA 18936
Age 52 o Director, Executive Vice President, A.M. Todd Group,
Inc. and Flavorite Laboratories.
- ----------------------------------------------------------------------------------------------------------------------------------
J. David Griswold Vice President and Secretary o Assistant Secretary and Associate General Counsel, Frank
909 A Street Russell Investment Management Company, Russell Fund
Tacoma, WA 98402 Distributors, Inc., Frank Russell Capital Inc., Frank
Age 42 Russell Company and Frank Russell Investments (Delaware),
Inc.;

o Director, Secretary and Associate General Counsel, Frank
Russell Securities, Inc.;

-13-
<PAGE>

<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deedra S. Walkey Assistant Secretary o Associate General Counsel and Assistant Secretary, Frank
909 A Street Russell Company, Frank Russell Investment Management
Tacoma, WA 98402 Company, Frank Russell Trust Company, Frank Russell
Age 35 Investment Company, Russell Insurance Funds, and Russell
Insurance Agency.
- ----------------------------------------------------------------------------------------------------------------------------------
Carla L. Anderson Assistant Secretary o Paralegal and Assistant Secretary, Frank Russell
909 A Street Company, Frank Russell Investment Management Company,
Tacoma, WA 98402 Frank Russell Securities, Inc., Russell Fund
Age 34 Distributors, Inc., Frank Russell Capital Inc., Frank
Russell International Services Company Inc., Russell Real
Estate Advisors Inc. and A Street Investment Associates,
Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

COMPENSATION

- -------------------------------------------------------
Trustee Total Annual Compensation
from Investment Company per
Fiscal Year
- -------------------------------------------------------
Lynn L. Anderson $0
- -------------------------------------------------------
William L. Marshall $63,000
- -------------------------------------------------------
Steven J. Mastrovich $63,000
- -------------------------------------------------------
Patrick J. Riley $63,000
- -------------------------------------------------------
Richard D. Shirk $63,000
- -------------------------------------------------------
Bruce D. Taber $63,000
- -------------------------------------------------------
Henry W. Todd $63,000
- -------------------------------------------------------

-14-
<PAGE>

- ------------------------------------------------------------------------------
Name of SSgA Fund Amount of Total Annual Trustee
Compensation (Including Out of Pocket
Expenses) Attributable to Each Fund
For the Fiscal Year Ended August 31,
1999
- ------------------------------------------------------------------------------
Money Market $148,616
- ------------------------------------------------------------------------------
US Government Money Market 26,152
- ------------------------------------------------------------------------------
Matrix Equity 11,327
- ------------------------------------------------------------------------------
S&P 500 Index 47,343
- ------------------------------------------------------------------------------
Small Cap 8,227
- ------------------------------------------------------------------------------
Yield Plus 14,754
- ------------------------------------------------------------------------------
Bond Market 4,966
- ------------------------------------------------------------------------------
Emerging Markets 6,022
- ------------------------------------------------------------------------------
US Treasury Money Market 20,386
- ------------------------------------------------------------------------------
Growth & Income 5,267
- ------------------------------------------------------------------------------
Intermediate 2,187
- ------------------------------------------------------------------------------
Prime Money Market 50,634
- ------------------------------------------------------------------------------
Tax Free Money Market 6,081
- ------------------------------------------------------------------------------
Active International 2,582
- ------------------------------------------------------------------------------
International Growth Opportunities 1,494
- ------------------------------------------------------------------------------
Tuckerman Active REIT 1,473
- ------------------------------------------------------------------------------
High Yield Bond 1,191
- ------------------------------------------------------------------------------
Special Equity 1,531
- ------------------------------------------------------------------------------
Aggressive Equity(1) 839
- ------------------------------------------------------------------------------
IAM SHARES(1) 430
- ------------------------------------------------------------------------------
All Life Solutions Funds 0
- ------------------------------------------------------------------------------

CONTROLLING AND PRINCIPAL SHAREHOLDERS

The Trustees and officers of Investment Company, as a group, own less than 1% of
Investment Company's voting securities.

o Charles Schwab & Company Inc., 101 Montgomery Street, San Francisco, CA
94104-4122--43%; and

o Batrus & Company, c/o Bankers Trust Company, PO Box 9005, Church Street
Station, New York, NY 10008--8%.

- ----------
(1) The fund did not operate a full year during fiscal 1999.

-15-
<PAGE>

INVESTMENT ADVISORY AND OTHER SERVICES

ADVISOR

The fund accrued the following expenses to Advisor for the fiscal years ended
August 31:

----------------------------------------------------------------
1999 1998 1997
----------------------------------------------------------------
$2,037,694 $1,655,030 $1,363,080
----------------------------------------------------------------

Effective November 1, 1995, the Advisor voluntarily agreed to reimburse the fund
for all expenses in excess of 1.25% of average daily net assets. The Advisor has
contractually agreed to this reimbursement through December 31, 2002. This
reimbursement amounted to $243,835 in fiscal 1999, $342,890 in fiscal 1998 and
$478,666 in fiscal 1997.

ADMINISTRATOR

Frank Russell Investment Management Company serves as the Investment Company's
Administrator, pursuant to an Administration Agreement dated April 12, 1988.

-16-
<PAGE>

below or the Administration Agreement approve its continuance. The Agreement may
be terminated by the Administrator or any fund without penalty upon sixty days'
notice and will terminate automatically upon its assignment.

The fund accrued the following expenses to Administrator for the fiscal years
ended August 31:

----------------------------------------------------------------
1999 1998 1997
----------------------------------------------------------------
$187,953 $175,204 $113,579
----------------------------------------------------------------

CUSTODIAN AND TRANSFER AGENT

DISTRIBUTOR

DISTRIBUTION PLAN AND SHAREHOLDER SERVICING ARRANGEMENTS

-17-
<PAGE>

neither "interested persons" (as defined in the 1940 Act) of the fund nor have
any direct or indirect financial interest in the operation of the Plan or any
related agreements.

The fund accrued the following expenses to the Distributor for the fiscal years
ended August 31:

----------------------------------------------------------------
1999 1998 1997
----------------------------------------------------------------
$231,395 $243,326 $330,683
----------------------------------------------------------------

For fiscal 1999, these amounts are reflective of the following individual
payments:

Advertising $ 4,460
Printing of Prospectuses 10,534
Compensation to Dealers 86,317
Compensation to Sales
Personnel 7,600
Other(3) 122,418
-------

- ----------
(1) Other expenses may include such items as compensation for travel,
conferences and seminars for staff, subscriptions, office charges and
professional fees.

-18-
<PAGE>

Under the Plan, each fund and/or the Distributor may also enter into agreements
("Service Agreements") with financial institutions, which may include Advisor
("Service Organizations"), to provide shareholder servicing with respect to Fund
shares held by or for the customers of the Service Organizations.

The fund accrued expenses in the following amount to Advisor under a Service
Agreement pursuant to Rule 12b-1 for the fiscal years ended August 31:

----------------------------------------------------------------
1999 1998 1997
----------------------------------------------------------------
$83,019 $79,828 $54,699
----------------------------------------------------------------

INDEPENDENT ACCOUNTANTS

LEGAL COUNSEL

Goodwin, Procter & Hoar LLP, Exchange Place, Boston, MA 02109, provides legal
services to the SSgA Funds.

BROKERAGE PRACTICES AND COMMISSIONS

All portfolio transactions are placed on behalf of the fund by Advisor. Advisor
ordinarily pays commissions when it executes transactions on a securities
exchange. In contrast, there is generally no stated commission on the purchase
or sale of securities traded in the over-the-counter markets, including most
debt securities and money market instruments. Rather, the price of such
securities includes an undisclosed "commission" in the form of a mark-up or
mark-down. The cost of securities purchased from underwriters includes an
underwriting commission or concession.

The fund contemplates purchasing most equity securities directly in the
securities markets located in emerging or developing countries or in the
over-the-counter markets. ADRs and EDRs may be listed on stock exchanges, or
traded in the over-the-counter markets in the US or Europe, as the case may be.
ADRs, like other securities traded in the US, will be subject to negotiated
commission rates.

Subject to the arrangements and provisions described below, the selection of a
broker or dealer to execute portfolio transactions is usually made by Advisor.
The Advisory Agreement provides, in substance and subject to specific directions
from officers of Investment Company, that in executing portfolio transactions
and selecting brokers or dealers, the principal objective is to seek the best
overall terms available to the fund. Ordinarily, securities will be purchased
from primary markets, and Advisor shall consider all factors it deems relevant
in assessing the best overall terms available for any transaction, including the
breadth of the market in the security, the price of the security, the financial
condition and execution capability of the broker or dealer, and the
reasonableness of the commission, if any, for the specific transaction and other
transactions on a continuing basis.

The Advisory Agreement authorizes Advisor to select brokers or dealers to
execute a particular transaction, including principal transactions, and in
evaluating the best overall terms available, to consider the "brokerage and
research services" (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) provided to the fund and/or Advisor (or its
affiliates). Advisor is authorized to cause the fund to pay a commission to a
broker or dealer who provides such brokerage and research services for executing
a portfolio transaction which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction. The fund or
Advisor, as appropriate, must determine in good faith that such commission was
reasonable in relation to the value of the brokerage and research services
provided--viewed in terms of that particular transaction or in terms of all the
accounts over which Advisor exercises investment discretion. Any commission, fee
or other remuneration paid to an affiliated broker-dealer is paid in compliance
with the fund's procedures adopted in accordance with Rule 17e-1 of the 1940
Act.

-19-
<PAGE>

brokerage and/or research services. In selecting a broker, including affiliates,
for a transaction, the primary consideration is prompt and effective execution
of orders at the most favorable prices. Subject to that primary consideration,
dealers may be selected for research, statistical or other services to enable
the fund to supplement its own research and analysis. Research services
generally include services which assist investment professionals in their
investment decision-making process, including information concerning securities
or indexes, performance, technical market action, pricing, risk measurement,
corporate responsibility and proxy issues, in addition to political and economic
developments.

The Trustees periodically review Advisor's performance of its
responsibilities in connection with the placement of portfolio transactions on
behalf of the fund and review the prices paid by the fund over representative
periods of time to determine if such prices are reasonable in relation to the
benefits provided to the fund. Certain services received by Advisor attributable
to a particular fund transaction may benefit one or more other accounts for
which Advisor exercises investment discretion or an Investment Portfolio other
than such fund. Advisor's fees are not reduced by Advisor's receipt of such
brokerage and research services.

The fund paid the following brokerage commissions for the fiscal years ended
August 31:

----------------------------------------------------------------
1999 1998 1997
----------------------------------------------------------------
$627,264 $842,128 $645,349
----------------------------------------------------------------

The principal reasons for changes in the fund's brokerage commissions for the
three years were: (1) changes in fund asset size; and (2) changes in market
conditions.

The fund has not paid commissions to an affiliated broker-dealer for the fiscal
years ended August 31, 1997, 1998 and 1999.

Securities Commissions
($000) ($000)
------------------------------
Arnhold & S. Beichroeder (1) 0 190
Nomura Securities International Inc.(1) 0 125
Gena Inc. New York (1) 0 55
Fitzgerald & Company Inc. (1, 2) 0 52
Santander Investment Securities(1) 0 48
Merrill Lynch Pierce Fenner (1, 2) 0 32
Credit Lyonnais Securities (1, 2) 0 26
ABN AMRO(1) 0 24
James Capel & Co.(1) 0 23
Lehman Bros. Inc.(1) 0 16
Jefferies & Co.(5) 0 0
Deutsche Bank Securities(2) 0 0
Salomon Smith Barney Inc.(2) 0 0

- ----------
(1) Broker commissions only.
(2) Broker principal transaction only.

-20-
<PAGE>

PRICING OF FUND SHARES

TAXES

-21-
<PAGE>

from options, futures or forward contracts) derived with respect to its business
of investing in such stock, securities or currencies ("Income Requirement"); (2)
at the close of each quarter of the fund's taxable year, at least 50% of the
value of its total assets must be represented by cash and cash items, US
Government securities, securities of other RICs, and other securities, with such
other securities limited, in respect of any one issuer, to an amount that does
not exceed 5% of the total assets of the fund or that does not represent more
than 10% of the outstanding voting securities of any one issuer; and (3) at the
close of each quarter of the fund's taxable year, not more than 25% of the value
of its assets may be invested in securities (other than US Government securities
or the securities of other RICs) of any one issuer.

At August 31, 1999, the fund had net tax basis capital loss carryovers of
$62,851 and $22,276,310, which may be applied against any realized net taxable
gains in each year or until their expiration dates of August 31, 2006, and
August 31, 2007, respectively. As permitted by tax regulations, the fund intends
to defer a net realized capital loss of $4,775,701 incurred from November 1,
1998 to August 31, 1999, and treat it as arising in the fiscal year 2000.

Foreign Income Taxes. Investment income received by the fund from sources within
foreign countries may be subject to foreign income taxes withheld at the source.
The United States has entered into tax treaties with many foreign countries
which would entitle the fund to a reduced rate of such taxes or exemption from
taxes on such income. It is impossible to determine the effective rate of
foreign tax for a fund in advance since the amount of the assets to be invested
within various countries is not known.

Foreign shareholders should consult with their tax advisors as to if and how the
federal income tax and its withholding requirements applies to them.

CALCULATION OF PERFORMANCE DATA

P(1+T)^n = ERV

where: P = a hypothetical initial payment of $1,000

-22-
<PAGE>

T = average annual total return

n = number of years

ERV = ending redeemable value of a $1,000 payment made
at the beginning of the 1-year, 5-year and 10-year
periods at the end of the year or period

Total returns and other performance figures are based on historical earnings and
are not indicative of future performance.

The average annual total return for the fund is as follows:

------------------------- ---------------------
One Year Ending Inception to
August 31, 1999 August 31, 1999(1)
------------------------- ---------------------
66.41% 2.93%
------------------------- ---------------------

- ----------
(1) Periods less than one year are not annualized. The Fund commenced
operations on March 1, 1994.

ADDITIONAL INFORMATION

SHAREHOLDER MEETINGS

CAPITALIZATION AND VOTING

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.

FEDERAL LAW AFFECTING STATE STREET

-23-
<PAGE>

FINANCIAL STATEMENTS

-24-
<PAGE>

APPENDIX - DESCRIPTION OF SECURITIES RATINGS

The following is a description of the securities ratings of Duff & Phelps Credit
Rating Co. ("D&P"), Fitch Investors Service, Inc. ("Fitch"), Standard & Poor's
Corporation ("S&P"), Moody's Investors Service, Inc. ("Moody's"), IBCA Limited
and IBCA Inc. ("IBCA") and Thomson BankWatch ("Thomson").

Long-Term Corporation and Tax-Exempt Debt Ratings

The two highest ratings of D&P for tax-exempt and corporate fixed-income
securities are AAA and AA. Securities rated AAA are of the highest credit
quality. The risk factors are considered to be negligible, being only slightly
more than for risk-free US Treasury debt. Securities rated AA are of high credit
quality. Protection factors are strong. Risk is modest but may vary slightly
from time to time because of economic conditions. The AA rating may be modified
by an addition of a plus (+) or minus (-) sign to show relative standing within
the major rating category.

The two highest ratings of Fitch for tax-exempt and corporate bonds are AAA and
AA. AAA bonds are considered to be investment grade and of the highest credit
quality. The obligor is judged to have an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events. AA bonds are considered to be investment grade and of very
high credit quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated F-1+. Plus (+) and minus (-) signs are used with the AA rating symbol to
indicate relative standing within the rating category.

The two highest ratings of S&P for tax-exempt and corporate bonds are AAA and
AA. Bonds rated AAA bear the highest rating assigned by S&P to a debt obligation
and the AAA rating indicates in its opinion an extremely strong capacity to pay
interest and repay principal. Bonds rated AA by S&P are judged by it to have a
very strong capacity to pay interest and repay principal, and they differ from
AAA issues only in small degree. The AA rating may be modified by an addition of
a plus (+) or minus (-) sign to show relative standing within the major rating
category. The foregoing ratings are sometimes followed by a "p" indicating that
the rating is provisional. A provisional rating assumes the successful
completion of the project being financed by the debt being rated and indicates
that payment of debt service requirements is largely or entirely dependent upon
the successful and timely completion of the project. This rating, however, while
addressing credit quality subsequent to completion of the project, makes no
comment on the likelihood of, or the risk of default upon failure of, such
completion.

The two highest ratings of Moody's for tax-exempt and corporate bonds are Aaa
and Aa. Tax-exempt and corporate bonds rated Aaa are judged to be of the "best
quality." The rating of Aa is assigned to bonds which are of "high quality by
all standards." Aa bonds are rated lower than Aaa bonds because margins of
protection may not be as large or fluctuations of protective elements may be of
greater amplitude or there may be other elements which make the long-term risks
appear somewhat larger. Moody's may modify a rating of Aa by adding numerical
modifiers of 1, 2 or 3 to show relative standing within the Aa category. The
foregoing ratings for tax-exempt bonds are sometimes presented in parentheses
preceded with a "con" indicating the bonds are rated conditionally. Such
parenthetical rating denotes the probable credit stature upon completion of
construction or elimination of the basis of the condition. In addition, Moody's
has advised that the short-term credit risk of a long-term instrument sometimes
carries a MIG rating or one of the commercial paper ratings described below.

The two highest ratings of IBCA for corporate bonds are AAA and AA. Obligations
rated AAA by IBCA have the lowest expectation of investment risk. Capacity for
timely repayment of principal and interest is substantial, such that adverse
changes in business, economic or financial conditions are unlikely to increase
investment risk significantly. Obligations for which there is a very low
expectation of investment risk are rated AA. IBCA may append a rating of plus
(+) or minus (-) to a rating to denote relative status within a major rating
category. IBCA does not rate tax-exempt bonds.

The two highest ratings of Thomson for corporate bonds are AAA and AA. Bonds
rated AAA are of the highest credit quality. The ability of the obligor to repay
principal and interest on a timely basis is considered to be very high. Bonds
rated AA indicate a superior ability on the part of the obligor to repay
principal and interest on a timely basis with limited incremental risk versus
issues rated in the highest category. These ratings may be modified by the
addition of a plus (+) or minus (-) sign to show relative standing within the
rating categories. Thomson does not rate tax-exempt bonds.

Short-Term Corporate and Tax-Exempt Debt Ratings

The highest rating of D&P for commercial paper is Duff 1. D&P employs three
designations, Duff 1 plus, Duff 1 and Duff 1 minus, within the highest rating
category. Duff 1 plus indicates highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or ready access to
alternative sources of funds, is judged to be outstanding, and safety is just
below risk-free US Treasury short-term obligations. Duff 1 indicates very high
certainty of timely payment. Liquidity factors are excellent and supported by
strong fundamental protection factors. Risk factors are considered to be minor.
Duff 1 minus indicates high certainty of timely payment. Liquidity factors are
strong and supported

-25-
<PAGE>

by good fundamental protection factors. Risk factors are very small. Duff 2
indicates good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.

Fitch's short-term ratings apply to tax-exempt and corporate debt obligations
that are payable on demand or have original maturities of up to three years. The
highest rating of Fitch for short-term securities encompasses both the F-1+ and
F-1 ratings. F-1+ securities possess exceptionally strong credit quality. Issues
assigned this rating are regarded as having the strongest degree of assurance
for timely payment. F-1 securities possess very strong credit quality. Issues
assigned this rating reflect an assurance of timely payment only slightly less
in degree than issues rated F-1+. F-2 securities possess good credit quality and
have a satisfactory degree of assurance for timely payment, but the margin of
safety is not as great as the F-1+ and F-1 categories.

S&P's commercial paper ratings are current assessments of the likelihood of
timely payment of debt having an original maturity of no more than 365 days. The
A-1 designation indicates that the degree of safety regarding timely payment is
strong. Those issues determined to possess extremely strong safety
characteristics will be denoted with a plus (+) designation. The A-2 designation
indicates that capacity for timely payment on these issues is satisfactory.
However, the relative degree of safety is not as high as for issues designated
A-1.

Moody's short-term debt ratings are opinions of the ability of issuers to repay
punctually promissory obligations not having an original maturity in excess of
nine months. Issuers rated Prime-1 (or related supporting institutions) in the
opinion of Moody's have a superior capacity for repayment of short-term
promissory obligations. Issuers rated Prime-2 (or related supporting
institutions) have a strong capacity for repayment of short-term promissory
obligations. This capacity will normally be evidenced by many of the
characteristics of Prime-1 rated issues, but to a lesser degree. Ample alternate
liquidity is maintained.

IBCA assesses the investment quality of unsecured debt with an original maturity
of less than one year which is issued by bank holding companies and their
principal banking subsidiaries. The designation A1 by IBCA indicates that the
obligation is supported by a very strong capacity for timely repayment. Those
obligations rated A1+ are supported by the highest capacity for timely
repayment. The designation A-2 by IBCA indicates that the obligation is
supported by a satisfactory capacity for timely payment, although such capacity
may be susceptible to adverse changes in business, economic or financial
conditions.

Thomson's short-term paper ratings assess the likelihood of an untimely payment
of principal or interest of debt having a maturity of one year or less which is
issued by banks and financial institutions. The designation TBW-1 represents the
highest short-term rating category and indicates a very high degree of
likelihood that principal and interest will be paid on a timely basis. The
designation TBW-2 represents the second highest short-term rating category and
indicates that while the degree of safety regarding timely payment of principal
and interest is strong, the relative degree of safety is not as high as for
issues rated TBW-1.

Tax-Exempt Note Ratings

A S&P rating of SP-1 indicates very strong or strong capacity to pay principal
and interest. Those issues determined to possess overwhelming safety
characteristics are given a plus (+) designation. Notes rated SP-2 are issued by
issuers that exhibit satisfactory capacity to pay principal and interest.

Moody's ratings for state and municipal notes and other short-term obligations
are designated Moody's Investment Grade ("MIG"). MIG-1/VMIG-1 denotes best
quality. There is present strong protection from established cash flows,
superior liquidity support or demonstrated broad-based access to the market for
refinancing. MIG-2/VMIG-2 denotes high quality, with margins of protection ample
although not as large as in the MIG-1/VMIG-1 group.

Fitch uses its short-term ratings described above under "Short-Term Corporate
and Tax-Exempt Debt Ratings" for tax-exempt notes.

D&P uses the fixed-income ratings described above under "Long-Term Corporate and
Tax-Exempt Debt Ratings" for tax-exempt notes and other short-term obligations.

-26-
<PAGE>

Filed pursuant to Rule 485(b)
File Nos. 33-19229; 811-5430

SSgA FUNDS
One International Place
Boston, Massachusetts 02110
1-800-997-7327
www.ssgafunds.com

STATEMENT OF ADDITIONAL INFORMATION

IAM SHARES FUND

DECEMBER 17, 1999

This statement incorporates by reference the fund's annual report to
shareholders for the fiscal year ended August 31, 1999. A copy of the fund's
annual report accompanies this statement.

- 1 -
<PAGE>

TABLE OF CONTENTS

FUND HISTORY...................................................................3

DESCRIPTION OF THE FUND AND ITS INVESTMENT RISKS...............................3

INVESTMENT STRATEGIES........................................................3
HEDGING STRATEGIES AND RELATED INVESTMENT TECHNIQUES.........................6
INVESTMENT RISKS.............................................................7
INVESTMENT RESTRICTIONS......................................................7
TEMPORARY DEFENSIVE POSITION.................................................8
PORTFOLIO TURNOVER...........................................................8

MANAGEMENT OF THE FUND.........................................................8

BOARD OF TRUSTEES AND OFFICERS...............................................8
COMPENSATION................................................................10
CONTROLLING AND PRINCIPAL SHAREHOLDERS......................................12

INVESTMENT ADVISORY AND OTHER SERVICES........................................13

ADVISOR.....................................................................13
ADMINISTRATOR...............................................................13
CUSTODIAN AND TRANSFER AGENT................................................14
DISTRIBUTOR.................................................................14
DISTRIBUTION PLAN AND SHAREHOLDER SERVICING ARRANGEMENTS....................14
INDEPENDENT ACCOUNTANTS.....................................................15
LEGAL COUNSEL...............................................................15

BROKERAGE PRACTICES AND COMMISSIONS...........................................15

PRICING OF FUND SHARES........................................................17

TAXES.........................................................................18

CALCULATION OF PERFORMANCE DATA...............................................19

ADDITIONAL INFORMATION........................................................19

SHAREHOLDER MEETINGS........................................................19
CAPITALIZATION AND VOTING...................................................20
FEDERAL LAW AFFECTING STATE STREET..........................................20

FINANCIAL STATEMENTS..........................................................20

- 2 -
<PAGE>

FUND HISTORY

DESCRIPTION OF THE FUND AND ITS INVESTMENT RISKS

INVESTMENT STRATEGIES

To the extent consistent with its investment objective and restrictions, the
fund may invest in the following instruments and use the following investment
techniques:

Optimization Model and Risk. The fund will utilize an optimization model to
implement its investment strategy. Under normal market conditions, the fund will
remain fully exposed to the equity markets at all times. As the equity market
rises or declines, the fund is expected to do likewise. Therefore, there is the
risk that investing in the fund could result in a loss of capital.

- ----------
(1) With the exception of the SSgA Tuckerman Active REIT Fund, which is
non-diversified.

- 3 -
<PAGE>

- 4 -
<PAGE>

exercised prior to the expiration date. The fund will not invest more than 5% of
the value of its net assets in warrants, or more than 2% in warrants which are
not listed on the New York or American Stock Exchanges.

- 5 -
<PAGE>

HEDGING STRATEGIES AND RELATED INVESTMENT TECHNIQUES

- 6 -
<PAGE>

deposits on the fund's existing futures positions and premiums paid for related
options would exceed 5% of the market value of the fund's total assets.

INVESTMENT RISKS

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.

INVESTMENT RESTRICTIONS

The fund is subject to the following investment restrictions. Restrictions 1
through 11 are fundamental and may be changed only with the approval of a
majority of the shareholders of the fund. Restrictions 12 through 15 are
nonfundamental and may be changed by the fund with the approval of the fund's
board of trustees but without shareholder consent. Unless otherwise noted, these
restrictions apply at the time an investment is made. The fund will not:

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 investments once borrowed funds (including reverse
repurchase agreements) exceed 5% of its total assets.

3. Pledge, mortgage or hypothecate its assets. However, the fund may pledge
securities having a market value at the time of the pledge not exceeding
33-1/3% of the value of the fund's total assets to secure borrowings
permitted by paragraph (2) above.

4. With respect to 75% of its total assets, invest in securities of any one
issuer (other than securities issued by the US Government, its agencies,
and instrumentalities), if immediately after and as a result of such
investment the current market value of the fund's holdings in the
securities of such issuer exceeds 5% of the value of the fund's assets and
to not more than 10% of the outstanding voting securities of such issuer.

5. Make loans to any person or firm; provided, however, that the making of a
loan shall not include (i) the acquisition for investment of bonds,
debentures, notes or other evidences of indebtedness of any corporation or
government which are publicly distributed or of a type customarily
purchased by institutional investors, or (ii) the entry into repurchase
agreements or reverse repurchase agreements. The fund may (i) lend cash to
any registered investment company or portfolio series for which the fund's
Advisor serves as advisor or subadvisor to the extent permitted by the
1940 Act or any rule or order issued thereunder and (ii) lend its
portfolio securities to broker-dealers or other institutional investors if
the aggregate value of all securities loaned does not exceed 33-1/3% of
the value of the fund's total assets.

6. Purchase or sell commodities or commodity futures contracts except that
the fund may enter into futures contracts and options thereon to the
extent provided in its Prospectus.

7. Purchase or sell real estate or real estate mortgage loans; provided,
however, that the fund may invest in securities secured by real estate or
interests therein or issued by companies which invest in real estate or
interests therein.

8. Engage in the business of underwriting securities issued by others, except
that the fund will not be deemed to be an underwriter or to be
underwriting on account of the purchase of securities subject to legal or
contractual restrictions on disposition.

9. Issue senior securities, except as permitted by its investment objective,
policies and restrictions, and except as permitted by the Investment
Company Act of 1940 (1940 Act).

10. Purchase or sell puts, calls or invest in straddles, spreads or any
combination thereof, if as a result of such purchase the value of the
fund's aggregate investment in such securities would exceed 5% of the
fund's total assets.

- 7 -
<PAGE>

11. Make short sales of securities or purchase any securities on margin,
except for such short-term credits as are necessary for the clearance of
transactions. The fund may make initial margin deposits and variation
margin payments in connection with transactions in futures contracts and
related options.

12. Purchase from or sell portfolio securities to its officers or directors or
other interested persons (as defined in the 1940 Act) of the fund,
including their investment advisors and affiliates, except as permitted by
the 1940 Act and exemptive rules or orders thereunder.

13. Invest in securities issued by other investment companies except in
connection with a merger, consolidation, acquisition of assets, or other
reorganization approved by the fund's shareholders, except that the fund
may invest in such securities to the extent permitted by the 1940 Act.

14. Invest more than 15% of its net assets in the aggregate, on an ongoing
basis, in illiquid securities or securities that are not readily
marketable, including repurchase agreements and time deposits of more than
seven days' duration.

15. Make investments for the purpose of gaining control of an issuer's
management.

TEMPORARY DEFENSIVE POSITION

For defensive purposes, the fund may invest temporarily in short term fixed
income securities. These 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. These
short term, fixed income securities may be used without limitation to invest
uncommitted cash balances or to maintain liquidity to meet shareholder
redemptions. When using this strategy, the weighted average maturity of
securities held by the fund will decline, which will possibly cause its yield to
decline as well. This strategy may be inconsistent with the fund's principal
investment strategy in an attempt to respond to adverse market, economic,
political or other conditions. Taking such a temporary defensive position may
result in the fund not achieving its investment objective.

PORTFOLIO TURNOVER

The portfolio turnover rate for the fund for the fiscal period ended August 31,
1999, is nominal due to the fund's short period of operation and is therefore
not reported.

MANAGEMENT OF THE FUND

BOARD OF TRUSTEES AND OFFICERS

- 8 -
<PAGE>

- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Lynn L. Anderson Trustee (Interested o Vice Chairman, Frank Russell Company;
909 A Street Person of the SSgA
Tacoma, WA 98402 funds as defined in o Chairman of the Board and Chief Executive Officer,
Age 60 the 1940 Act), Frank Russell Investment Management Company and
Chairman of the Russell Fund Distributors, Inc.;
Board, President and
Treasurer o Chairman of the Board, Frank Russell Trust
Company;

o Trustee, President and Chief Executive Officer,
Frank Russell Investment Company and Russell
Insurance Funds; and

- ------------------------------------------------------------------------------------------------------------------------
William L. Marshall Trustee o Chief Executive Officer and President, Wm. L.
33 West Court Street Marshall Associates, Inc. (a registered investment
Doylestown, PA 18901 advisor and provider of financial and related
Age 57 consulting services);

o Certified Financial Planner and Member, Institute
of Certified Financial Planners;

o Member, Registry of Financial Planning
Practitioners and Advisory Committee,
International Association for Financial Planning
Broker-Dealer Program;

o Registered Representative for Securities with FSC
Securities Corp., Marietta, Georgia.

- ------------------------------------------------------------------------------------------------------------------------
Steven J. Mastrovich Trustee o President, Key Global Capital, Inc.;
176 Federal Street, 3rd Floor
Boston, MA 02110 o From 1997 to 1998, Partner, Squire, Sanders &
Age 43 Dempsey (law firm);

o From 1994 to 1997, Partner, Brown, Rudnick, Freed
& Gesmer (law firm); and

o From 1990 to 1994, Partner, Warner & Stackpole
(law firm).

- ------------------------------------------------------------------------------------------------------------------------
Patrick J. Riley Trustee o Partner, Riley, Burke & Donahue, L.L.P. (law firm).
One Corporate Place
55 Ferncroft Road
Danvers, MA 01923
Age 51

- ------------------------------------------------------------------------------------------------------------------------
Richard D. Shirk Trustee o President and Chief Executive Officer, Blue
3350 Peachtree Road, N.E. Cross/Blue Shield of Georgia.
Atlanta, GA 30326
Age 54

- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

- 9 -
<PAGE>

- ------------------------------------------------------------------------------------------------------------------------
Henry W. Todd Trustee o President and Director, Zink & Triest Co., Inc.
111 Commerce Drive (dealer in vanilla flavor materials); and
Montgomeryville, PA 18936
Age 52 o Director, Executive Vice President, A.M. Todd Group,
Inc. and Flavorite Laboratories.

- ------------------------------------------------------------------------------------------------------------------------
J. David Griswold Vice President and o Assistant Secretary and Associate General Counsel,
909 A Street Secretary Frank Russell Investment Management Company, Russell
Tacoma, WA 98402 Fund Distributors, Inc., Frank Russell Capital Inc.,
Age 42 Frank Russell Company and Frank Russell Investments
(Delaware), Inc.;

o Director, Secretary and Associate General Counsel,
Frank Russell Securities, Inc.;

o Secretary, Frank Russell Canada Limited/Limitee.

- ------------------------------------------------------------------------------------------------------------------------
Mark E. Swanson Assistant Secretary, o Director - Funds Administration, Frank Russell
909 A Street Assistant Treasurer Investment Management Company and Frank Russell Trust
Tacoma, WA 98402 and Principal Company; and
Age 36 Accounting Officer
o Treasurer and Chief Accounting Officer, Frank Russell
Investment Company and Russell Insurance Funds.

- ------------------------------------------------------------------------------------------------------------------------
Rick J. Chase Assistant Secretary o Manager, Fund Administration, Frank Russell Investment
909 A Street Management Company; and
Tacoma, WA 98402
Age 34 o Assistant Treasurer, Frank Russell Investment Company
and Russell Insurance Funds.

- ------------------------------------------------------------------------------------------------------------------------
Deedra S. Walkey Assistant Secretary o Associate General Counsel and Assistant Secretary,
909 A Street Frank Russell Company, Frank Russell Investment
Tacoma, WA 98402 Management Company, Frank Russell Trust Company, Frank
Age 35 Russell Investment Company, Russell Insurance Funds,
and Russell Insurance Agency.

- ------------------------------------------------------------------------------------------------------------------------
Carla L. Anderson Assistant Secretary o Paralegal and Assistant Secretary, Frank Russell
909 A Street Company, Frank Russell Investment Management Company,
Tacoma, WA 98402 Frank Russell Securities, Inc., Russell Fund
Age 34 Distributors, Inc., Frank Russell Capital Inc., Frank
Russell International Services Company Inc., Russell
Real Estate Advisors Inc. and A Street Investment
Associates, Inc.

- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

COMPENSATION

- 10 -
<PAGE>

- --------------------------------------------------------------------------------
Trustee Total Annual Compensation
from Investment Company per
Fiscal Year
- --------------------------------------------------------------------------------
Lynn L. Anderson $0
- --------------------------------------------------------------------------------
William L. Marshall $63,000
- --------------------------------------------------------------------------------
Steven J. Mastrovich $63,000
- --------------------------------------------------------------------------------
Patrick J. Riley $63,000
- --------------------------------------------------------------------------------
Richard D. Shirk $63,000
- --------------------------------------------------------------------------------
Bruce D. Taber $63,000
- --------------------------------------------------------------------------------
Henry W. Todd $63,000
- --------------------------------------------------------------------------------

- 11 -
<PAGE>

- --------------------------------------------------------------------------------
Name of SSgA Fund Amount of Total Annual
Trustee Compensation
(Including Out of Pocket
Expenses) Attributable to
Each Fund For the Fiscal
Year Ended August 31, 1999
- --------------------------------------------------------------------------------
Money Market $148,616
- --------------------------------------------------------------------------------
US Government Money Market 26,152
- --------------------------------------------------------------------------------
Matrix Equity 11,327
- --------------------------------------------------------------------------------
S&P 500 Index 47,343
- --------------------------------------------------------------------------------
Small Cap 8,227
- --------------------------------------------------------------------------------
Yield Plus 14,754
- --------------------------------------------------------------------------------
Bond Market 4,966
- --------------------------------------------------------------------------------
Emerging Markets 6,022
- --------------------------------------------------------------------------------
US Treasury Money Market 20,386
- --------------------------------------------------------------------------------
Growth & Income 5,267
- --------------------------------------------------------------------------------
Intermediate 2,187
- --------------------------------------------------------------------------------
Prime Money Market 50,634
- --------------------------------------------------------------------------------
Tax Free Money Market 6,081
- --------------------------------------------------------------------------------
Active International 2,582
- --------------------------------------------------------------------------------
International Growth Opportunities 1,494
- --------------------------------------------------------------------------------
Tuckerman Active REIT 1,473
- --------------------------------------------------------------------------------
High Yield Bond 1,191
- --------------------------------------------------------------------------------
Special Equity 1,531
- --------------------------------------------------------------------------------
Aggressive Equity(1) 839
- --------------------------------------------------------------------------------
IAM SHARES(1) 430
- --------------------------------------------------------------------------------
All Life Solutions Funds 0
- --------------------------------------------------------------------------------

CONTROLLING AND PRINCIPAL SHAREHOLDERS

The Trustees and officers of Investment Company, as a group, own less than 1% of
Investment Company's voting securities.

o Dolphin & Company, IAM National Pension, PO Box 470-JQ7N, Boston, MA
02102--84%: and

o Bankers Trust, PO Box 9014, Church Street Station, New York, NY
10008--16%.

- ----------
(1) The fund did not operate a full year during fiscal 1999.

- 12 -
<PAGE>

INVESTMENT ADVISORY AND OTHER SERVICES

ADVISOR

For the period June 2, 1999 (commencement of operations) to August 31, 1999, the
fund accrued $35,669 in expenses to the Advisor.

ADMINISTRATOR

Frank Russell Investment Management Company serves as the Investment Company's
Administrator, pursuant to an Administration Agreement dated April 12, 1988.

- 13 -
<PAGE>

For the period June 2, 1999 (commencement of operations) to August 31, 1999, the
fund accrued $3,115 in expenses to the Administrator.

CUSTODIAN AND TRANSFER AGENT

DISTRIBUTOR

DISTRIBUTION PLAN AND SHAREHOLDER SERVICING ARRANGEMENTS

- 14 -
<PAGE>

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 and or the Distributor, 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.

For the period June 2, 1999 (commencement of operations) to August 31, 1999, the
fund accrued $2,703 in expenses to the Distributor.

For 1999, this amount is reflective of the following individual payments:

Advertising $ 54
Printing of
Prospectuses 75
Compensation to Dealers --
Compensation to Sales
Personnel 634
Other* 1,940

The fund accrued expenses of $3,598 to the Advisor, under a Service Agreement
pursuant to Rule 12b-1, for the period June 2, 1999 (commencement of operations)
to August 31, 1999.

INDEPENDENT ACCOUNTANTS

LEGAL COUNSEL

Goodwin, Procter & Hoar LLP, Exchange Place, Boston, MA 02109, provides legal
services to the SSgA Funds.

BROKERAGE PRACTICES AND COMMISSIONS

- ----------
* Other expenses may include such items as compensation for travel,
conferences and seminars for staff, subscriptions, office charges and
professional fees.

- 15 -
<PAGE>

"commission" in the form of a mark-up or mark-down. The cost of securities
purchased from underwriters includes an underwriting commission or concession.

Subject to the arrangements and provisions described below, the selection of a
broker or dealer to execute portfolio transactions is usually made by Advisor.
The Advisory Agreement provides, in substance and subject to specific directions
from officers of Investment Company, that in executing portfolio transactions
and selecting brokers or dealers, the principal objective is to seek the best
overall terms available to the fund. Ordinarily, securities will be purchased
from primary markets, and Advisor shall consider all factors it deems relevant
in assessing the best overall terms available for any transaction, including the
breadth of the market in the security, the price of the security, the financial
condition and execution capability of the broker or dealer, and the
reasonableness of the commission, if any, for the specific transaction and other
transactions on a continuing basis.

The Trustees periodically review Advisor's performance of its responsibilities
in connection with the placement of portfolio transactions on behalf of the fund
and review the prices paid by the fund over representative periods of time to
determine if such prices are reasonable in relation to the benefits provided to
the fund. Certain services received by Advisor attributable to a particular fund
transaction may benefit one or more other accounts for which Advisor exercises
investment discretion or an Investment Portfolio other than such fund. Advisor's
fees are not reduced by Advisor's receipt of such brokerage and research
services.

The total brokerage commissions paid by the fund amounted to the following for
the period June 2, 1999 (commencement of operations) to August 31:

---------------------
1999
---------------------
$58,368
---------------------

Of the total brokerage commissions paid by the fund, commissions received by an
affiliated broker/dealer amounted to the following for the period June 2, 1999
(commencement of operations) to August 31:

- 16 -
<PAGE>

---------------------
1999
---------------------
$28,756
---------------------

Relating to the total brokerage commissions paid by the fund for the period June
2, 1999 (commencement of operations) to August 31, 1999, the percentage of
brokerage commissions received by an affiliated broker/dealer amounted to 49% of
the total.

The percentage of transactions (relating to commission-based trading activity)
effected through an affiliated broker/dealer as a percentage of total
commission-based transactions was 76% for the period June 2, 1999 (commencement
of operations) to August 31, 1999.

During the fiscal year ended August 31, 1999, the fund purchased securities
issued by the following regular brokers or dealers, as defined by Rule 10b-1 of
the 1940 Act, each of which is one of the fund's largest brokers or dealers by
dollar amounts of securities executed or commissions received on behalf of the
fund. The value of broker-dealer securities held and commissions received as of
August 31, 1999, is as follows:

Securities Commissions
$000 ($000)

State Street Brokerage Services, Inc..(1) 48 29
DB Clearing Services(1) 0 29
Charles Schwab & C., Inc.(1) 158 1
Investment Technology Group(1) 0 0
Lehman Bros. Inc.(2) 5,375 0
Troster Singer Stevens(2) 0 0
JP Morgan Securities Inc.(2) 129 0
Salomon Smith Barney Inc.(2) 0 0
Herzog Heine Geduld Inc.(2) 0 0
Knight Securities L.P.(2) 0 0

PRICING OF FUND SHARES

- ----------
(1) Broker commissions only.
(2) Broker principal transaction only.

- 17 -
<PAGE>

TAXES

- 18 -
<PAGE>

CALCULATION OF PERFORMANCE DATA

P(1+T)^n = ERV

where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a $1,000 payment made
at the beginning of the 1-year, 5-year and 10-year
periods at the end of the year or period

Total returns and other performance figures are based on historical earnings and
are not indicative of future performance.

The average annual total return for the fund is as follows:

Inception to
August 31, 1999(1)

1.40%

ADDITIONAL INFORMATION

SHAREHOLDER MEETINGS

- ----------
(1) Periods less than one year are not annualized. The fund commenced
operations on June 2, 1999.

- 19 -
<PAGE>

CAPITALIZATION AND VOTING

FEDERAL LAW AFFECTING STATE STREET

FINANCIAL STATEMENTS

- 20 -
<PAGE>

Filed pursuant to Rule 485(b)
File Nos. 33-19229; 811-5430

SSgA FUNDS
One International Place
Boston, Massachusetts 02110
1-800-997-7327
www.ssgafunds.com

STATEMENT OF ADDITIONAL INFORMATION

MONEY MARKET FUND

U.S. GOVERNMENT MONEY MARKET FUND

DECEMBER 17, 1999

This statement incorporates by reference each fund's annual report to
shareholders for the fiscal year ended August 31, 1999. A copy of each fund's
annual report accompanies this statement.

-1-
<PAGE>

TABLE OF CONTENTS

FUND HISTORY...................................................................3

DESCRIPTION OF THE FUND AND ITS INVESTMENT RISKS...............................3

INVESTMENT STRATEGIES........................................................3
INVESTMENT RESTRICTIONS......................................................7

MANAGEMENT OF THE FUND.........................................................8

INVESTMENT ADVISORY AND OTHER SERVICES........................................12

ADVISOR.....................................................................12
ADMINISTRATOR...............................................................13
CUSTODIAN AND TRANSFER AGENT................................................13
DISTRIBUTOR.................................................................14
DISTRIBUTION PLAN AND SHAREHOLDER SERVICING ARRANGEMENTS....................14
INDEPENDENT ACCOUNTANTS.....................................................15
LEGAL COUNSEL...............................................................16

BROKERAGE PRACTICES AND COMMISSIONS...........................................16

PRICING OF FUND SHARES........................................................17

TAXES.........................................................................18

CALCULATION OF PERFORMANCE DATA...............................................18

ADDITIONAL INFORMATION........................................................19

SHAREHOLDER MEETINGS........................................................19
CAPITALIZATION AND VOTING...................................................19
FEDERAL LAW AFFECTING STATE STREET..........................................20

FINANCIAL STATEMENTS..........................................................20

APPENDIX: DESCRIPTION OF SECURITIES RATINGS...................................21

RATINGS OF DEBT INSTRUMENTS.................................................21
RATINGS OF COMMERCIAL PAPER.................................................21

-2-
<PAGE>

FUND HISTORY

DESCRIPTION OF THE FUND AND ITS INVESTMENT RISKS

INVESTMENT STRATEGIES

To the extent consistent with its investment objective and restrictions, the
funds may invest in the following instruments and use the following investment
techniques:

US Government Obligations. The types of US Government obligations in which each
fund may at times invest include: (1) A variety of US Treasury obligations,
which differ only in their interest rates, maturities and times of issuance; and
(2) obligations issued or guaranteed by US Government agencies and
instrumentalities which are supported by any of the following: (a) the full
faith and credit of the US Treasury, (b) the right of the issuer to borrow an
amount limited to a specific line of credit from the US Treasury, (c)
discretionary authority of the US Government agency or instrumentality or (d)
the credit of the instrumentality (examples of agencies and instrumentalities
are: Federal Land Banks, Federal Housing Administration, Federal Farm Credit
Bank, Farmers Home Administration, Export--Import Bank of the United States,
Central Bank for Cooperatives, Federal Intermediate Credit Banks, Federal Home
Loan Banks, General Services Administration, Maritime Administration, Tennessee
Development Bank, Asian-American Development Bank, Student Loan Marketing
Association, International Bank for Reconstruction and Development and Federal
National Mortgage Association). No assurance can be given that in the future the
US Government will provide financial support to such US Government agencies or
instrumentalities described in (2)(b), (2)(c) and (2)(d), other than as set
forth above, since it is not obligated to do so by law. Each fund may purchase
US Government obligations on a forward commitment basis.

Repurchase Agreements. The funds may enter into repurchase agreements with
financial institutions. Under repurchase agreements, these parties sell
securities to a fund and agree to repurchase the securities at the fund's cost
plus interest within a specified time (normally one day). The securities
purchased by each fund have a total value in excess of the purchase price paid
by the fund and are held by Custodian until repurchased. Repurchase agreements
assist the funds in being invested fully while retaining "overnight" flexibility
in pursuit of investments of a longer-term nature. The funds will limit
repurchase transactions to those member banks of the Federal Reserve System and
broker-dealers whose creditworthiness is continually monitored and found
satisfactory by Advisor.

Reverse Repurchase Agreements. The funds may enter into reverse repurchase
agreements under the circumstances described in "Investment Restrictions". Under
reverse repurchase agreements, a fund transfers possession of portfolio
securities to financial institutions in return for cash in an amount equal to a
percentage of the portfolio securities' market value and agrees to repurchase
the securities at a future date by repaying the cash with interest. Each fund
retains the right to receive interest and principal payments from the securities
while they are in the possession of the financial institutions. Cash or liquid
high quality debt obligations from a fund's portfolio equal in value to the
repurchase price including any accrued interest will be segregated by Custodian
on the fund's records while a reverse repurchase agreement is in effect. Reverse
repurchase agreements involve the risk that the market value of securities sold
by each fund may decline below the price at which it is obligated to repurchase
the securities.

Forward Commitments. Each fund may contract to purchase securities for a fixed
price at a future date beyond customary settlement time consistent with each
fund's ability to manage its investment portfolio, maintain a stable net asset
value and meet redemption requests. A fund may dispose of a commitment prior to
settlement if it is appropriate to do so and realize short-term profits or
losses upon such sale. When effecting such transactions, cash or liquid high
quality debt obligations held by the fund of a dollar amount

- ----------
(1) With the exception of the SSgA Tuckerman Active REIT Fund, which is
non-diversified.

-3-
<PAGE>

sufficient to make payment for the portfolio securities to be purchased will be
segregated on the fund's records at the trade date and maintained until the
transaction is settled. Forward commitments involve a risk of loss if the value
of the security to be purchased declines prior to the settlement date, or if the
other party fails to complete the transaction.

-4-
<PAGE>

Illiquid Securities. The fund will not invest more than 10% of its net assets in
illiquid securities or securities that are not readily marketable. These
securities include repurchase agreements and time deposits of more than seven
days' duration and participation interests (including municipal leases),
floating and variable rate demand obligations and tender option bonds as to
which the fund cannot exercise a demand feature in seven or fewer days or for
which there is no secondary market. The absence of a regular trading market for
illiquid securities imposes additional risk on investments in these securities.
Illiquid securities may be difficult to value and may often be disposed of only
after considerable expense and delay.

Section 4(2) Commercial Paper (Money Market only). The fund may invest in
commercial paper issued in reliance on the so-called "private placement"
exemption from registration afforded by Section 4(2) of the Securities Act of
1933 ("Section 4(2) paper"). Section 4(2) paper is restricted as to disposition
under the federal securities laws, and generally is sold to investors who agree
that they are purchasing the paper for an investment and not with a view to
public distribution. Any resale by the purchaser must be in an exempt
transaction. Section 4(2) paper is normally resold to other investors through or
with the assistance of the issuer or investment dealers who make a market in
Section 4(2) paper, thus providing liquidity. Pursuant to guidelines established
by the Board of Trustees, the Advisor may determine that Section 4(2) paper is
liquid for the purposes of complying with the fund's investment restriction
relating to investments in illiquid securities.

Variable and Floating Rate Securities (Items 2, 3 and 4 below apply to the Money
Market Fund on ly). The Funds may purchase variable rate securities which are
instruments issued or guaranteed by entities such as the: (1) US Government, or
an agency or instrumentality thereof, (2) corporations, (3) financial
institutions or (4) insurance companies that have a rate of interest subject to
adjustment at regular intervals but less frequently than annually. A variable
rate security provides for the automatic establishment of a new interest rate on
set dates. Variable rate obligations whose interest is readjusted no less
frequently than annually will be deemed to have a maturity equal to the period
remaining until the next readjustment of the interest rate. The funds may also
purchase floating rate securities. A floating rate security provides for the
automatic adjustment of its interest rate whenever a specified interest rate
changes. Interest rates on these securities are ordinarily tied to, and are a
percentage of, a widely recognized interest rate, such as the yield on 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.

Asset-Backed Securities (Money Market Fund only). Asset-backed securities
represent undivided fractional interests in pools of instruments, such as
consumer loans, and are similar in structure to mortgage-related pass-through
securities. 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.

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 a 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 which shorten the weighted
average life of asset-backed securities and may lower their return, in the same
manner as described below for prepayments of pools of mortgage loans underlying
mortgage-backed securities. Use of asset-backed securities will represent less
than 5% of the fund's total assets by issuer.

-5-
<PAGE>

and the Federal National Mortgage Association ("FNMA"), a government sponsored
corporation owned entirely by private stockholders. Commercial banks, savings
and loan associations, private mortgage insurance companies, mortgage bankers
and other secondary market issuers also create pass-through pools of
conventional residential mortgage loans. Such issuers may be the originators of
the underlying mortgage loans as well as the guarantors of the mortgage-related
securities.

1. GNMA Mortgage Pass-Through Certificates ("Ginnie Maes"). Ginnie Maes
represent an undivided interest in a pool of mortgage loans that are
insured by the Federal Housing Administration or the Farmers Home
Administration or guaranteed by the Veterans Administration. Ginnie
Maes entitle the holder to receive all payments (including
prepayments) of principal and interest owed by the individual
mortgagors, net of fees paid to GNMA and to the issuer which
assembles the loan pool and passes through the monthly mortgage
payments to the certificate holders (typically, a mortgage banking
firm), regardless of whether the individual mortgagor actually makes
the payment. Because payments are made to certificate holders
regardless of whether payments are actually received on the
underlying loans, Ginnie Maes are of the "modified pass-through"
mortgage certificate type. GNMA is authorized to guarantee the
timely payment of principal and interest on the Ginnie Maes as
securities backed by an eligible pool of mortgage loans. The GNMA
guaranty is backed by the full faith and credit of the United
States, and GNMA has unlimited authority to borrow funds from the US
Treasury to make payments under the guaranty. The market for Ginnie
Maes is highly liquid because of the size of the market and the
active participation in the secondary market by securities dealers
and a variety of investors.

The market value of mortgage-related securities depends on, among other things,
the level of interest rates, the certificates' coupon rates and the payment
history of the underlying borrowers.

Stripped (Zero Coupon) Securities. The fund may invest in stripped securities,
which are zero coupon bonds, notes 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. Stripped
securities may exhibit greater price volatility than ordinary debt securities
because of the manner in which their principal securities issued by the US
Treasury and recorded in the Federal Reserve book-entry record-keeping system.
Because stripped securities do not pay current income, their prices can be very
volatile when interest rates change. The fund may invest no more than 25% of its
assets in stripped securities that have been stripped by their holder, typically
a custodian bank or investment brokerage firm. A number of securities firms and
banks have stripped the interest coupons and resold them in custodian receipt
programs with different names such as

-6-
<PAGE>

Treasury Income Growth Receipts ("TIGRS") and Certificates of Accrual on
Treasuries ("CATS"). Privately-issued stripped securities such as TIGRS and CATS
are not themselves guaranteed by the US Government, but the future payment of
principal or interest on US Treasury obligations which they represent is so
guaranteed.

Treasury Inflation-Protection Securities. Each fund may invest in
Inflation-Protection Securities ("IPS"), a type of inflation-indexed Treasury
security. IPS provide for semiannual payments of interest and a payment of
principal at maturity. In general, each payment will be adjusted to take into
account any inflation or deflation that occurs between the issue date of the
security and the payment date based on the Consumer Price Index for All Urban
Consumers ("CPI-U").

INVESTMENT RESTRICTIONS

Each fund is subject to the following fundamental investment restrictions.
Unless otherwise noted, these restrictions apply on a fund-by-fund basis at the
time an investment is made. A fund will not:

1. Invest 25% or more of the value of its total assets in securities of
companies primarily engaged in any one industry (other than the US
Government, its agencies and instrumentalities ). Concentration may
occur as a result of changes in the market value of portfolio
securities, but may not result from investment. US banks and certain
domestic branches of foreign banks are not considered a single
industry for purposes of this restriction.

3. Pledge, mortgage or hypothecate its assets. However, a fund may
pledge securities having a market value at the time of the pledge
not exceeding 33-1/3% of the value of the fund's total assets to
secure borrowings permitted by paragraph (2) above.

4. With respect to 75% of its total assets, invest in securities of any
one issuer (other than securities issued by the US Government, its
agencies, and instrumentalities), if immediately after and as a
result of such investment the current market value of the fund's
holdings in the securities of such issuer exceeds 5% of the value of
the fund's assets and to not more than 10% of the outstanding voting
securities of such issuer.

5. Make loans to any person or firm; provided, however, that the making
of a loan shall not include (i) the acquisition for investment of
bonds, debentures, notes or other evidences of indebtedness of any
corporation or government which are publicly distributed or of a
type customarily purchased by institutional investors, or (ii) the
entry into repurchase agreements or reverse repurchase agreements. A
fund may lend its portfolio securities to broker-dealers or other
institutional investors if the aggregate value of all securities
loaned does not exceed 33-1/3% of the value of the fund's total
assets. With respect to the Money Market Fund only, the fund may
lend cash to any registered investment company or portfolio series
for which the Fund's Advisor serves as advisor or subadvisor to the
extent permitted by the 1940 Act or any rule or order issued
thereunder.

6. Purchase or sell commodities or commodity futures contracts.

-7-
<PAGE>

7. Purchase or sell real estate or real estate mortgage loans;
provided, however, that (i) the Government Money Market Fund may
purchase or sell government guaranteed real estate mortgage loans;
and (ii) the funds may invest in securities secured by real estate
or interests therein or issued by companies which invest in real
estate or interests therein.

8. Engage in the business of underwriting securities issued by others,
except that a fund will not be deemed to be an underwriter or to be
underwriting on account of the purchase of securities subject to
legal or contractual restrictions on disposition.

9. Issue senior securities, except as permitted by its investment
objective, policies and restrictions, and except as permitted by the
1940 Act.

10. Purchase or sell puts, calls or invest in straddles, spreads or any
combination thereof.

11. Make short sales of securities or purchase any securities on margin,
except for such short-term credits as are necessary for the
clearance of transactions.

12. Purchase from or sell portfolio securities to its officers or
directors or other interested persons (as defined in the 1940 Act)
of the funds, including their investment advisors and affiliates,
except as permitted by the 1940 Act and exemptive rules or orders
thereunder.

13. Invest in securities issued by other investment companies except in
connection with a merger, consolidation, acquisition of assets, or
other reorganization approved by the funds' shareholders.

14. Invest in securities of any issuer which, together with its
predecessor, has been in operation for less than three years if, as
a result, more than 5% of the fund's total assets would be invested
in such securities.

15. Invest more than 10% of its net assets in the aggregate, on an
ongoing basis, in illiquid securities or securities that are not
readily marketable, including repurchase agreements and time
deposits of more than seven days' duration.

16. Purchase interests in oil, gas or other mineral exploration or
development programs.

17. Make investments for the purpose of gaining control of an issuer's
management.

18. Purchase the securities of any issuer if the Investment Company's
officers, Directors, Advisor or any of their affiliates beneficially
own more than one-half of 1% of the securities of such issuer or
together own beneficially more than 5% of the securities of such
issuer.

MANAGEMENT OF THE FUND

BOARD OF TRUSTEES AND OFFICERS

-8-
<PAGE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Name, Address and Age Position(s) with Principal Occupation(s) During Past 5 Years
SSgA funds
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Lynn L. Anderson Trustee (Interested Person of o Vice Chairman, Frank Russell Company;
909 A Street the SSgA funds as defined in the
Tacoma, WA 98402 1940 Act), Chairman of the o Chairman of the Board and Chief
Age 60 Board, President and Treasurer Executive Officer, Frank Russell
Investment Management Company and
Russell Fund Distributors, Inc.;

o Chairman of the Board, Frank Russell
Trust Company;

o Trustee, President and Chief Executive
Officer, Frank Russell Investment
Company and Russell Insurance Funds; and

o Director, Russell Insurance Agency,
Inc., Frank Russell Investments
(Ireland) Limited, Frank Russell
Investment Company plc; Frank Russell
Institutional Funds plc, Frank Russell
Qualifying Investor Fund, and Frank
Russell Investments (Cayman) Ltd.
- ------------------------------------------------------------------------------------------------------------------------
William L. Marshall Trustee o Chief Executive Officer and President,
33 West Court Street Wm. L. Marshall Associates, Inc. (a
Doylestown, PA 18901 registered investment advisor and
Age 57 provider of financial and related
consulting services);

o Certified Financial Planner and
Member, Institute of Certified
Financial Planners;

o Member, Registry of Financial Planning
Practitioners and Advisory Committee,
International Association for Financial
Planning Broker-Dealer Program;

o Registered Representative for
Securities with FSC Securities Corp.,
Marietta, Georgia.
- ------------------------------------------------------------------------------------------------------------------------
Steven J. Mastrovich Trustee o President, Key Global Capital, Inc.;
176 Federal Street, 3rd Floor
Boston, MA 02110 o From 1997 to 1998, Partner, Squire,
Age 43 Sanders & Dempsey (law firm);

o From 1994 to 1997, Partner, Brown,
Rudnick, Freed & Gesmer (law firm); and

-9-
<PAGE>

<TABLE>
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
26 Round Top Road Industrial Control Systems.
Boxford, MA 01921
Age 56
- ------------------------------------------------------------------------------------------------------------------------
Henry W. Todd Trustee o President and Director, Zink & Triest
111 Commerce Drive Co., Inc. (dealer in vanilla flavor
Montgomeryville, PA 18936 materials); and
Age 52
o Director, Executive Vice President,
A.M. Todd Group, Inc. and Flavorite
Laboratories.
- ------------------------------------------------------------------------------------------------------------------------
J. David Griswold Vice President and Secretary o Assistant Secretary and Associate
909 A Street General Counsel, Frank Russell
Tacoma, WA 98402 Investment Management Company, Russell
Age 42 Fund Distributors, Inc., Frank Russell
Capital Inc., Frank Russell Company and
Frank Russell Investments (Delaware),
Inc.;

o Director, Secretary and Associate
General Counsel, Frank Russell
Securities, Inc.;

o Secretary, Frank Russell Canada
Limited/Limitee.
- ------------------------------------------------------------------------------------------------------------------------
Mark E. Swanson Assistant Secretary, Assistant o Director - Funds Administration, Frank
909 A Street Treasurer and Principal Russell Investment Management Company
Tacoma, WA 98402 Accounting Officer and Frank Russell Trust Company; and
Age 36
o Treasurer and Chief Accounting
Officer, Frank Russell Investment
Company and Russell Insurance Funds.
- ------------------------------------------------------------------------------------------------------------------------
Rick J. Chase Assistant Secretary o Manager, Fund Administration, Frank
909 A Street Russell Investment Management Company;
Tacoma, WA 98402 and
Age 34
o Assistant Treasurer, Frank Russell
Investment Company and Russell
Insurance Funds.
- ------------------------------------------------------------------------------------------------------------------------
Deedra S. Walkey Assistant Secretary o Associate General Counsel and
909 A Street Assistant Secretary, Frank Russell
Tacoma, WA 98402 Company, Frank Russell Investment
Age 35 Management Company, Frank Russell Trust
Company, Frank Russell Investment
Company, Russell Insurance Funds, and
Russell Insurance Agency.
- ------------------------------------------------------------------------------------------------------------------------
Carla L. Anderson Assistant Secretary o Paralegal and Assistant Secretary,
909 A Street Frank Russell Company, Frank Russell
Tacoma, WA 98402 Investment Management Company, Frank
Age 34 Russell Securities, Inc., Russell Fund
Distributors, Inc., Frank Russell
Capital Inc., Frank Russell
International Services Company Inc.,
Russell Real Estate Advisors Inc. and A
Street Investment Associates, Inc.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

COMPENSATION

-10-
<PAGE>

------------------------------------------------
Trustee Total Annual Compensation
from Investment Company
per Fiscal Year
------------------------------------------------
Lynn L. Anderson $0
------------------------------------------------
William L. Marshall $63,000
------------------------------------------------
Steven J. Mastrovich $63,000
------------------------------------------------
Patrick J. Riley $63,000
------------------------------------------------
Richard D. Shirk $63,000
------------------------------------------------
Bruce D. Taber $63,000
------------------------------------------------
Henry W. Todd $63,000
------------------------------------------------

- ----------
(1) The fund did not operate a full year during fiscal 1999.

-11-
<PAGE>

CONTROLLING AND PRINCIPAL SHAREHOLDERS

The Trustees and officers of Investment Company, as a group, own less than 1% of
Investment Company's voting securities.

Money Market Fund

o William H. Gates Foundation, 2365 Carillon Pt., Kirkland, WA
98033-7353--21%.

o SSGA CM96, 225 Franklin St., Boston, MA 02110-2804--6%.

Government Money Market Fund

o Turtle & Co., Sweep, PO Box 9427, Boston, MA 02209-9427--11%;

o State Street Bank and Trust Company, Newport Office Park, 108 Myrtle St.
AH3, North Quincy, MA 02171-1753--9%;

o ADP ZF1M, 1 ADP Blvd., Roseland, NJ 07068-1728--8%;

o University of Pennsylvania, 3451 Walnut Street, Philadelphia, PA
19104-6205--7%; and

o Government of Singapore, State Street Bank, One Newport Avenue, North
Quincy, MA 02171-02605--9%.

INVESTMENT ADVISORY AND OTHER SERVICES

ADVISOR

The Money Market and Government Money Market Funds accrued the following
expenses to Advisor for the fiscal years ended August 31:

-12-
<PAGE>

--------------------------------------------------------------------------
1999 1998 1997
--------------------------------------------------------------------------
Money Market $18,916,832 $12,730,865 $10,638,528
--------------------------------------------------------------------------
Government Money Market $3,309,521 $2,155,910 $2,091,160
--------------------------------------------------------------------------

ADMINISTRATOR

Frank Russell Investment Management Company serves as the Investment Company's
Administrator, pursuant to an Administration Agreement dated April 12, 1988.

The Money Market and Government Money Market Funds accrued the following
expenses to Administrator for the fiscal years ended August 31:

--------------------------------------------------------------------------
1999 1998 1997
--------------------------------------------------------------------------
Money Market $2,350,171 $1,532,523 $1,245,280
--------------------------------------------------------------------------
Government Money Market $412,315 $262,785 $244,335
--------------------------------------------------------------------------

CUSTODIAN AND TRANSFER AGENT

-13-
<PAGE>

per investment portfolio and from $4.00 to $16.00 per security, depending on the
type of instrument and the pricing service used; and yield calculation fees of
$350.00 per non-money market portfolio per year. For Transfer and Dividend
Disbursing Agent services, State Street is paid the following annual account
services fees: $9.00 open account fee; $1.50 closed account fee; fund minimum
per portfolio for one to four portfolios--$36,000, five to six
portfolios--$24,000, and over six portfolios $18,000. Portfolio fees are
allocated to each fund based on the average net asset value of each fund and are
billable on a monthly basis at the rate of 1/12 of the annual fee. State Street
will apply a $5.00 fee to each telephone transaction (purchase or redemption),
which is applied against the monthly billing. State Street is reimbursed by each
fund for supplying certain out-of-pocket expenses including postage, transfer
fees, stamp duties, taxes, wire fees, telexes, and freight.

DISTRIBUTOR

DISTRIBUTION PLAN AND SHAREHOLDER SERVICING ARRANGEMENTS

-14-
<PAGE>

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.

Each fund accrued the following expenses to Distributor for the fiscal years
ended August 31:

--------------------------------------------------------------------------
1999 1998 1997
--------------------------------------------------------------------------
Money Market Fund $2,770,913 $2,327,851 $1,580,068
--------------------------------------------------------------------------
Government Money Market Fund 317,018 309,505 287,158
--------------------------------------------------------------------------

For fiscal 1999, these amounts are reflective of the following individual
payments:

Money Government
Market Money Market

Advertising $ 85,663 $ 15,845
Printing of Prospectuses 119,263 20,966
Compensation to Dealers 937,214 947
Compensation to Sales Personnel 737,140 130,547
Other(1) 891,633 148,713
-------- --------

Each fund accrued expenses in the following amounts to Advisor, under Service
Agreements pursuant to Rule 12b-1, for fiscal year ended August 31:

--------------------------------------------------------------------------
1999 1998 1997
--------------------------------------------------------------------------
Money Market Fund $2,691,113 $1,890,456 $1,551,176
--------------------------------------------------------------------------
Government Money
Market Fund $ 635,531 $ 386,357 $ 719,992
--------------------------------------------------------------------------

INDEPENDENT ACCOUNTANTS

- ----------
(1) Other expenses may include such items as compensation for travel,
conferences and seminars for staff, subscriptions, office charges and
professional fees.

-15-
<PAGE>

LEGAL COUNSEL

Goodwin, Procter & Hoar LLP, Exchange Place, Boston, MA 02109, provides legal
services to the SSgA Funds.

BROKERAGE PRACTICES AND COMMISSIONS

The Advisory Agreement authorizes Advisor to select brokers or dealers to
execute a particular transaction, including principal transactions, and in
evaluating the best overall terms available, to consider the "brokerage and
research services" (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) provided to a fund and/or the Advisor (or its
affiliates). Advisor is authorized to cause each fund to pay a commission to a
broker or dealer who provides such brokerage and research services for executing
a portfolio transaction which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction. Each fund or
the Advisor, as appropriate, must determine in good faith that such commission
was reasonable in relation to the value of the brokerage and research services
provided--viewed in terms of that particular transaction or in terms of all the
accounts over which Advisor exercises investment discretion. Any commission, fee
or other remuneration paid to an affiliated broker-dealer is paid in compliance
with the fund's procedures adopted in accordance with Rule 17e-1 of the 1940
Act.

During the fiscal year ended August 31, 1999, the Money Market Fund and
Government Money market Fund purchased securities issued by the following
regular brokers or dealers, as defined by Rule 10b-1 of the 1940 Act, each of
which is one of the funds' ten largest brokers or dealers by dollar amounts of
securities executed or commissions received on behalf of the fund.

The value of broker-dealer securities held as of August 31, 1999, is as follows:

-16-
<PAGE>

Government
Money Market Fund Money Market Fund
($000) ($000)
-------------------------------------
Euro Brokers Inc.(1) 0 --
Tradition(1) 0 --
Chase Bank(1) 400 --
Broadcort Capital Corp.(1) 0
Lehman Brothers Inc.(1) 600 90
Fidelity Capital Markets(1) 0
CS First Boston(1) 0 --
Bear, Stearns & Co., Inc.(1) -- 0
Goldman Sachs & Co.(1) 0
Merrill Lynch Pierce Fenner(1) 1,000 0
Salomon Smith Barney Inc.(1) -- 0
Prebon Securities(1) 0 --
Donaldson, Lufkin & Jenrette Corp.(1) -- 0
J.P. Morgan, Inc.(1) -- 0
Lummis & Co.(1) 0 --
Donaldson, Lufkin & Jenrette(1) -- 0
Deutsche Morgan Grenfell/CJL Prime(1) -- 0
First Chicago(1) -- 0

The Money Market and US Government Money Market Funds normally do not pay a
stated brokerage commissions on transactions.

PRICING OF FUND SHARES

Shares of the funds are offered without a sales commission by Russell Fund
Distributors, Inc. (the Distributor), to institutional and retail investors
which invest for their own account or in a fiduciary or agency capacity. Net
asset value per share of the Government Fund is calculated twice each business
day, as of 12:00 noon Eastern time and as of the close of the regular trading
session on the New York Stock Exchange (currently 4:00 p.m. Eastern time). Net
asset value per share of the Money Market Fund is calculated as of the close of
the regular trading session on the New York Stock Exchange (currently 4:00 p.m.
Eastern time). A business day is one on which both the Boston Federal Reserve
and the New York Stock Exchange are open for business.

It is the policy of each fund to use its best efforts to maintain a constant
price per share of $1.00, although there can be no assurance that the $1.00 net
asset value per share will be maintained. In accordance with this effort and
pursuant to Rule 2a-7 under the 1940 Act, the funds use the amortized cost
valuation method to value portfolio instruments. This method involves valuing an
instrument at its cost and thereafter assuming a constant amortization to
maturity of any discount or premium, even though the portfolio security may
increase or decrease in market value generally in response to changes in
interest rates. While this method provides certainty in valuation, it may result
in periods during which value, as determined by amortized cost, is higher or
lower than the price a fund would receive if it sold the instrument.

For example, in periods of declining interest rates, the daily yield on a fund's
shares computed by dividing the annualized daily income on a fund's portfolio by
the net asset value based upon the amortized cost valuation technique may tend
to be higher than a similar computation made by using a method of valuation
based upon market prices and estimates. In periods of rising interest rates,

- --------
(1) Broker principal transaction only.

-17-
<PAGE>

the daily yield on fund shares computed the same way may tend to be lower than a
similar computation made by using a method of calculation based upon market
prices and estimates.

The Trustees have established procedures reasonably designed to stabilize each
fund's price per share at $1.00. These procedures include: (1) the determination
of the deviation from $1.00, if any, of each fund's net asset value using market
values; (2) periodic review by the Trustees of the amount of and the methods
used to calculate the deviation; and (3) maintenance of records of such
determination. The Trustees will promptly consider what action, if any, should
be taken if such deviation exceeds 1/2 of one percent.

TAXES

As of August 31, 1999, the Money Market Fund had a net tax basis capital loss
carryover of $251,856, which may be applied against any realized net taxable
gains in each succeeding year or until its expiration date of August 31, 2003,
whichever occurs first.

CALCULATION OF PERFORMANCE DATA

The funds compute average annual total return by using a standardized method of
calculation required by the Securities and Exchange Commission. Average annual
total return is computed by finding the average annual compounded rates of
return on a hypothetical initial investment of $1,000 over the one-year,
five-year and ten-year periods (or life of the fund as appropriate), that would
equate the initial amount invested to the ending redeemable value, according to
the following formula:

-18-
<PAGE>

P(1+T)^n = ERV

where: P = a hypothetical initial payment of $1,000

T = average annual total return

n = number of years

ERV = ending redeemable value of a $1,000 payment made at the
beginning of the 1-year, 5-year and 10-year periods at the
end of the year or period

The calculation assumes that all dividends and distributions of the funds are
reinvested at the price stated in the Prospectus on the dividend dates during
the period, and includes all recurring and nonrecurring fees that are charged to
all shareholder accounts. Total returns and other performance figures are based
on historical earnings and are not indicative of future performance.

The current annualized yield of the funds may be quoted in published material.
The yield is calculated daily based upon the seven days ending on the date of
calculation ("base period"). The yields are computed by determining the net
change, exclusive of capital changes, in the value of a hypothetical
pre-existing account having a balance of one share at the beginning of the base
period, subtracting a hypothetical charge reflecting deductions from shareholder
accounts and dividing the net change in the account value by the value of the
account at the beginning of the base period to obtain the base period return,
and then multiplying the base period return by (365/7) with the resulting yield
figure carried to the nearest hundredth of one percent. An effective yield is
computed by determining the net change, exclusive of capital changes, in the
value of a hypothetical pre-existing account having a balance of one share at
the beginning of the period, subtracting a hypothetical charge reflecting
deductions from shareholder accounts, and dividing the difference by the value
of the account at the beginning of the base period to obtain the base period
return, and then compounding the base period return by adding 1, raising the sum
to a power equal to 365 divided by 7, and subtracting 1 from the result,
according to the following formula:

EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)^(365/7)]-1

The following are the current and effective yields for the funds for the
seven-day period ended August 31, 1999:

Money Market Fund

Current Yield 4.94%

Effective Yield 5.06%

Government Fund

Current Yield 4.73%

Effective Yield 4.84%

The yields quoted are not indicative of future results. Yields will depend on
the type, quality, maturity, and interest rate of money market instruments held
by the funds.

ADDITIONAL INFORMATION

SHAREHOLDER MEETINGS

CAPITALIZATION AND VOTING

-19-
<PAGE>

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.

FEDERAL LAW AFFECTING STATE STREET

FINANCIAL STATEMENTS

The 1999 fiscal year-end financial statements for each fund, including notes to
the financial statements and financial highlights and the Report of Independent
Accountants, are included in each fund's Annual Report to shareholders. A copy
of the Annual Report accompanies this Statement of Additional Information and is
incorporated herein by reference.

-20-
<PAGE>

APPENDIX: DESCRIPTION OF SECURITIES RATINGS

RATINGS OF DEBT INSTRUMENTS

Moody's Investors Service, Inc. ("Moody's") -- Long Term Debt Ratings.

Aaa -- Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a large or
by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.

Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risk appear
somewhat larger than the Aaa securities.

A -- Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in
the future.

Baa -- Bonds which are rated Baa are considered as medium-grade
obligations (i.e., they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and in fact have speculative
characteristics as well.

Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B. The modifier 1 indicates that the
obligation ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a
ranking in the lower end of that generic rating category.

Standard & Poor's Corporation ("S&P"). The ratings are based, in varying
degrees, on the following considerations: (1) The likelihood of default --
capacity and willingness of the obligator as to the timely payment of interest
and repayment of principal in accordance with the terms of the obligation; (2)
The nature of and provisions of the obligation; and (3) The protection afforded
by, and relative position of, the obligation in the event of bankruptcy,
reorganization, or other arrangement under the laws of bankruptcy and other laws
affecting creditors' rights.

AAA -- Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.

AA -- Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.

A -- Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in higher
rated categories.

BBB -- Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.

Plus (+) or minus (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

RATINGS OF COMMERCIAL PAPER

Moody's. Moody's short-term debt ratings are opinions of the ability of issuers
to repay punctually senior debt obligations. These obligations have an original
maturity not exceeding one year, unless explicitly noted. Moody's employs the
following three designations, all judged to be investment grade, to indicate the
relative repayment ability of rated issuers:

Issuers rated Prime-1 (or supporting institutions) have a superior ability
for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:

o Leading market positions in well-established industries.

-21-
<PAGE>

o High rates of return on funds employed.

o Conservative capitalization structure with moderate reliance
on debt and ample asset protection.

o Broad margins in earnings coverage of fixed financial charges
and high internal cash generation.

o Well-established access to a range of financial markets and
assured sources of alternate liquidity.

Issuers rated Prime-2 (or supporting institutions) have a strong ability
for repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, may be more
subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample
alternative liquidity is maintained.

Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the
level of debt protection measurements and may require relatively high
financial leverage. Adequate alternate liquidity is maintained.

Issuers rated Not Prime do not fall within any of the Prime rating
categories.

S&P. An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt considered shot-term in the relevant market. Ratings are
graded into several categories, ranging from A-1 for the highest quality
obligations to D for the lowest. These categories are as follows:

A-1 -- This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+)
designation.

A-2 -- Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.

Fitch's Investors Service, Inc. ("Fitch"). Commercial paper rated by Fitch
reflects Fitch's current appraisal of the degree of assurance of timely payment
of such debt. An appraisal results in the rating of an issuer's paper as F-1,
F-2, F-3, or F-4.

F-1 -- This designation indicates that the commercial paper is regarded as
having the strongest degree of assurance for timely payment.

F-2 -- Commercial paper issues assigned this rating reflect an assurance
of timely payment only slightly less in degree than those issues rated
F-1.

Duff and Phelps, Inc. Duff & Phelps' short-term ratings are consistent with the
rating criteria utilized by money market participants. The ratings apply to all
obligations with maturities of under one year, including commercial paper, the
uninsured portion of certificates of deposit, unsecured bank loans, master
notes, bankers acceptances, irrevocable letters of credit, and current
maturities of long-term debt. Asset-backed commercial paper is also rated
according to this scale.

Emphasis is placed on liquidity which is defined as not only cash from
operations, but also access to alternative sources of funds including trade
credit, bank lines, and the capital markets. An important consideration is the
level of an obligor's reliance on short-term funds on an ongoing basis.

The distinguishing feature of Duff & Phelps' short-term ratings is the
refinement of the traditional '1' category. The majority of short-term debt
issuers carry the highest rating, yet quality differences exist within that
tier. As a consequence, Duff & Phelps has incorporated gradations of '1+' (one
plus) and '1-' (one minus) to assist investors in recognizing those differences.

Duff 1+--Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative sources
of funds, is outstanding, and safety is just below risk-free U.S. Treasury
short-term obligations.

Duff 1--Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors. Risk
factors are minor.

Duff 1- -- High certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk factors are
very small.

o Good Grade. Duff 2--Good certainty of timely payment. Liquidity factors
and company fundamentals are sound. Although ongoing funding needs may
enlarge total financing requirements, access to capital markets is good.
Risk factors are small.

o Satisfactory Grade. Duff 3--Satisfactory liquidity and other protection
factors qualify issue as to investment grade. Risk factors are larger and
subject to more variation. Nevertheless, timely payment is expected.

-22-
<PAGE>

o Non-Investment Grade. Duff 4--Speculative investment characteristics.
Liquidity is not sufficient to ensure against disruption in debt service.
Operating factors and market access may be subject to a high degree of
variation.

o Default. Duff 5--Issuer failed to meet scheduled principal and/or interest
payments.

IBCA, Inc. In addition to conducting a careful review of an institution's
reports and published figures, IBCA's analysts regularly visit the companies for
discussions with senior management. These meetings are fundamental to the
preparation of individual reports and ratings. To keep abreast of any changes
that may affect assessments, analysts maintain contact throughout the year with
the management of the companies they cover.

IBCA's analysts speak the languages of the countries they cover, which is
essential to maximize the value of their meetings with management and to
properly analyze a company's written materials. They also have a thorough
knowledge of the laws and accounting practices that govern the operations and
reporting of companies within the various countries.

Often, in order to ensure a full understanding of their position, companies
entrust IBCA with confidential data. While these data cannot be disclosed in
reports, they are taken into account when assigning our ratings. Before dispatch
to subscribers, a draft of the report is submitted to each company to permit
correction of any factual errors and to enable clarification of issues raised.

IBCA's Rating Committees meet at regular intervals to review all ratings and to
ensure that individual ratings are assigned consistently for institutions in all
the countries covered. Following the Committee meetings, ratings are issued
directly to subscribers. At the same time, the company is informed of the
ratings as a matter of courtesy, but not for discussion.

A1+--Obligations supported by the highest capacity for timely repayment.

A1--Obligations supported by a very strong capacity for timely repayment.

A2--Obligations supported by a strong capacity for timely repayment,
although such capacity may be susceptible to adverse changes in business,
economic or financial conditions.

B1--Obligations supported by an adequate capacity for timely repayment.
Such capacity is more susceptible to adverse changes in business,
economic, or financial conditions than for obligations in higher
categories.

B2--Obligations for which the capacity for timely repayment is susceptible
to adverse changes in business, economic or financial conditions.

C1--Obligations for which there is an inadequate capacity to ensure timely
repayment.

D1--Obligations which have a high risk of default or which are currently
in default.

-23-
<PAGE>

Filed pursuant to Rule 485(b)
File Nos. 33-19229; 811-5430

SSgA FUNDS
One International Place
Boston, Massachusetts 02110
1-800-997-7327
www.ssgafunds.com

STATEMENT OF ADDITIONAL INFORMATION

PRIME MONEY MARKET FUND

DECEMBER 17, 1999

This statement incorporates by reference the fund's annual report to
shareholders for the fiscal year ended August 31, 1999. A copy of the fund's
annual report accompanies this statement.

-1-
<PAGE>

TABLE OF CONTENTS

FUND HISTORY...................................................................3

DESCRIPTION OF THE FUND AND ITS INVESTMENT RISKS...............................3

INVESTMENT STRATEGIES........................................................3
INVESTMENT RESTRICTIONS......................................................7

MANAGEMENT OF THE FUND.........................................................8

INVESTMENT ADVISORY AND OTHER SERVICES........................................12

ADVISOR.....................................................................12
ADMINISTRATOR...............................................................12
CUSTODIAN AND TRANSFER AGENT................................................13
DISTRIBUTOR.................................................................13
DISTRIBUTION PLAN AND SHAREHOLDER SERVICING ARRANGEMENTS....................14
INDEPENDENT ACCOUNTANTS.....................................................15
LEGAL COUNSEL...............................................................15

BROKERAGE PRACTICES AND COMMISSIONS...........................................15

PRICING OF FUND SHARES........................................................16

TAXES.........................................................................17

CALCULATION OF PERFORMANCE DATA...............................................18

ADDITIONAL INFORMATION........................................................19

SHAREHOLDER MEETINGS........................................................19
CAPITALIZATION AND VOTING...................................................19
FEDERAL LAW AFFECTING STATE STREET..........................................19

FINANCIAL STATEMENTS..........................................................19

APPENDIX: DESCRIPTION OF SECURITIES RATINGS..................................20

RATINGS OF DEBT INSTRUMENTS.................................................20
RATINGS OF COMMERCIAL PAPER.................................................20

-2-
<PAGE>

FUND HISTORY

DESCRIPTION OF THE FUND AND ITS INVESTMENT RISKS

The SSgA Funds is an open-end, management investment company which offers shares
of beneficial interest in separate portfolios, each of which is referred to as a
fund. The SSgA Funds are diversified1, in that at least 75% of its total assets
are represented by a variety of instruments including cash, government
securities, securities of other investment companies, and other securities
within the limitations described in the investment restrictions.

INVESTMENT STRATEGIES

To the extent consistent with its investment objective and restrictions, the
fund may invest in the following instruments and use the following investment
techniques:

- ----------
(1) With the exception of the SSgA Tuckerman Active REIT Fund, which is
non-diversified.

-3-
<PAGE>

on the fund's records. For the purpose of determining the adequacy of these
securities the segregated securities will be valued at market. If the market
value of such securities declines, additional cash or securities will be
segregated on the fund's records on a daily basis so that the market value of
the account will equal the amount of such commitments by the fund. The fund will
not invest more than 25% of its net assets in when-issued securities.

-4-
<PAGE>

the securities while they are in the possession of the financial institutions.
Cash or liquid high quality debt obligations from a fund's portfolio equal in
value to the repurchase price including any accrued interest will be segregated
by Custodian on the fund's records while a reverse repurchase agreement is in
effect. Reverse repurchase agreements involve the risk that the market value of
securities sold by the fund may decline below the price at which it is obligated
to repurchase the securities. Reverse repurchase agreement may be used as a
means of borrowing temporarily for extraordinary or emergency purposes or to
facilitate redemptions and are not used to leverage the fund.

Variable and Floating Rate Securities. The Funds may purchase variable rate
securities which are instruments issued or guaranteed by entities such as the:
(1) US Government, or an agency or instrumentality thereof, (2) corporations,
(3) financial institutions or (4) insurance companies that have a rate of
interest subject to adjustment at regular intervals but less frequently than
annually. A variable rate security provides for the automatic establishment of a
new interest rate on set dates. Variable rate obligations whose interest is
readjusted no less frequently than annually will be deemed to have a maturity
equal to the period remaining until the next readjustment of the interest rate.
The Funds may also purchase floating rate securities. A floating rate security
provides for the automatic adjustment of its interest rate whenever a specified
interest rate changes. Interest rates on these securities are ordinarily tied
to, and are a percentage of, a widely recognized interest rate, such as the
yield on 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.

-5-
<PAGE>

The market value of mortgage-related securities depends on, among other things,
the level of interest rates, the certificates' coupon rates and the payment
history of the underlying borrowers.

-6-
<PAGE>

INVESTMENT RESTRICTIONS

The Fund is subject to the following fundamental investment restrictions, each
of which applies at the time an investment is made. The Fund will not:

1. Borrow money, 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 investments once borrowed funds (including reverse
repurchase agreements) exceed 5% of its total assets.

2. Pledge, mortgage or hypothecate its assets. However, the Fund may
pledge securities having a market value (on a daily marked-to-market
basis) at the time of the pledge not exceeding 33-1/3% of the value
of the Fund's total assets to secure borrowings permitted by
paragraph (1) above.

3. Make loans to any person or firm; provided, however, that the making
of a loan shall not include (i) the acquisition for investment of
bonds, debentures, notes or other evidences of indebtedness of any
corporation or government which are publicly distributed or of a
type customarily purchased by institutional investors, or (ii) the
entry into "repurchase agreements." A Fund may lend its portfolio
securities to broker-dealers or other institutional investors if the
aggregate value of all securities loaned does not exceed 33-1/3% of
the value of the Fund's total assets.

4. Engage in the business of underwriting securities issued by others,
except that the Fund will not be deemed to be an underwriter or to
be underwriting on account of the purchase of securities subject to
legal or contractual restrictions on disposition.

5. Issue senior securities, except as permitted by its investment
objective, policies and restrictions, and except as permitted by the
1940 Act.

6. Purchase or sell puts, calls or invest in straddles, spreads or any
combination thereof.

7. Make short sales of securities or purchase any securities on margin,
except for such short-term credits as are necessary for the
clearance of transactions.

8. Purchase from or sell portfolio securities to its officers or
directors or other "interested persons" (as defined in the 1940 Act)
of the Fund, including their investment advisors and affiliates,
except as permitted by the 1940 Act and exemptive rules or orders
thereunder.

9. Invest more than 10% of its net assets in the aggregate, on an
ongoing basis, in illiquid securities or securities that are not
readily marketable, including repurchase agreements and time
deposits of more than seven days' duration.

-7-
<PAGE>

10. Make investments for the purpose of gaining control of an issuer's
management.

11. Invest 25% or more of the value of its total assets in securities of
companies primarily engaged in any one industry (other than the US
Government, its agencies and instrumentalities). Concentration may
occur as a result of changes in the market value of portfolio
securities, but may not result from investment. Foreign and domestic
branches of US banks and US branches of foreign banks are not
considered a single industry for purposes of this restriction.

12. With respect to 75% of its total assets, invest in securities of any
one issuer (other than securities issued by the US Government, its
agencies, and instrumentalities), if immediately after and as a
result of such investment the current market value of the Fund's
holdings in the securities of such issuer exceeds 5% of the value of
the Fund's assets and to not more than 10% of the outstanding voting
securities of such issuer.

13. Purchase or sell real estate or real estate mortgage loans;
provided, however, that the Fund may invest in securities secured by
real estate or interests therein or issued by companies which invest
in real estate or interests therein.

14. Purchase interests in oil, gas or other mineral exploration or
development programs.

15. Purchase the securities of any issuer if the Investment Company's
officers, Directors, Advisor or any of their affiliates beneficially
own more than one-half of 1% of the securities of such issuer or
together own beneficially more than 5% of the securities of such
issuer.

16. Invest in securities of any issuer which, together with its
predecessor, has been in operation for less than three years if, as
a result, more than 5% of the Funds' total assets would be invested
in such securities, except that the Funds may invest in securities
of a particular issuer to the extent their respective underlying
indices invest in that issuer.

MANAGEMENT OF THE FUND

BOARD OF TRUSTEES AND OFFICERS

-8-
<PAGE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Name, Address and Age Position(s) with Principal Occupation(s) During Past 5 Years
SSgA funds
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Lynn L. Anderson Trustee (Interested o Vice Chairman, Frank Russell Company;
909 A Street Person of the SSgA
Tacoma, WA 98402 funds as defined in o Chairman of the Board and Chief Executive Officer,
Age 60 the 1940 Act), Frank Russell Investment Management Company and
Chairman of the Russell Fund Distributors, Inc.;
Board, President and
Treasurer o Chairman of the Board, Frank Russell Trust Company;

o Trustee, President and Chief Executive Officer, Frank
Russell Investment Company and Russell Insurance
Funds; and

o Director, Russell Insurance Agency, Inc., Frank
Russell Investments (Ireland) Limited, Frank Russell
Investment Company plc; Frank Russell Institutional
Funds plc, Frank Russell Qualifying Investor Fund, and
Frank Russell Investments (Cayman) Ltd.
- ------------------------------------------------------------------------------------------------------------------------
William L. Marshall Trustee o Chief Executive Officer and President, Wm. L. Marshall
33 West Court Street Associates, Inc. (a registered investment advisor and
Doylestown, PA 18901 provider of financial and related consulting
Age 57 services);

o Certified Financial Planner and Member, Institute of
Certified Financial Planners;

o Member, Registry of Financial Planning Practitioners
and Advisory Committee, International Association for
Financial Planning Broker-Dealer Program;

o Registered Representative for Securities with FSC
Securities Corp., Marietta, Georgia.
- ------------------------------------------------------------------------------------------------------------------------
Steven J. Mastrovich Trustee o President, Key Global Capital, Inc.;
176 Federal Street, 3rd Floor
Boston, MA 02110 o From 1997 to 1998, Partner, Squire, Sanders & Dempsey
Age 43 (law firm);

o From 1994 to 1997, Partner, Brown, Rudnick, Freed &
Gesmer (law firm); and

-9-
<PAGE>

<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Bruce D. Taber Trustee o Consultant, Computer Simulation, General Electric
26 Round Top Road Industrial Control Systems.
Boxford, MA 01921
Age 56
- ------------------------------------------------------------------------------------------------------------------------
Henry W. Todd Trustee o President and Director, Zink & Triest Co., Inc.
111 Commerce Drive (dealer in vanilla flavor materials); and
Montgomeryville, PA 18936
Age 52 o Director, Executive Vice President, A.M. Todd Group,
Inc. and Flavorite Laboratories.
- ------------------------------------------------------------------------------------------------------------------------
J. David Griswold Vice President and o Assistant Secretary and Associate General Counsel,
909 A Street Secretary Frank Russell Investment Management Company, Russell
Tacoma, WA 98402 Fund Distributors, Inc., Frank Russell Capital Inc.,
Age 42 Frank Russell Company and Frank Russell Investments
(Delaware), Inc.;

o Director, Secretary and Associate General Counsel,
Frank Russell Securities, Inc.;

o Secretary, Frank Russell Canada Limited/Limitee.
- ------------------------------------------------------------------------------------------------------------------------
Mark E. Swanson Assistant Secretary, o Director - Funds Administration, Frank Russell
909 A Street Assistant Treasurer and Investment Management Company and Frank Russell Trust
Tacoma, WA 98402 Principal Accounting Company; and
Age 36 Officer
o Treasurer and Chief Accounting Officer, Frank Russell
Investment Company and Russell Insurance Funds.
- ------------------------------------------------------------------------------------------------------------------------
Rick J. Chase Assistant Secretary o Manager, Fund Administration, Frank Russell Investment
909 A Street Management Company; and
Tacoma, WA 98402
Age 34 o Assistant Treasurer, Frank Russell Investment Company
and Russell Insurance Funds.
- ------------------------------------------------------------------------------------------------------------------------
Deedra S. Walkey Assistant Secretary o Associate General Counsel and Assistant Secretary,
909 A Street Frank Russell Company, Frank Russell Investment
Tacoma, WA 98402 Management Company, Frank Russell Trust Company, Frank
Age 35 Russell Investment Company, Russell Insurance Funds,
and Russell Insurance Agency.
- ------------------------------------------------------------------------------------------------------------------------
Carla L. Anderson Assistant Secretary o Paralegal and Assistant Secretary, Frank Russell
909 A Street Company, Frank Russell Investment Management Company,
Tacoma, WA 98402 Frank Russell Securities, Inc., Russell Fund
Age 34 Distributors, Inc., Frank Russell Capital Inc., Frank
Russell International Services Company Inc., Russell
Real Estate Advisors Inc. and A Street Investment
Associates, Inc.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

COMPENSATION

-10-
<PAGE>

----------------------------------------------------
Trustee Total Annual Compensation
from Investment Company per
Fiscal Year
----------------------------------------------------
Lynn L. Anderson $0
----------------------------------------------------
William L. Marshall $63,000
----------------------------------------------------
Steven J. Mastrovich $63,000
----------------------------------------------------
Patrick J. Riley $63,000
----------------------------------------------------
Richard D. Shirk $63,000
----------------------------------------------------
Bruce D. Taber $63,000
----------------------------------------------------
Henry W. Todd $63,000
----------------------------------------------------

--------------------------------------------------------------------
Name of SSgA Fund Amount of Total Annual Trustee
Compensation (Including Out of
Pocket Expenses) Attributable to
Each Fund For the Fiscal Year
Ended August 31, 1999
--------------------------------------------------------------------
Money Market $148,616
--------------------------------------------------------------------
US Government Money Market 26,152
--------------------------------------------------------------------
Matrix Equity 11,327
--------------------------------------------------------------------
S&P 500 Index 47,343
--------------------------------------------------------------------
Small Cap 8,227
--------------------------------------------------------------------
Yield Plus 14,754
--------------------------------------------------------------------
Bond Market 4,966
--------------------------------------------------------------------
Emerging Markets 6,022
--------------------------------------------------------------------
US Treasury Money Market 20,386
--------------------------------------------------------------------
Growth & Income 5,267
--------------------------------------------------------------------
Intermediate 2,187
--------------------------------------------------------------------
Prime Money Market 50,634
--------------------------------------------------------------------
Tax Free Money Market 6,081
--------------------------------------------------------------------
Active International 2,582
--------------------------------------------------------------------
International Growth Opportunities 1,494
--------------------------------------------------------------------
Tuckerman Active REIT 1,473
--------------------------------------------------------------------
High Yield Bond 1,191
--------------------------------------------------------------------
Special Equity 1,531
--------------------------------------------------------------------
Aggressive Equity(1) 839
--------------------------------------------------------------------
IAM SHARES(1) 430
--------------------------------------------------------------------
All Life Solutions Funds 0
--------------------------------------------------------------------

- ----------
(1) The fund did not operate a full year during fiscal 1999.

-11-
<PAGE>

CONTROLLING AND PRINCIPAL SHAREHOLDERS

The Trustees and officers of Investment Company, as a group, own less than 1% of
Investment Company's voting securities.

o Global Financial Asset Services Omnibus Control Account MT01, State Street
Bank and Trust Company, PO Box 1992, North Quincy, MA 02171--65%.

INVESTMENT ADVISORY AND OTHER SERVICES

ADVISOR

The fund accrued the following expenses to Advisor for the fiscal years ended
August 31:

----------------------------------------------------------------
1999 1998 1997
----------------------------------------------------------------
$4,030,377 $2,587,310 $1,919,970
----------------------------------------------------------------

The Advisor voluntarily agreed to reimburse the fund for all expenses in excess
of .20% of average daily net assets on an annual basis. The Advisor has
contractually agreed to this waiver through December 31, 2010. The Advisor
reimbursed $1,729,867 in fiscal 1999, $1,437,500 in fiscal 1998 and $986,421 in
fiscal 1997.

ADMINISTRATOR

Frank Russell Investment Management Company serves as the Investment Company's
Administrator, pursuant to an Administration Agreement dated April 12, 1988.

-12-
<PAGE>

The fund accrued the following expenses to Administrator for the fiscal years
ended August 31:

----------------------------------------------------------------
1999 1998 1997
----------------------------------------------------------------
$835,190 $522,160 $375,056
----------------------------------------------------------------

CUSTODIAN AND TRANSFER AGENT

DISTRIBUTOR

-13-
<PAGE>

DISTRIBUTION PLAN AND SHAREHOLDER SERVICING ARRANGEMENTS

The fund accrued the following expenses to Russell Fund Distributors for the
fiscal years ended August 31:

----------------------------------------------------------------
1999 1998 1997
----------------------------------------------------------------
$673,246 $470,433 $364,711
----------------------------------------------------------------

-14-
<PAGE>

For fiscal 1999, these amounts are reflective of the following individual
payments:

Advertising $ 8,649
Printing of Prospectuses 17,543
Compensation to Dealers 65,879
Compensation to Sales Personnel 306,043
Other(1) 275,132
--------

The fund accrued expenses in the following amount to Advisor, under a Service
Agreement pursuant to Rule 12b-1, for the fiscal years ended August 31:

----------------------------------------------------------------
1999 1998 1997
----------------------------------------------------------------
$671,730 $431,218 $319,995
----------------------------------------------------------------

INDEPENDENT ACCOUNTANTS

LEGAL COUNSEL

Goodwin, Procter & Hoar LLP, Exchange Place, Boston, MA 02109, provides legal
services to the SSgA Funds.

BROKERAGE PRACTICES AND COMMISSIONS

- ----------
(1) Other expenses may include such items as compensation for travel,
conferences and seminars for staff, subscriptions, office charges and
professional fees.

-15-
<PAGE>

($000)
---------------
Lehman Brothers Inc.(1) 0
CS First Boston Corp.(1) 0
Goldman Sachs & Co.(1) 0
Merrill Lynch Pierce Fenner(1) 0
Prebon Securities(1) 0
J.P. Morgan, Inc.(1) 0
Lummis & Co.(1) 0
Euro Brokers Inc.(1) 0
General Motors Acceptance(1) 0
Chase Bank(1) 100,000

The Prime Money Market Fund normally does not pay a stated brokerage commission
on transactions.

PRICING OF FUND SHARES

- ----------
(1) Broker principal transaction only.

-16-
<PAGE>

as of the close of the regular trading session of the New York Stock Exchange
(currently, 4:00 p.m. Eastern time). A business day is one on which both the
Boston Federal Reserve and the New York Stock Exchange are open for business.

It is the fund's policy to use its best efforts to maintain a constant price per
share of $1.00, although there can be no assurance that the $1.00 net asset
value per share will be maintained. In accordance with this effort and pursuant
to Rule 2a-7 under the 1940 Act, the fund uses the amortized cost valuation
method to value its portfolio instruments. This method involves valuing an
instrument at its cost and thereafter assuming a constant amortization to
maturity of any discount or premium, even though the portfolio security may
increase or decrease in market value generally in response to changes in
interest rates. While this method provides certainty in valuation, it may result
in periods during which value, as determined by amortized cost, is higher or
lower than the price the fund would receive if it sold the instrument.

For example, in periods of declining interest rates, the daily yield on the
fund's shares computed by dividing the annualized daily income on the fund's
portfolio by the net asset value based upon the amortized cost valuation
technique may tend to be higher than a similar computation made by using a
method of valuation based upon market prices and estimates. In periods of rising
interest rates, the daily yield on fund shares computed the same way may tend to
be lower than a similar computation made by using a method of calculation based
upon market prices and estimates.

The Trustees have established procedures reasonably designed to stabilize the
fund's price per share at $1.00. These procedures include: (1) the determination
of the deviation from $1.00, if any, of the fund's net asset value using market
values; (2) periodic review by the Trustees of the amount of and the methods
used to calculate the deviation; and (3) maintenance of records of such
determination. The Trustees will promptly consider what action, if any, should
be taken if such deviation exceeds 1/2 of one percent.

TAXES

-17-
<PAGE>

CALCULATION OF PERFORMANCE DATA

P(1+T)^n = ERV

where: P = a hypothetical initial payment of $1,000

T = average annual total return

n = number of years

ERV = ending redeemable value of a $1,000 payment made
at the beginning of the 1-year, 5-year and 10-year
periods at the end of the year or period

Total returns and other performance figures are based on historical earnings and
are not indicative of future performance.

The current annualized yield of the fund may be quoted in published material.
The yield is calculated daily based upon the seven days ending on the date of
calculation ("base period"). The yields are computed by determining the net
change, exclusive of capital changes, in the value of a hypothetical
pre-existing account having a balance of one share at the beginning of the base
period, subtracting a hypothetical charge reflecting deductions from shareholder
accounts and dividing the net change in the account value by the value of the
account at the beginning of the base period to obtain the base period return,
and then multiplying the base period return by (365/7) with the resulting yield
figure carried to the nearest hundredth of one percent. An effective yield is
computed by determining the net change, exclusive of capital changes, in the
value of a hypothetical pre-existing account having a balance of one share at
the beginning of the period, subtracting a hypothetical charge reflecting
deductions from shareholder accounts, and dividing the difference by the value
of the account at the beginning of the base period to obtain the base period
return, and then compounding the base period return by adding 1, raising the sum
to a power equal to 365 divided by 7, and subtracting 1 from the result,
according to the following formula:

EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)^(365/7)]-1

The following are the Fund's current and effective yields for the seven-day
period ended August 31, 1999:

Current Yield 5.13%

Effective Yield 5.26%

The yields quoted are not indicative of future results. Yields will depend on
the type, quality, maturity, and interest rate of money market instruments held
by the fund.