STATE STREET RESEARCH INSTITUTIONAL FUNDS, N-1A/A, 1999-06-02

STATE STREET RESEARCH INSTITUTIONAL FUNDS
N-1A/A, 1999-06-02

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<PAGE>

As filed with the Securities and Exchange Commission on June 2, 1999

Securities Act of 1933 Registration No. 333-73433
Investment Company Act of 1940 File No. 811-09247
================================================================================

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]

Pre-Effective Amendment No. 1 [x]

Post-Effective Amendment No. [ ]
---

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]

Amendment No. 1 [X]
---

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

STATE STREET RESEARCH INSTITUTIONAL FUNDS
--------------------------------------
(Exact Name of Registrant as Specified in Charter)

One Financial Center, Boston, Massachusetts 02111
--------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, Including Area Code: (617) 357-1200

Francis J. McNamara, III
Executive Vice President, Secretary & General Counsel
State Street Research & Management Company
One Financial Center
Boston, Massachusetts 02111
--------------------------------------------------------
(Name and Address of Agent for Service)

Copy to:

Gregory D. Sheehan, Esq.
Ropes & Gray
One International Place, Boston, Massachusetts 02111

Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.

Title of Securities Being Registered: Shares of Beneficial Interest of the
State Street Research Institutional Funds.

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

The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>

STATE STREET RESEARCH
INSTITUTIONAL FUNDS

CORE FIXED INCOME FUND CORE LARGE CAP GROWTH FUND

A BOND FUND FOCUSING A STOCK FUND SEEKING COMPETITIVE
ON U.S. INVESTMENT GRADE TOTAL RETURNS RELATIVE TO THE
FIXED-INCOME SECURITIES. STANDARD & POOR'S 500 COMPOSITE
STOCK INDEX

CORE PLUS FIXED INCOME FUND LARGE CAP GROWTH FUND

A BOND FUND INVESTING IN INVESTMENT A STOCK FUND SEEKING COMPETITIVE
GRADE FIXED-INCOME SECURITIES AND TOTAL RETURNS RELATIVE TO THE
USING AN OPPORTUNISTIC APPROACH TO RUSSELL 1000 GROWTH INDEX
HIGH YIELD AND FOREIGN SECURITIES.

MANAGED BY STATE STREET RESEARCH & MANAGEMENT COMPANY

PROSPECTUS
July 1, 1999

THIS PROSPECTUS CONTAINS INFORMATION YOU SHOULD KNOW BEFORE YOU INVEST. PLEASE
READ IT CAREFULLY AND KEEP IT WITH YOUR INVESTMENT RECORDS.

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.

<PAGE>

Contents

THE FUNDS.......................................................1
OBJECTIVES AND PRINCIPAL STRATEGIES........................1
Fixed Income Funds...............................1
Equity Funds.....................................3
PRINCIPAL RISKS............................................4
Fixed Income Funds...............................4
Equity Funds.....................................5
INVESTOR EXPENSES..........................................5
INVESTMENT MANAGER........................................10

CLASSES OF SHARES..............................................10
Share Classes.............................................10
Eligibility for Classes -- New Investors..................11
Eligibility and Conversion Between Classes --
Existing Shareholders....................................11

BUYING, EXCHANGING AND SELLING SHARES..........................12
General Information.......................................12
Opening an Account........................................12
Buying Shares.............................................13
Cash Purchase Option............................13
In-Kind Purchase Option.........................14
Exchanging Shares.........................................14
Selling Shares............................................14
Methods for Selling Shares......................15
Payment Options.................................15
In-Kind Redemption of Shares....................15
Other Information on Selling Shares.............15

DISTRIBUTIONS..................................................16

VALUATION AND OTHER POLICIES...................................17

TAX CONSIDERATIONS.............................................18

OTHER SECURITIES AND RISKS.....................................19

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<PAGE>

THE FUNDS

This prospectus describes four State Street Research Institutional Funds
(the "Funds") that are available to institutional investors and private clients.
The Funds' Objectives and Principal Strategies are described below, followed by
a discussion of the Principal Risks of investing in the Funds.

Additional information about other Fund investment strategies, securities
and risks begins on page 19.

OBJECTIVES AND PRINCIPAL STRATEGIES

FIXED INCOME FUNDS

STATE STREET RESEARCH CORE FIXED INCOME FUND

OBJECTIVE. The State Street Research Core Fixed Income Fund (the "Core
Fixed Fund") seeks competitive total returns primarily from investing in fixed
income securities.

BENCHMARK. The investment manager measures the performance of the Core
Fixed Fund by comparing its total return to the Lehman Brothers Aggregate Bond
Index and to the performance of other investment managers on similar accounts.

PRINCIPAL STRATEGIES. In constructing the Core Fixed Fund's portfolio,
the investment manager seeks a combination of yield and potential for price
appreciation. In order to manage the price sensitivity of the overall
portfolio to changes in interest rates, the investment manager establishes
duration targets based on economic and monetary factors affecting interest
rates and bond market returns. The investment manager also allocates the
Fund's investments among bond market sectors (such as U.S. Treasury
securities, U.S. government agency securities, mortgage-backed or
asset-backed securities and corporate debt securities) based upon its
evaluation of the relative price and yield attractiveness of the various
sectors. The investment manager also decides how the Fund's portfolio should
be positioned along the yield curve by selecting securities in certain
maturity ranges based upon the relative price and yield attractiveness of
those maturities. When selecting particular fixed income securities that will
satisfy the desired duration, yield curve positioning and sector weighting
for the overall portfolio, the investment manager relies primarily on its own
research regarding the credit quality, yield characteristics and interest
rate sensitivity of individual securities.

The Core Fixed Fund invests primarily in securities rated, at the time of
purchase, investment grade by at least one nationally recognized rating agency
or considered to be of comparable quality by the investment manager ("investment
grade securities"). Currently, such securities are those rated within or above
the Standard & Poor's BBB- or the Moody's Baa3 rating categories, or within
comparable categories of other rating agencies.

The Core Fixed Fund's investment grade securities may include debt
securities issued by the U.S. Treasury or any U.S. government agency, mortgage
and asset-backed securities (including Collateralized Mortgage Obligations
("CMOs")), U.S. dollar-denominated debt

-1-

<PAGE>

securities of foreign issuers, corporate debt and cash equivalents.
Additionally, the Core Fixed Fund also may use futures, options, swaps and other
derivatives for hedging purposes and for portfolio duration or yield curve
management. Additionally, the Core Fixed Fund may invest in Rule 144A and other
unregistered securities.

The investment manager monitors and adjusts the Core Fixed Fund's
investments to maintain a weighted average asset quality of A or higher, and a
duration generally within 1 1/2 years of the Lehman Brothers Aggregate Bond
Index. Securities downgraded below investment grade will be sold within one year
of such downgrade or as the investment manager believes market conditions
reasonably permit.

STATE STREET RESEARCH CORE PLUS FIXED INCOME FUND

OBJECTIVE. The State Street Research Core Plus Fixed Income Fund (the "Core
Plus Fund") seeks competitive total returns primarily from investing in fixed
income securities.

BENCHMARK. The investment manager measures the performance of the Core Plus
Fund by comparing its total return to the Lehman Brothers Aggregate Bond Index
and to the performance of other investment managers on similar accounts.

PRINCIPAL STRATEGIES. The investment manager follows the same overall
management strategy as with the Core Fixed Income Fund, but the Core Plus Fund
seeks to outperform the Lehman Brothers Aggregate Bond Index by a somewhat
greater margin than the Core Fixed Fund by assuming the additional risks (and
additional opportunities for loss) inherent in non-U.S. dollar-denominated,
lower quality and emerging market securities.

The Core Plus Fund may invest in any of the same types of securities and
derivative instruments (including for the same purposes) as the Core Fixed Fund.
In addition, the Core Plus Fund may invest up to 30% of its total assets
(measured at the time of purchase) in total in (i) non-U.S. dollar-denominated
securities not exceeding 20% of the Fund's total assets (measured at the time of
purchase), (ii) lower quality securities not exceeding 20% of the Fund's total
assets (measured at the time of purchase), and (iii) securities of issuers
located in developing or emerging market countries not exceeding 10% of its
total assets (measured at the time of purchase). (Securities purchased by the
Fund within the 10% limit in clause (iii) will not be counted toward the limits
in clauses (i) or (ii), but will be counted toward the preceding 30% limit.)

The Core Plus Fund's lower quality securities may include high yield bonds,
convertible bonds, convertible preferred stocks and warrants and other
securities attached to high yield bonds or other fixed income securities. Lower
quality securities are securities that, at the time of purchase, are not rated
investment grade by any nationally recognized rating agency and are not
considered to be of investment grade quality by the investment manager. Although
the Core Plus Fund does not generally seek to eliminate all foreign currency
risk, it may at times use foreign currencies, forward currency contracts and
currency-related derivative instruments, including cross-hedging techniques, to
hedge some or all of its foreign currency exposure.

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<PAGE>

In managing the Fund's portfolio, the investment manager monitors and
adjusts the Fund's investments to maintain a weighted average asset quality of
BBB or higher, and a duration generally within 1 1/2 years of the Lehman
Brothers Aggregate Bond Index.

EQUITY FUNDS

STATE STREET RESEARCH CORE LARGE CAP GROWTH FUND

OBJECTIVE. The State Street Research Core Large Cap Growth Fund (the "Core
Large Cap Growth Fund") seeks to provide long-term growth of capital.

BENCHMARK. The investment manager measures the performance of the Core
Large Cap Growth Fund by comparing its return to the Standard & Poor's 500
Composite Stock Index (the "S&P 500 Index") and to the performance of other
investment managers on similar accounts

PRINCIPAL STRATEGIES. The Core Large Cap Growth Fund invests primarily in
stocks believed by the investment manager to have long-term growth potential. In
selecting stocks, the investment manager seeks to identify large capitalization
stocks with sustainable above average earnings growth. Generally, the Core Large
Cap Growth Fund invests in no more than 60 different stocks, with the
investments weighted to reflect the investment manager's highest confidence
ideas. The investment manager may also adjust the sector allocations of the
portfolio relative to the S&P 500 Index. The investment manager attempts to
manage risk by maintaining a moderate predicted tracking error relative to the
S&P 500 Index. While the Core Large Cap Growth Fund emphasizes established
companies, it may also invest in other sizes or types of companies. Current
income is not a significant factor in stock selection.

For cash management purposes, the Core Large Cap Growth Fund may also
invest in U.S. government securities, commercial paper rated A-1 or better by
Standard & Poor's or P-1 or better by Moody's, and other cash equivalents.

STATE STREET RESEARCH LARGE CAP GROWTH FUND

OBJECTIVE. The State Street Research Large Cap Growth Fund (the "Large Cap
Growth Fund") seeks to provide long-term growth of capital.

BENCHMARK. The investment manager measures the performance of the Large Cap
Growth Fund by comparing its total return to the Russell 1000 Growth Index and
to the performance of other investment managers on similar accounts.

PRINCIPAL STRATEGIES. The Large Cap Growth Fund invests primarily in the
same types of securities as the Core Large Cap Growth Fund. This Fund may be
more volatile than the Core Large Cap Growth Fund, however, because a higher
percentage of the Large Cap Growth Fund's assets are expected to be invested in
stocks of companies listed in the Russell 1000 Growth Index, which tracks growth
companies included among the 1,000 largest U.S. companies based on total market
capitalization. The Large Cap Growth Fund's more aggressive growth style is also
reflected in its greater emphasis on growth sectors, currently including
technology and health care, relative to the S&P 500 Index.

-3-

<PAGE>

PRINCIPAL RISKS

The Funds' shares will change in value, and you could lose money by
investing in the Funds. The Funds may not achieve their respective Objectives.

PRINCIPAL RISKS -- FIXED INCOME FUNDS

Because the Core Fixed Fund and the Core Plus Fund (together, the "Fixed
Income Funds") invest primarily in bonds and other fixed income securities,
their major risks are those of bond investing, including the tendency of prices
to fall when interest rates rise. There is also the risk that bond issuers may
default on principal or interest payments. In general, the risks associated with
fixed income investing are greater for bonds with longer maturities.

Lower quality fixed income securities, such as may be held by the Core Plus
Fund, generally are considered to be speculative investments and involve greater
risks and market price fluctuations than higher quality securities. The prices
of most lower quality securities are vulnerable to economic recessions, when it
becomes difficult for issuers to generate sufficient cash flow to pay principal
and interest. Many lower quality securities are also affected by weak equity
markets, when issuers find it hard to improve their financial condition by
replacing debt with equity and when investors, such as the Funds, find it hard
to sell their lower quality securities at desirable prices. In addition, the
value of a lower quality security will usually fall substantially if an issuer
defaults or goes bankrupt. Even anticipation of defaults by certain issuers, or
the perception of economic or financial weakness, may cause the market for lower
quality securities to fall.

Both U.S. dollar-denominated and non-U.S. dollar-denominated securities of
non-U.S. issuers involve additional risks to those presented by securities of
U.S. issuers. They are generally more volatile and less liquid than similar U.S.
securities, in part because of higher political and economic risks, lack of
reliable information and fluctuations in currency exchange rates. For non-U.S.
dollar-denominated securities, such as may be held by the Core Plus Fund,
changes in currency exchange rates have the potential to reduce or eliminate
gains achieved in securities markets or to create net losses. These risks are
usually higher for investments in developing and emerging market countries.

Mortgage-related securities, which represent interests in pools of
mortgages, may offer attractive yields but generally carry additional risks. The
prices and yields of mortgage-related securities typically assume that the
securities will be redeemed at a given time before maturity. When interest rates
fall substantially, these securities usually are redeemed early because the
underlying mortgages are often prepaid. The Funds would then have to reinvest
the money at a lower rate. In addition, the price or yield of mortgage-related
securities may fall if they are redeemed later than expected.

Like mortgage-related securities, other types of asset-backed securities
represent interests in pools of assets, for example retail installment loans and
revolving credit receivables such as credit card receivables. They are subject
to prepayment risks similar to those of mortgage-related securities, and to
delays in payment due to unanticipated legal or administrative costs.

-4-

<PAGE>

Certain types of derivatives, including some derivatives that may be used
by the Fixed Income Funds, can amplify a gain or loss, potentially earning or
losing substantially more money than the actual cost of the derivative. With
some derivatives, whether used for hedging or investment, there is also the risk
that the counterparty may fail to honor its contract terms, causing a loss for a
Fund. The Fixed Income Funds' use of derivatives will be consistent with their
portfolio credit quality and duration management policies described above.

PRINCIPAL RISKS -- EQUITY FUNDS

Because the Core Large Cap Growth and Large Cap Growth Funds (together, the
"Equity Funds") invest primarily in stocks, their major risks are those of stock
investing, including sudden, unpredictable drops in value and the potential for
periods of lackluster performance. In addition, growth stocks are generally more
volatile than many other types of equity investments, such as value stocks and
general stock indices, because more of their present market value is derived
from future earnings expectations. At times when it appears these expectations
may not be met, growth stock prices typically fall.

There are particular risks associated with investing in companies of a
given size. Larger, more established companies may be less able to respond
quickly to competitive challenges, such as changes in technology and consumer
tastes. Smaller companies may be particularly sensitive to adverse market and
other developments, since they often have limited product lines or resources
compared to their larger competitors, and may depend on a small or less
experienced management group. Stocks of these companies may be thinly traded and
the companies may be less able to withstand short-term or long-term adverse
economic conditions than larger companies.

Because of these and other risks, the Equity Funds may under-perform
certain other stock funds (those emphasizing value stocks, for example) during
periods when growth stocks are out of favor. The success of each Fund's
investment strategy relative to its benchmark depends largely on the investment
manager's skill in assessing the potential of the stocks the Fund buys.

INVESTOR EXPENSES

The information in the following expense tables describes the expenses that
will be incurred by investors in the Funds. Investors should keep in mind that
the examples are for comparison purposes only. A Fund's actual performance and
expenses may be higher or lower.

-5-

<PAGE>

INVESTOR EXPENSES
CORE FIXED INCOME FUND

<TABLE>
<CAPTION>
ANNUAL FUND EXPENSES (deducted from the Fund's assets, and EXPENSES DEDUCTED FROM FUND ASSETS -- AS A % OF
therefore paid indirectly by all Fund investors) AVERAGE NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
CLASS I* CLASS II* CLASS III* CLASS IV*
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Management Fee(1) 0.40 0.40 0.40 0.40
Other Expenses
Shareholder Service Fee 0.30 0.20 0.10 0.05
Other(1) 0.45 0.45 0.45 0.45
Total Other Expenses 0.75 0.65 0.55 0.50
Total Annual Fund Operating Expenses 1.15 1.05 0.95 0.90
Fee Waiver and Expense Reimbursement 0.65 0.65 0.65 0.65
NET ANNUAL FUND EXPENSES 0.50 0.40 0.30 0.25

EXAMPLE YEARS HELD EXPENSES DEDUCTED FROM FUND ASSETS -- AS A DOLLAR
AMOUNT ON $10,000 INVESTED
- ------------------------------------------------------------------------------------------------------------------------------
CLASS I* CLASS II* CLASS III* CLASS IV*
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 $51 $41 $31 $26
3(2) $301/$160 $269/$128 $238/$97 $222/$80
</TABLE>

The Example converts the "Net Annual Fund Expenses" shown in the expense table
into dollar amounts, and is designed to allow investors to compare the estimated
costs of each Fund with those of other mutual funds. The example illustrates the
costs an investor would incur on an initial investment of $10,000 held for the
number of years indicated, assuming the investor reinvests all distributions and
earns a hypothetical 5% annual return. Investors should keep in mind that the
example is for comparison purposes only. A Fund's actual performance and
expenses may be higher or lower.

(1) THE INVESTMENT MANAGER HAS CONTRACTUALLY AGREED TO WAIVE MANAGEMENT FEES AND
BEAR OR REIMBURSE CERTAIN OTHER FUND OPERATING EXPENSES SUCH THAT TOTAL ANNUAL
FUND OPERATING EXPENSES DO NOT EXCEED 0.20%, EXCLUDING SHAREHOLDER SERVICE FEES,
BROKERAGE COSTS, TAXES AND CERTAIN OTHER EXPENSES THROUGH JUNE 1, 2000 AND
THEREAFTER UNTIL THE INVESTMENT MANAGER HAS GIVEN SIX MONTHS NOTICE OF THE
TERMINATION OF SUCH AGREEMENT.

(2) THE DOLLAR AMOUNTS APPEARING ON THE LEFT ASSUME THAT THE INVESTMENT
MANAGER'S FEE WAIVER AND EXPENSE REIMBURSEMENT ARRANGEMENTS DISCUSSED IN
FOOTNOTE (1) ABOVE ARE NOT EXTENDED BEYOND JUNE 1, 2000. THE DOLLAR AMOUNTS
APPEARING ON THE RIGHT ASSUME THE CONTINUATION OF THE INVESTMENT MANAGER'S FEE
WAIVER AND EXPENSE REIMBURSEMENT ARRANGEMENTS DESCRIBED IN FOOTNOTE (1).
ALTHOUGH THE FUND EXPECTS THESE ARRANGEMENTS TO CONTINUE THROUGH THE 3 YEAR
PERIOD, THERE CAN BE NO ASSURANCES IN THIS REGARD.

* Class descriptions begin on page 10.

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INVESTOR EXPENSES
CORE PLUS FIXED INCOME FUND

ANNUAL FUND EXPENSES (deducted from the Fund's assets, and EXPENSES DEDUCTED FROM FUND ASSETS -- AS A % OF
therefore paid indirectly by all Fund investors) AVERAGE NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
CLASS I* CLASS II* CLASS III* CLASS IV*
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Management Fee(1) 0.40 0.40 0.40 0.40
Other Expenses
Shareholder Service Fee 0.30 0.20 0.10 0.05
Other(1) 0.45 0.45 0.45 0.45
Total Other Expenses 0.75 0.65 0.55 0.50
Total Annual Fund Operating Expenses 1.15 1.05 0.95 0.90
Fee Waiver and Expense Reimbursement 0.65 0.65 0.65 0.65
NET ANNUAL FUND EXPENSES 0.50 0.40 0.30 0.25

* Class descriptions begin on page 10.

-7-

<PAGE>

INVESTOR EXPENSES
CORE LARGE CAP GROWTH FUND

ANNUAL FUND EXPENSES (deducted from the Fund's assets, and (EXPENSES DEDUCTED FROM FUND ASSETS -- AS A % OF
therefore paid indirectly by all Fund investors) AVERAGE NET ASSETS)
- ------------------------------------------------------------------------------------------------------------------------------
CLASS I* CLASS II* CLASS III* CLASS IV*
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Management Fee(1) 0.55 0.55 0.55 0.55
Other Expenses
Shareholder Service Fee 0.30 0.20 0.10 0.05
Other(1) 0.45 0.45 0.45 0.45
Total Other Expenses 0.75 0.65 0.55 0.50
Total Annual Fund Operating Expenses 1.30 1.20 1.10 1.05
Fee Waiver and Expense Reimbursement 0.65 0.65 0.65 0.65
NET ANNUAL FUND EXPENSES 0.65 0.55 0.45 0.40

EXAMPLE YEARS HELD EXPENSES DEDUCTED FROM FUND ASSETS -- AS A DOLLAR
AMOUNT ON $10,000 INVESTED
- ------------------------------------------------------------------------------------------------------------------------------
CLASS I* CLASSII* CLASS III* CLASS IV*
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 $66 $56 $46 $41
3(2) $348/$208 $317/$176 $285/$144 $269/$128

</TABLE>

(1) THE INVESTMENT MANAGER HAS CONTRACTUALLY AGREED TO WAIVE MANAGEMENT FEES AND
BEAR OR REIMBURSE CERTAIN OTHER FUND OPERATING EXPENSES SUCH THAT TOTAL ANNUAL
FUND OPERATING EXPENSES DO NOT EXCEED 0.35%, EXCLUDING SHAREHOLDER SERVICE FEES,
BROKERAGE COSTS, TAXES AND CERTAIN OTHER EXPENSES THROUGH JUNE 1, 2000 AND
THEREAFTER UNTIL THE INVESTMENT MANAGER HAS GIVEN SIX MONTHS NOTICE OF THE
TERMINATION OF SUCH AGREEMENT.

* Class descriptions begin on page 10.

-8-

<PAGE>

INVESTOR EXPENSES
LARGE CAP GROWTH FUND

EXAMPLE YEARS HELD EXPENSES DEDUCTED FROM FUND ASSETS -- AS A DOLLAR
AMOUNT ON $10,000 INVESTED
- ------------------------------------------------------------------------------------------------------------------------------
CLASS I* CLASS II* CLASS III* CLASS IV*
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 $66 $56 $46 $41
3(2) $348/$208 $317/$176 $285/$144 $269/$128

</TABLE>

(1) THE INVESTMENT MANAGER HAS CONTRACTUALLY AGREED TO WAIVE MANAGEMENT FEES AND
BEAR OR REIMBURSE CERTAIN OTHER FUND OPERATING EXPENSES SUCH THAT TOTAL ANNUAL
FUND OPERATING EXPENSES DO NOT EXCEED 0.35%, EXCLUDING SHAREHOLDER SERVICE FEES,
BROKERAGE COSTS, TAXES AND CERTAIN OTHER EXPENSES THROUGH JUNE 1, 2000 AND
THEREAFTER UNTIL THE INVESTMENT MANAGER HAS GIVEN SIX MONTHS NOTICE OF THE
TERMINATION OF SUCH AGREEMENT.

* Class descriptions begin on page 10.

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<PAGE>

INVESTMENT MANAGER

The Funds' investment manager is State Street Research & Management
Company, One Financial Center, Boston, MA 02111. The firm traces its heritage
back to 1924 and the founding of one of America's first mutual funds. Today the
firm has more than $54 billion in assets under management (as of March 31,
1999).

The investment manager is responsible for the Funds' investment and
business activities, and receives the management fee from each Fund. The
investment manager has contractually agreed to waive management fees and bear or
reimburse certain other Fund operating expenses such that Total Annual Fund
Operating Expenses do not exceed 0.20% (Fixed Income Funds) and 0.35% (Equity
Funds), excluding shareholder service fees, brokerage costs, taxes and certain
other expenses through June 1, 2000 and thereafter until the investment manager
has given six months notice of the termination of such agreement. The investment
manager is a subsidiary of Metropolitan Life Insurance Company.

The investment manager's Core Fixed Income team is responsible for managing
the Core Fixed Income and the Core Plus Fixed Income Funds and making decisions
with regard to duration targets, yield curve positioning and weightings of
sectors and types of securities. Mark Marinella, a senior member of the Core
Fixed Income team, is responsible for implementing the strategy of the team with
respect to specific decisions relating to security purchases and sales. A senior
vice president, Mr. Marinella joined the investment manager in August 1998.
Before joining the investment manager, Mr. Marinella served as a principal and
senior portfolio manager at STW Fixed Income Management Ltd., director of fixed
income at CS First Boston Corp., and senior portfolio manager at Dewey Square
Investors and Massachusetts Financial Services. Mr. Marinella has worked as an
investment professional since 1985.

The investment manager's Large Cap Growth Team has been responsible for the
Core Large Cap and Large Cap Funds' day-to-day portfolio management since each
Fund's inception in June 1999.

CLASSES OF SHARES

SHARE CLASSES

Each Fund offers four classes of shares: Class I, Class II, Class III and
Class IV. The sole economic difference among the classes is the level of
shareholder service fee borne by each for shareholder service, reporting and
other support. These differences reflect the lower costs of servicing
shareholder accounts as a percentage of assets for larger accounts. Class I
shares of the Equity Funds may only be purchased by certain institutional
investors, such as retirement plans, foundations, endowments, corporations,
partnerships, trusts, or similar institutional investors ("Institutional
Investors"). Institutional Investors, as well as natural persons with existing
advisory relationships with the investment manager ("Private Clients"), may
purchase Class I shares of the Fixed Income Funds and Class II, Class III and
Class IV shares of all Funds.

-10-

<PAGE>

The Funds have entered into a Servicing Agreement with State Street
Research & Management Company under which the classes pay the following
shareholder service fees, (expressed as an annual percentage of the average
daily net assets of each class of shares): Class I shares -- 0.30%, Class II
shares -- 0.20%, Class III shares -- 0.10%, and Class IV shares -- 0.05%.

ELIGIBILITY FOR CLASSES -- NEW INVESTORS

A new investor's eligibility for a particular class of shares of the Funds
depends primarily on the investor's aggregate amount invested in all of the
Funds (the "Initial Investment"). The Initial Investment must equal the "Minimum
Total Investment" shown in the table below to be eligible for a particular class
of shares of the Funds. As noted above, only Institutional Investors may
purchase Class I shares of the Equity Funds.

ALL FUNDS MINIMUM TOTAL
INVESTMENT
-----------------------------
<S> <C>
Class I $ 1 million
Class II $ 5 million
Class III $15 million
Class IV $25 million
-----------------------------
</TABLE>

ELIGIBILITY AND CONVERSION BETWEEN CLASSES -- EXISTING SHAREHOLDERS

To be eligible to purchase a particular class of shares of any Fund, an
existing shareholder's "Total Investment" must equal the applicable Minimum
Total Investment shown in the table above. The Total Investment for a
shareholder will be determined by the investment manager on the last business
day of each calendar quarter, or on such other dates as the investment manager
may select (each a "Measuring Date"). A shareholder's Total Investment will
equal the aggregate net asset value of the shareholder's shares of all the Funds
as of a particular Measuring Date.

Depending on a shareholder's Total Investment, the shareholder's shares in
any Fund will automatically convert to a different class of shares of that same
Fund, as follows:

- If the shareholder's Total Investment is less than 95% of the Minimum
Total Investment for the shareholder's existing class of shares, the
shares will convert to the class of shares with the lowest shareholder
service fee for which the shareholder is eligible on the Measuring
Date. 95% of the Minimum Total Investment for the four classes of
shares equals $950,000 (Class I), $4.75 million (Class II), $14.25
million (Class III) and $23.75 million (Class IV). Although not
available to Private Clients when making an initial investment in the
Equity

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<PAGE>

Funds, shares held by current Private Client shareholders may convert
to Class I shares as described.

- If the shareholder's Total Investment is equal to or greater than the
Minimum Total Investment for a class of shares with a lower
shareholder service fee than that which is borne by the shareholder's
existing class, the shares will convert to the class of shares with
the lowest shareholder service fee for which the shareholder is
eligible on the Measuring Date.

All conversions will occur within 10 business days following the Measuring Date.

BUYING, EXCHANGING AND SELLING SHARES

GENERAL INFORMATION

If you have questions regarding how to purchase, exchange or sell Fund
shares, contact your State Street Research client service representative. If for
any reason you are unable to reach your State Street Research client service
representative, please call 1-800-521-6548. Whenever communicating in writing,
please address all correspondence to State Street Research Institutional Funds
at One Financial Center, Boston, MA 02111.

TIMING OF REQUESTS. All requests to buy or sell shares received in good
order by State Street Research before the close of regular trading on the New
York Stock Exchange (normally 4:00 p.m. eastern time) will be executed the same
day, at the day's closing share price. Requests received thereafter will be
executed the following day, at that day's closing share price.

TELEPHONE REQUESTS. When you open an account you automatically receive
telephone privileges, allowing you to place requests for your account by
telephone. For your protection, all telephone calls may be recorded. As long as
State Street Research takes certain measures to authenticate telephone requests
on your account, you may be held responsible for unauthorized requests.
Unauthorized telephone requests are rare, but if you want to protect yourself
completely, you can decline the telephone privilege on your application. A Fund
may suspend or eliminate the telephone privilege at any time.

CONFIRMATIONS. Each Fund will send shareholders written confirmation
(including a statement of shares owned) at the time of each transaction.

OPENING AN ACCOUNT

A State Street Research Institutional Funds account (an "Account") may be
opened by calling or writing your State Street Research client service
representative to obtain an application.

-12-

<PAGE>

BUYING SHARES

The Core Fixed and Core Plus Fixed Funds require initial purchases of
shares to be in minimum amounts of $1,000,000 for all investors. The Core Large
Cap Growth and Large Cap Growth Funds require initial purchases to be in minimum
amounts of $1,000,000 for Institutional Investors and $5,000,000 for Private
Clients. For more information about your eligibility for different classes of
shares, see the preceding "Classes of Shares" section.

All orders to purchase shares are subject to acceptance by a Fund.
Purchases will be made in full and fractional shares, calculated to three
decimal places.

Investors should call their State Street Research client service
representative at 1-800- 521-6548 before attempting to place an order for Fund
shares. Investors have the following two options for buying shares:

CASH PURCHASE OPTION

TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
<S> <C> <C>
BY FEDERAL FUNDS WIRE Call State Street Research to Call State Street Research
obtain an account number and to obtain a control number.
forward your application to Instruct your bank to wire funds
State Street Research to:
Institutional Funds. Wire funds
using the instructions at right. - State Street Bank and
Trust Company, Boston,
MA
- ABA: 011000028
- BNF: Fund name and
share class you want to
buy
- AC: 99029761
- OBI: your name and your
account number
- Control: the number given
to you by State Street
Research

BY MAIL Make your check payable to Fill out investment instructions
"State Street Research or indicate the Fund name and
Institutional Funds." Forward account number on your check.
the check and your application Make your check payable to
to State Street Research "State Street Research
Institutional Funds. Institutional Funds." Forward
the check and instructions to
State Street Research
Institutional Funds.

</TABLE>

-13-

<PAGE>

IN-KIND PURCHASE OPTION

Shares of each Fund may be purchased partly or entirely in exchange for
securities, but only subject to the investment manager's determination that the
securities to be exchanged are acceptable. In all cases, the investment manager
reserves the right to reject any particular investment. Securities accepted by
the investment manager in exchange for Fund shares will be valued as set forth
under "Determination of Net Asset Value" as of the time of the next
determination of net asset value. All dividends, interest, subscription or other
rights which are accrued or reflected in the market value of accepted securities
plus any accrued income at the time of valuation become the property of the
relevant Fund and must be delivered to the Fund upon receipt by the investor
from the issuer. A gain or loss for federal income tax purposes may be realized
by investors subject to federal income taxation upon the exchange, depending
upon the investor's basis in the securities tendered.

The investment manager will not approve the acceptance of securities in
exchange for Fund shares unless (1) the investment manager, in its sole
discretion, believes the securities are appropriate investments for the Fund;
(2) the investor represents and agrees that all securities offered to the Fund
are not subject to any restrictions upon their sale by the Fund under the
Securities Act of 1933, or otherwise; and (3) the securities may be acquired
under the relevant Fund's investment restrictions. Investors interested in
making in-kind purchases should telephone their State Street Research client
service representative or call 1-800-521-6548.

PAYING FOR SHARES BY WIRE. Funds may be wired between 8:00 a.m. and 4:00
p.m. eastern time. To make a same day wire investment, please notify State
Street Research by 12:00 noon eastern time of your intention to wire funds, and
make sure your wire arrives prior to the close of trading that day on the New
York Stock Exchange (normally 4:00 p.m. eastern time).

EXCHANGING SHARES

Shareholders of any Institutional Fund may exchange their shares for
shares of any other Institutional Fund without payment of any exchange fees.
Shareholders interested in exchanging shares of one Fund for shares of a
different Fund should contact their State Street Research client service
representative or call 1-800-521-6548.

SELLING SHARES

Shares of each Fund may be redeemed on any day when the New York Stock
Exchange is open for regular trading. The redemption price is the net asset
value per share next determined after receipt of the redemption request in good
order. In order to help facilitate the timely payment of redemption proceeds, it
is recommended that investors telephone their State Street Research client
services representative at least two days prior to submitting a request.

-14-

<PAGE>

METHODS FOR SELLING SHARES

BY TELEPHONE As long as the transaction does not require a written
request, you can sell shares by calling State Street
Research.

BY MAIL Send a letter of instruction to State Street Research
Institutional Funds. Specify the Fund, the account
number, the dollar value or number of shares and
your desired payment option (see below). Be sure to
include all necessary signatures and any additional
documents as may be requested by the Fund.

PAYMENT OPTIONS

BY FEDERAL FUNDS WIRE Check with State Street Research to make sure that a wire
redemption privilege, including a bank designation, is in
place on your account. Once this is established, you may
place your request to sell shares with State Street
Research. Proceeds will be wired to your predesignated
bank account. Proceeds sent by federal funds wire must
total at least $5,000.

BY CHECK A check will be mailed to the account's address of record.

IN-KIND REDEMPTION OF SHARES

With respect to any shareholder, a Fund is only obligated to satisfy
redemption requests in cash to the extent of the lesser of 1% of the Fund's
total assets or $250,000 in any 90 day period. If the investment manager
determines, in its sole discretion, that it would be detrimental to the best
interests of the remaining shareholders of a Fund to make payment wholly or
partly in cash, the Fund may satisfy any redemption request in excess of such
amount in whole or in part by a distribution in kind of readily marketable
securities held by the Fund in lieu of cash. Securities used to redeem Fund
shares in kind will be valued in accordance with the relevant Fund's procedures
for valuation described under "Valuation and Other Policies - Calculating Share
Price." Investors generally will incur brokerage charges on the sale of any such
securities so received in payment of redemptions. In-kind redemptions will be
transferred and delivered as directed by the investor.

OTHER INFORMATION ON SELLING SHARES

Payment on redemption will generally be made as promptly as possible.
However, a Fund may delay sending you redemption proceeds for up to seven days
after the request for a redemption is received by the Fund in good order, and
may under certain circumstances suspend the right of redemption. See "Valuation
and Other Policies -- Additional Policies". A redemption request is in good
order if it includes the correct name in which shares are registered, the
investor's account number and the number of shares or the dollar amount of
shares to be redeemed and if it is signed correctly in accordance with the form
of registration. Persons acting

-15-

<PAGE>

in a fiduciary capacity, or on behalf of a corporation, partnership or
trust, must specify, in full, the capacity in which they are acting.

If you sell shares before the check for those shares has been collected,
you will not receive the proceeds until your initial payment has cleared. This
may take up to 15 days after your purchase was recorded (in rare cases, longer).
If you open an account with shares purchased by wire, you cannot sell those
shares until your application has been processed.

Circumstances that Require Written Requests. Please submit instructions in
writing when any of the following apply:

- the name, authorized signatory, mailing address or client bank account
has changed within the last 30 days

- you want the proceeds to go to a name or address not on the account
registration

- you are transferring shares to an account with a different
registration

When opening an account with the Funds, shareholders will be required to
designate the account(s) to which funds or securities may be transferred upon
redemption. Designation of additional accounts and any change in the accounts
originally designated must be made in writing, together with such documentation
as may be requested by the Fund. All redemption proceeds and other distributions
will be sent to the account or address of record, unless the Fund is instructed
otherwise in writing, together with such documentation as may be requested by
the Fund.

State Street Research will attempt to notify you promptly if any
information necessary to process your request is missing.

DISTRIBUTIONS

Each Fund distributes its net investment income and net capital gains
(collectively "distributions") to shareholders. The Fixed Income Funds declare
and pay dividends from net investment income quarterly. Net capital gains, if
any, are distributed around the end of a Fixed Income Fund's fiscal year, which
is January 31. The Equity Funds typically distribute both their net investment
income and net capital gains, if any, around the end of their fiscal year, which
is also January 31. To comply with tax regulations, a Fund may also pay an
additional capital gains distribution in December.

A shareholder may have distributions from a Fund reinvested in the Fund or
paid in cash. Distributions will be automatically reinvested in the Fund unless
other instructions are given to State Street Research. Cash distributions will
be mailed out by check or routed directly to the bank account designated by the
investor.

-16-

<PAGE>

VALUATION AND OTHER POLICIES

CALCULATING SHARE PRICE. The Funds calculate their share price every
business day at the close of regular trading on the New York Stock Exchange
(normally 4:00 p.m. eastern time). The share price is a Fund's total assets
minus its liabilities divided by the number of existing shares (net asset value,
or NAV).

In calculating its NAV, a Fund uses the last reported sale price or
quotation for portfolio securities at the close of regular trading on the New
York Stock Exchange that day. However, in cases where these are unavailable, or
when the investment manager believes that subsequent events have rendered them
unreliable, a Fund may use fair-value estimates instead.

Because foreign securities markets are sometimes open on different days
from U.S. markets, there may be instances when the value of a Fund's portfolio
changes on days when you cannot buy or sell Fund shares.

ACCOUNTS WITH LOW BALANCES. If the value of a shareholder's account in any
Fund falls below $500,000, State Street Research may, if the shareholder's
account in that Fund is not increased to at least $1,000,000 within 60 days
after notice is mailed to the shareholder, sell the shareholder's shares and
mail the proceeds to the shareholder's address of record.

THE FUNDS' BUSINESS HOURS. The Funds are open the same days as the New York
Stock Exchange (generally Monday through Friday). State Street Research client
service representatives are available from 9:00 a.m. to 5:00 p.m. eastern time
on these days.

ADDITIONAL POLICIES. Please note that the Funds maintain additional
policies and reserve certain rights, including:

- A Fund may vary its requirements for initial or additional
investments, exchanges, and reinvestments.

- At any time, a Fund may change any of its order acceptance practices,
and may suspend the sale of its shares.

- Each Fund may suspend the right of redemption and may postpone payment
for more than seven days when the New York Stock Exchange is closed
for other than weekends or holidays, or during any other period
permitted by the SEC for the protection of investors.

- Certificates are not available to be issued for any Fund or class.

-17-

<PAGE>

TAX CONSIDERATIONS

An investor subject to federal income tax whose investment is not in a
tax-deferred or non-taxable account may want to avoid:

- investing a large amount in a Fund close to the end of the fiscal year
or a calendar year (if the Fund makes a capital gains distribution,
the investor will receive some of the investor's investment back, as a
taxable distribution);

- selling shares at a loss for tax purposes and investing in a
substantially identical investment (such as the same Fund or a similar
Fund) within 30 days before or after such sale (such a transaction is
usually considered a "wash sale," and an investor will not be allowed
to claim a tax loss on a wash sale).

The Funds have been advised by counsel that the conversion of a
shareholder's investment from one class of shares to another class of shares in
the same Fund should not result in the recognition of gain or loss in the
converted Fund's shares. The shareholder's tax basis in the new class of shares
immediately after the conversion should equal the shareholder's basis in the
converted shares immediately before conversion, and the holding period of the
new class of shares should include the holding period of the converted shares.

TAX EFFECTS OF DISTRIBUTIONS AND TRANSACTIONS. Each Fund intends to qualify
as a regulated investment company under the Internal Revenue Code and to meet
all other requirements necessary in order for the Fund not to be subject to
federal income taxes on the ordinary income and net realized capital gain that
it distributes to its shareholders.

In general, distributions of investment income and short-term capital gains
(I.E., gains from assets that the Fund has held for one year or less) will be
taxable to shareholders subject to federal income tax as ordinary income.
Corporate shareholders may be entitled to a dividends received deduction with
respect to certain designated dividends. Capital gain distributions relating to
gains from assets held by the Fund for more than one year will be taxable to
shareholders subject to federal income tax as long-term capital gain.

Distributions will be taxable to a shareholder as described above even if
they are paid from income earned or gains realized by a Fund prior to the
shareholder's investment and thus were included in the price paid by the
shareholder for its shares. In addition, distributions by a Fund will be taxable
as described above regardless of whether the shareholder receives the
distributions in cash or has them reinvested in the Fund. Every year, each Fund
will provide each shareholder with information detailing the amount of ordinary
income and capital gains distributed to the shareholder for the previous year.

A Fund's investments in foreign securities may be subject to foreign
withholding taxes. In that case, the Fund's yield on those securities would be
decreased. Shareholders generally will not be entitled to claim a credit or
deduction with respect to foreign taxes. In addition, the Fund's

-18-

<PAGE>

investment in foreign securities or foreign currencies may affect the amount or
timing of taxes payable by shareholders.

The exchange or redemption of shares may produce a gain or loss, and is a
taxable event. A loss incurred with respect to shares of a Fund held for six
months or less will be treated as a long-term capital loss to the extent of any
capital gains distributions with respect to such shares.

A shareholder's investment in a Fund could be subject to state, local or
foreign taxes and could have additional tax consequences. Shareholders should
consult their tax advisers regardingthe precise tax consequences of investing in
a Fund in light of each shareholder's particular tax situation.

BACKUP WITHHOLDING. Certain shareholders may be subject to backup
withholding at a rate of 31% of distributions and proceeds if incomplete or
incorrect taxpayer information has been provided, if the shareholder has
underreported dividends or interest income in the past, or if proper
certification that the shareholder is not subject to withholding is not
provided.

OTHER SECURITIES AND RISKS

The Funds' portfolio securities and investment practices offer certain
opportunities and impose various risks. Major investments and risk factors are
outlined in the Fund descriptions starting on page 1. Each Fund may also use
some or all of the securities and practices that, together with their associated
risks, are described below. Because the types of investments a Fund makes may
change over time, the types of risks affecting the Fund may change as well.

ADRS (AMERICAN DEPOSITARY RECEIPTS). The Equity Funds may invest in ADRs,
which are U.S. dollar-denominated securities backed by foreign securities
deposited in the United States. ADRs are created for trading in U.S. markets,
will fluctuate with the value of the underlying security, reflect changes in
exchange rates and otherwise involve risks associated with foreign securities.

ASSET-BACKED SECURITIES. The Fixed Income Funds may invest in asset-backed
securities, which represent interests in pools of debt (including interests in
pools of debt other than mortgage notes), such as credit card accounts. The
principal risks of asset-backed securities are that payments may be made more
slowly, and rates of default may be higher, than expected on the underlying
obligations. In addition, because some of these securities are new or complex,
unanticipated problems may affect their value or liquidity.

CONVERTIBLE SECURITIES. The Equity Funds and the Core Plus Fixed Income
Fund may invest in convertible securities, which are fixed income securities
that may later convert to an underlying equity security. Prior to conversion,
convertible securities have the same general characteristics as other fixed
income securities, and the price of a convertible security will normally
fluctuate in response to interest rates and other factors bearing on the price
of fixed income securities when the price of the underlying equity security is
less than the conversion

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<PAGE>

price ("out of the money"). When the price of the underlying equity security is
greater than the conversion price ("in the money"), the value of the convertible
security will normally tend to fluctuate to a greater extent in conjunction with
the price of the underlying equity security.

DERIVATIVES. All Funds may use derivatives, which are financial instruments
whose value derives from another security, an index, an interest rate or a
currency. Derivatives include options contracts, futures contracts, swap
contracts and other instruments. All Funds may use derivatives for hedging
(attempting to offset a potential loss in one position by establishing an
interest in an opposite position). This includes the use of currency-based
derivatives for hedging a Fund's positions in non-U.S. dollar-denominated
securities, including cross-currency hedging between two currencies other than
the U.S. dollar. All Funds may also use derivatives for liquidity and for
investment purposes (investing for potential income or capital gain).

While hedging can guard against potential risk, it adds to a Fund's
expenses and can eliminate some opportunities for gains. There is also a risk
that a derivative intended as a hedge may not perform as expected. In addition,
a Fund's use of derivatives may affect the timing and amount of taxes payable by
shareholders. With some derivatives, whether used for hedging or investment,
there is also the risk that the counterparty may fail to honor its contract
terms, causing a loss for a Fund.

The main risk with derivatives is that some types can amplify a gain or
loss, potentially earning or losing substantially more money than the actual
cost of the derivative.

FOREIGN AND NON-U.S. DOLLAR-DOMINATED SECURITIES. All Funds may invest in
foreign securities, and all Funds except the Core Fixed Fund may invest in
non-U.S. dollar-denominated securities. Both U.S. dollar-denominated and
non-U.S. dollar-denominated securities of non- U.S. issuers involve additional
risks to those presented by securities of U.S. issuers. They are generally more
volatile and less liquid than their U.S. counterparts, in part because of higher
political and economic risks, lack of reliable information and fluctuations in
currency exchange rates. For non-U.S. dollar-denominated securities, changes in
currency exchange rates have the potential to reduce or eliminate certain gains
achieved in a Fund's securities or to create net losses. These risks are usually
higher for investments in developing and emerging market countries.

INVESTMENT COMPANIES. When permitted by applicable laws and subject to
certain limits and conditions, the Funds may invest in other investment
companies managed by the investment manager, thereby gaining exposure to certain
types of assets on a more diversified basis than might otherwise be the case.

NEW SECURITIES. The Fixed Income Funds may invest in newly developed types
of securities and related instruments which have characteristics similar to
other fixed income investments, are being traded through the institutional
trading desks of broker-dealers and asset

-20-

<PAGE>

managers, and have attributes and risk profiles consistent with the Fund's
objective and strategies.

PAYMENT-IN-KIND (PIK) SECURITIES. The Fixed Income Funds may invest in
payment-inkind securities, such as bonds paying current interest payments in
additional bonds instead of cash. Because PIKs do not pay current interest in
cash, their values may fluctuate more widely in response to interest rate
changes than do the values of ordinary bonds.

REPURCHASE AGREEMENTS. All Funds may buy securities with the understanding
that the seller will buy them back with interest at a later date. If the seller
is unable to honor its commitment to repurchase the securities, the Fund could
lose money.

RESTRICTED AND ILLIQUID SECURITIES. All Funds may purchase restricted
securities, including Rule 144A securities. All Funds may purchase illiquid
securities. Any securities whose resale is restricted or that are thinly traded
can be difficult to sell at a desired time and price. Some of these securities
are new and complex, and trade only among institutions; the markets for these
securities are still developing, and may not function as efficiently as
established markets. Owning a large percentage of restricted and illiquid
securities could hamper a Fund's ability to raise cash to meet redemptions.
Also, because there may not be an established market price for these securities,
the Fund may have to estimate their value, which means that their valuation --
and the valuation of the Fund -- may have a subjective element.

SECURITIES LENDING. All Funds may seek additional income by lending
portfolio securities to qualified institutions. By reinvesting any cash
collateral it receives in these transactions, a Fund could realize additional
gains or losses. If the borrower fails to return the securities and the
collateral has declined in value, the Fund could lose money.

STANDARD & POOR'S DEPOSITORY RECEIPTS (SPDRS). The Equity Funds may invest
in SPDRs, which represent ownership interests in unit investment trusts holding
a portfolio of securities closely reflecting the price performance and dividend
yield of the S&P 500 Index. SPDRs are subject to the same risks as other types
of equity investments. The Equity Funds may also invest in other, similar
securities representing portfolios of index-based pooled investments, including
investments in foreign countries or regions.

STRUCTURED SECURITIES. The Fixed Income Funds may invest in structured
securities, which are securities issued by an entity holding underlying
instruments producing cash flows. The cash flows of the underlying instruments
may be apportioned among classes of structured securities to create securities
with different investment characteristics. Other types of structured securities
may be linked by a formula to the price of an underlying instrument. These types
of structured securities are generally more volatile than direct investments in
their underlying instruments.

WARRANTS. The Fixed Income Funds may invest in warrants and other equity
securities attached to high yield bonds and other fixed income securities.
Warrants are rights to purchase

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<PAGE>

securities at specific prices valid for a specific period of time. A warrant's
price will normally fluctuate in the same direction as the prices of its
underlying securities, but may have substantially more volatility. Warrant
holders receive no dividends and have no voting rights with respect to the
underlying security.

WHEN-ISSUED SECURITIES. All Funds may invest in securities prior to their
date of issue. These securities could fall in value by the time they are
actually issued, which may be any time from a few days to over a year.

ZERO (OR STEP) COUPONS. The Fixed Income Funds may invest in zero coupon
securities. A zero coupon security is a debt security that is purchased and
traded at a discount to its face value because it pays no interest for some or
all of its life. Interest, however, is reported as income to a Fund and the Fund
is required to distribute to shareholders an amount equal to the amount
reported. Those distributions may force the Fund to liquidate portfolio
securities at a disadvantageous time. These securities involve special credit
and duration risks, as their value could decline substantially by the time
interest is actually paid, which may be at any time from a few days to a number
of years.

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

CHANGES IN POLICIES. Unless otherwise noted, the Funds' policies (including
each Fund's Objective) are non-fundamental and may be changed without a
shareholder vote.

DEFENSIVE INVESTING. During unusual market conditions, each Fund may place
significant assets in cash or high-quality, short-term debt securities. To the
extent that a Fund does this, it may not be pursuing its Objective. A Fund's
investment manager may choose to keep the Fund fully or primarily invested in
non-cash instruments, irrespective of market conditions.

MANAGEMENT RISK. Although a Fund may have the flexibility to use some or
all of the investment strategies, securities and derivative instruments
described in this prospectus and in the SAI, the Fund's investment manager may
choose not to use a particular strategy or type of security for a variety of
reasons. These choices may cause the Fund to miss opportunities, lose money or
not achieve its Objective.

SECURITIES RATINGS. When securities are rated by one or more independent
rating agencies, a Fund uses these ratings to determine credit quality. In cases
where a security is rated in conflicting categories by different rating
agencies, a Fund may choose to follow the higher rating.

YEAR 2000. The investment manager does not currently anticipate that
computer problems related to the year 2000 will have a material effect on the
Funds. However, there can be no assurances in this area, including the
possibility that year 2000 computer problems could adversely affect
communications systems, investment markets, issuers of securities held by the
Funds or the economy in general.

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<PAGE>

For Additional Information

IF YOU HAVE QUESTIONS ABOUT THE FUNDS OR WOULD LIKE TO REQUEST A FREE COPY OF
THE CURRENT ANNUAL/SEMIANNUAL REPORT OR SAI, CONTACT STATE STREET RESEARCH.

STATE STREET RESEARCH INSTITUTIONAL FUNDS
One Financial Center
Boston, MA 02111
Telephone: 1-800-521-6548

YOU CAN ALSO OBTAIN INFORMATION ABOUT THE FUNDS, INCLUDING THE SAI AND CERTAIN
OTHER FUND DOCUMENTS, ON THE INTERNET AT WWW.SEC.GOV, IN PERSON AT THE SEC'S
PUBLIC REFERENCE ROOM IN WASHINGTON, DC (TELEPHONE 1-800-SEC-0330) OR BY MAIL BY
SENDING YOUR REQUEST, ALONG WITH A DUPLICATING FEE, TO THE SEC'S PUBLIC
REFERENCE SECTION, WASHINGTON, DC 20549-6009.

You can find additional information on the Funds' structure and their
performance in the STATEMENT OF ADDITIONAL INFORMATION (SAI). The SAI contains
further information about the Funds and their investment limitations and
policies. It also includes the most recent annual report and the independent
accountants' report. A current SAI for these Funds is on file with the
Securities and Exchange Commission and is incorporated by reference into (is
legally part of) this prospectus.

811-9247

<PAGE>

STATE STREET RESEARCH
INSTITUTIONAL FUNDS

STATEMENT OF ADDITIONAL INFORMATION

July 1, 1999

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
TRUST HISTORY AND CLASSIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . .2

ADDITIONAL INVESTMENT POLICIES AND RESTRICTIONS. . . . . . . . . . . . . . . . . . .2

ADDITIONAL INFORMATION CONCERNING
INVESTMENTS AND RISKS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

DEBT INSTRUMENTS AND
PERMITTED CASH INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

CLASSES OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

TRUSTEES AND OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

MANAGEMENT OF THE FUND AND INVESTMENT ADVISORY AND OTHER SERVICES. . . . . . . . . 33

PURCHASE AND REDEMPTION OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . . 35

SHAREHOLDER ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

NET ASSET VALUE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

CERTAIN TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

CALCULATION OF PERFORMANCE DATA. . . . . . . . . . . . . . . . . . . . . . . . . . 44

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT . . . . . . . . . . . . . . . . . . . 47

CUSTODIAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

DISTRIBUTOR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

INDEPENDENT ACCOUNTANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
</TABLE>

The following Statement of Additional Information is not a Prospectus. It
should be read only in conjunction with the Prospectus of the State Street
Research Institutional Funds dated July 1, 1999 (the "Prospectus"), which may
be obtained without charge from the offices of State Street Research
Institutional Funds (the "Trust"), One Financial Center, Boston, Massachusetts
02111-2690.

<PAGE>

TRUST HISTORY AND CLASSIFICATION

State Street Research Institutional Funds (the "Trust") is a Massachusetts
business trust organized on March 3, 1999. The Trust is an open-end management
investment company with an unlimited number of authorized shares of beneficial
interest. These shares may be divided into different "series," each of which is
a separately managed pool of assets of the Trust that may have a different
investment objective and different investment policies from the objective and
policies of another series. The Trust's shares are currently divided into four
series: the State Street Research Core Fixed Income Fund, the State Street
Research Core Plus Fixed Income Fund, the State Street Research Core Large Cap
Growth Fund and the State Street Research Large Cap Growth Fund (each a "Fund,"
and collectively, the "Funds"). The Trustees may, without shareholder approval,
create additional series of shares representing additional investment
portfolios. Any such series may, without shareholder approval, be divided into
two or more classes of shares having such preferences and special or relative
rights and privileges as the Trustees determine. Each Fund's shares are
currently divided into four classes: Class I, Class II, Class III and Class IV
shares.

ADDITIONAL INVESTMENT POLICIES AND RESTRICTIONS

The Trust has adopted certain investment restrictions with respect to each
Fund, and those investment restrictions are either fundamental or not
fundamental. Fundamental restrictions with respect to each Fund may not be
changed by the Trust except by the affirmative vote of a majority of the
outstanding voting securities of such Fund. Restrictions that are not
fundamental may be changed by a vote of the Trustees of the Trust. With respect
to the investment restrictions described below, all percentage limitations on
investments apply at the time of investment and shall not be considered violated
unless an excess or deficiency occurs or exists immediately after and as a
result of such investment.

The fundamental and nonfundamental policies of the Fund do not apply to any
matters involving the issuance of multiple classes of shares of the Fund or the
creation or use of structures (such as a fund of funds or master-feeder
structure) allowing the Fund to invest any or all of its assets in collective
investment vehicles or allowing the Fund to serve as such a collective
investment vehicle for other funds, to the extent permitted by law and
regulatory authorities.

The Trust's fundamental investment restrictions with respect to each Fund
are set forth below. Under these restrictions, it is the Trust's policy with
respect to each Fund:

(1) not to purchase a security of any one issuer (other than securities
issued or guaranteed as to principal or interest by the U.S.
Government or its agencies or instrumentalities or mixed-ownership
U.S. Government corporations or sponsored enterprises) if such
purchase would, with respect to 75% of the Fund's total assets, cause
more than 5% of the Fund's total assets to be invested

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in the securities of such issuer or cause more than 10% of the voting
securities of such issuer to be held by the Fund;

(2) not to issue senior securities as defined in the 1940 Act, except as
permitted by that Act and the rules, regulations or pronouncements
thereunder or as permitted by the Securities and Exchange Commission
(the creation of general liens or security interests under industry
practices for transactions in portfolio assets are not deemed to
involve the issuance of senior securities);

(3) not to underwrite or participate in the marketing of securities of
other issuers, except (a) the Fund may, acting alone or in syndicates
or groups, purchase or otherwise acquire securities of other issuers
for investment, either from the issuers or from persons in a control
relationship with the issuers or from underwriters of such securities;
and (b) to the extent that, in connection with the disposition of the
Fund's securities, the Fund may be a selling shareholder in an
offering or deemed to be an underwriter under certain federal
securities laws;

(4) not to purchase fee simple interests in real estate unless acquired as
a result of ownership of securities or other instruments, although the
Fund may purchase and sell other interests in real estate including
securities which are secured by real estate, or securities of
companies which make real estate loans or own, or invest or deal in,
real estate;

(5) not to invest in physical commodities or physical commodity contracts
and not to invest in options in excess of 10% of the Fund's total
assets, except that investments in essentially financial items or
arrangements such as, but not limited to, swap arrangements, hybrids,
currencies, currency and other forward contracts, delayed delivery and
when-issued contracts, futures contracts and options on futures
contracts on securities, securities indices, interest rates and
currencies shall not be deemed investments in commodities or
commodities contracts;

(6) not to lend money; however, the Fund may lend portfolio securities and
purchase bonds, debentures, notes, bills and any other debt related
instruments or interests (and enter into repurchase agreements with
respect thereto);

(7) not to make any investment which would cause more than 25% of the
value of the Fund's total assets to be invested in securities of
non-U.S. Government-related issuers principally engaged in any one
industry, as described in the Fund's Prospectus or Statement of
Additional Information as amended from time to time; and

(8) not to borrow money, including reverse repurchase agreements in so far
as such agreements may be regarded as borrowings, except for
borrowings not in an

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amount in excess of 331/3% of the value of its total assets (including
the proceeds of any such borrowings).

The following investment restrictions are not fundamental and may be
changed with respect to each Fund without shareholder approval. Under these
restrictions, it is the Trust's policy with respect to each Fund:

(1) not to purchase any security or enter into a repurchase agreement if
as a result more than 15% of its net assets would be invested in
securities that are illiquid (including repurchase agreements not
entitling the holder to payment of principal and interest within seven
days);

(2) not to engage in transactions in options except in connection with
options on securities, securities indices, currencies and interest
rates, and options on futures on securities, securities indices,
currencies and interest rates;

(3) not to purchase securities on margin or make short sales of securities
or maintain a short position except for short sales "against the box"
(for the purpose of this restriction, escrow or custodian receipts or
letters, margin or safekeeping accounts, or similar arrangements used
in the industry in connection with the trading of futures, options and
forward commitments are not deemed to involve the use of margin); and

(4) not to purchase a security issued by another investment company,
except to the extent permitted under the 1940 Act or any exemptive
order from the Securities and Exchange Commission or except by
purchases in the open market involving only customary brokers'
commissions, or securities acquired as dividends or distributions or
in connection with a merger, consolidation or similar transaction or
other exchange.

ADDITIONAL INFORMATION CONCERNING
INVESTMENTS AND RISKS

DERIVATIVES

To the extent described in the Prospectus, all of the Funds may buy and
sell certain types of derivatives, such as options, futures contracts, options
on futures contracts, and swaps under circumstances in which such instruments
are expected by State Street Research & Management Company, the Fund's
investment manager (the "Investment Manager"), to aid in achieving a Funds'
investment objective. A Fund may also purchase instruments with characteristics
of both futures and securities (e.g., debt instruments with interest and
principal payments determined by reference to the value of a commodity or a
currency at a future time) and which, therefore, possess the risks of both
futures and securities investments.

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Derivatives, such as options, futures contracts, options on futures
contracts, and swaps enable a Fund to take both "short" positions (positions
which anticipate a decline in the market value of a particular asset or index)
and "long" positions (positions which anticipate an increase in the market value
of a particular asset or index). A Fund may also use strategies which involve
simultaneous short and long positions in response to specific market conditions,
such as where the Investment Manager anticipates unusually high or low market
volatility.

All Funds may use derivatives for hedging. The term hedging is applied to
defensive strategies designed to protect a Fund from an expected decline in the
market value of an asset or group of assets that the Fund owns (in the case of a
short hedge) or to protect a Fund from an expected rise in the market value of
an asset or group of assets which it intends to acquire in the future (in the
case of a long or "anticipatory" hedge). This includes the use of currency
based derivatives for hedging a Fund's positions in non-U.S. dollar-denominated
securities, including cross-currency hedging between two currencies other than
the U.S. dollar. See "Currency Transactions." All Funds may also use
derivatives for liquidity purposes. All Funds may use derivatives for
investment purposes, including non-hedging strategies designed to produce
incremental income (such as the option writing strategy described below) or
strategies which are undertaken to profit from (i) an expected decline in the
market value of an asset or group of assets which a Fund does not own or (ii)
expected increases in the market value of an asset which it does not plan to
acquire. Information about specific types of instruments is provided below.

FUTURES CONTRACTS

Futures contracts are publicly traded contracts to buy or sell an
underlying asset or group of assets, such as a currency or an index of
securities, at a future time at a specified price. A contract to buy
establishes a long position while a contract to sell establishes a short
position.

The purchase of a futures contract on an equity security or an index of
equity securities normally enables a buyer to participate in the market movement
of the underlying asset or index after paying a transaction charge and posting
margin in an amount equal to a small percentage of the value of the underlying
asset or index. A Fund will initially be required to deposit with the Trust's
custodian or the futures commission merchant effecting the futures transaction
an amount of "initial margin" in cash or securities, as permitted under
applicable regulatory policies.

Initial margin in futures transactions is different from margin in
securities transactions in that the former does not involve the borrowing of
funds by the customer to finance the transaction. Rather, the initial margin is
like a performance bond or good faith deposit on the contract. Subsequent
payments (called "maintenance margin") to and from the broker will be made on a
daily basis as the price of the underlying asset fluctuates. This process is
known as "marking to market." For example, when a Fund has taken a long
position in a futures contract and the value of the underlying asset has risen,
that position will have increased in value and the Fund will receive from the
broker a maintenance margin payment equal to the

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increase in value of the underlying asset. Conversely, when a Fund has taken a
long position in a futures contract and the value of the underlying instrument
has declined, the position would be less valuable, and the Fund would be
required to make a maintenance margin payment to the broker.

At any time prior to expiration of the futures contract, a Fund may elect
to close the position by taking an opposite position which will terminate the
Fund's position in the futures contract. A final determination of maintenance
margin is then made, additional cash is required to be paid by or released to
the Fund, and the Fund realizes a loss or a gain. While futures contracts with
respect to securities do provide for the delivery and acceptance of such
securities, such delivery and acceptance are seldom made.

In transactions establishing a long position in a futures contract, assets
equal to the face value of the futures contract will be identified by a Fund to
the Trust's custodian for maintenance in a separate account to insure that the
Fund can meet its obligations under the futures contract, and to minimize the
risk that leverage could cause the Fund's assets to be inadequate to cover its
obligations. Similarly, assets having a value equal to the aggregate face value
of the futures contract will be identified with respect to each short position.
A Fund will utilize such assets and methods of cover as appropriate under
applicable exchange and regulatory policies.

OPTIONS

A Fund may use options to implement its investment strategy. There are two
basic types of options: "puts" and "calls." Each type of option can establish
either a long or a short position, depending upon whether the Fund is the
purchaser or the writer of the option. A call option on a security, for
example, gives the purchaser of the option the right to buy, and the writer the
obligation to sell, the underlying asset at the exercise price during the option
period. Conversely, a put option on a security gives the purchaser the right to
sell, and the writer the obligation to buy, the underlying asset at the exercise
price during the option period.

The risk of purchasing an option is equal to the premium paid, regardless
of how the price of the underlying asset changes. The opportunity for gain or
loss from a purchased option is dependent upon increases or decreases in the
value of the underlying asset. In general, a purchased put increases in value
as the value of the underlying security falls and a purchased call increases in
value as the value of the underlying security rises.

The principal reason to write options is to generate extra income (the
premium paid by the buyer). Written options have varying degrees of risk. An
uncovered written call option theoretically carries unlimited risk, as the
market price of the underlying asset could rise far above the exercise price
before its expiration. This risk is tempered when the call option is covered,
that is, when the option writer owns the underlying asset. In this case, the
writer runs the risk of the lost opportunity to participate in the appreciation
in value of the asset rather than the risk of an out-of-pocket loss. A written
put option has defined risk, that is, the

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difference between the agreed-upon price that a Fund must pay to the buyer upon
exercise of the put and the value, which could be zero, of the asset at the time
of exercise.

The obligation of the writer of an option continues until the writer
effects a closing purchase transaction or until the option expires. To secure
its obligation to deliver the underlying asset in the case of a call option, or
to pay for the underlying asset in the case of a put option, a covered writer is
required to deposit in escrow the underlying security or other assets in
accordance with the rules of the applicable clearing corporation and exchanges.

Among the options which a Fund may enter are options on securities indices.
A securities index assigns relative values to the securities included in the
index. In general, options on indices of securities are similar to options on
the securities themselves except that delivery requirements are different. For
example, a put option on an index of securities does not give the holder the
right to make actual delivery of a basket of securities but instead gives the
holder the right to receive an amount of cash upon exercise of the option if the
value of the underlying index has fallen below the exercise price. The amount
of cash received will be equal to the difference between the closing price of
the index and the exercise price of the option expressed in dollars times a
specified multiple. As with options on equity securities or futures contracts,
a Fund may offset its position in index options prior to expiration by entering
into a closing transaction on an exchange or it may let the option expire
unexercised. In connection with the use of such options, a Fund may cover its
position by identifying assets having a value equal to the aggregate face value
of the option position taken.

OPTIONS ON FUTURES CONTRACTS

An option on a futures contract gives the purchaser the right, in return
for the premium paid, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the period of the option.

LIMITATIONS AND RISKS OF OPTIONS AND FUTURES ACTIVITY

A Fund may not establish a position in a commodity futures contract or
purchase or sell a commodity option contract for other than bona fide hedging
purposes if immediately thereafter the sum of the amount of initial margin
deposits and premiums required to establish such positions for such non-hedging
purposes would exceed 5% of the market value of the Fund's net assets. The
Funds apply a similar policy to options that are not commodities.

As noted above, a Fund may engage in both hedging and nonhedging
strategies. Although effective hedging can generally capture the bulk of a
desired risk adjustment, no hedge is completely effective. A Fund's ability to
hedge effectively through transactions in futures and options depends on the
degree to which price movements in its holdings correlate with price movements
of the futures and options.

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Non-hedging strategies typically involve special risks. The profitability
of a Fund's non-hedging strategies will depend on the ability of the Investment
Manager to analyze both the applicable derivatives market and the market for the
underlying asset or group of assets. Derivatives markets are often more volatile
than corresponding securities markets and a relatively small change in the price
of the underlying asset or group of assets can have a magnified effect upon the
price of a related derivative instrument.

Derivatives markets also are often less liquid than the market for the
underlying asset or group of assets. Some positions in futures and options may
be closed out only on an exchange which provides a secondary market therefor.
There can be no assurance that a liquid secondary market will exist for any
particular futures contract or option at any specific time. Thus, it may not
be possible to close such an option or futures position prior to maturity. The
inability to close options and futures positions also could have an adverse
impact on a Fund's ability to effectively carry out their derivative strategies
and might, in some cases, require the Fund to deposit cash to meet applicable
margin requirements. A Fund will enter into an option or futures position only
if it appears to be a liquid investment.

SHORT SALES AGAINST THE BOX

The Core Large Cap Growth and Large Cap Growth Funds (the "Equity Funds")
may effect short sales, but only if such transactions are short sale
transactions known as short sales "against the box." A short sale is a
transaction in which the Fund sells a security it does not own by borrowing it
from a broker, and consequently becomes obligated to replace that security. A
short sale against the box is a short sale where the fund owns the security sold
short or has an immediate and unconditional right to acquire that security
without additional cash consideration upon conversation, exercise or exchange of
options with respect to securities held in its portfolio. The effect of selling
a security short against the box is to insulate that security against any future
gain or loss.

SWAP ARRANGEMENTS

All Funds may enter into various forms of swap arrangements with
counterparties with respect to, among other things, interest rates, currency
rates, indices or specific securities (or baskets of securities identified by,
among other things, issuers or credit ratings), including purchase of caps,
floors and collars as described below. The Funds, however, do not expect to
invest more than 5% of their net assets in such items. In an interest rate
swap, a Fund could agree for a specified period to pay a bank or investment
banker the floating rate of interest on a so-called notional principal amount
(i.e., an assumed figure selected by the parties for this purpose) in exchange
for agreement by the bank or investment banker to pay a Fund a fixed rate of
interest on the notional principal amount. In a currency swap, a Fund would
agree with the other party to exchange cash flows based on the relative
differences in values of a notional amount of two (or more) currencies; in an
index swap, the Fund would agree to exchange cash flows on a notional amount
based on changes in the values of the selected indices. Purchase of a cap
entitles the purchaser to receive payments from the seller on a notional amount
to the extent that the selected index exceeds an agreed upon interest rate or
amount whereas purchase

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of a floor entitles the purchaser to receive such payments to the extent the
selected index falls below an agreed-upon interest rate or amount. A collar
combines a cap and a floor.

A Fund may enter credit protection swap arrangements involving the sale by
the Fund of a put option on a debt security which is exercisable by the buyer
upon certain events, such as a default by the referenced creditor on the
underlying debt or a bankruptcy event of the creditor.

Most swaps entered into by a Fund will be on a net basis; for example, in
an interest rate swap, amounts generated by application of the fixed rate and
the floating rate to the notional principal amount would first offset one
another, with the Fund either receiving or paying the difference between such
amounts. In order to be in a position to meet any obligations resulting from
swaps, a Fund will designate appropriate liquid assets, including cash or other
portfolio securities; for swaps entered into on a net basis, assets will be
segregated having a daily net asset value equal to any excess of the Fund's
accrued obligations over the accrued obligations of the other party, while for
swaps on other than a net basis assets will be segregated having a value equal
to the total amount of the Fund's obligations.

These arrangements will be made primarily for hedging purposes, to preserve
the return on an investment or on a portion of a Fund's portfolio. However, the
Fund may, as noted above, enter into such arrangements for income purposes to
the extent permitted by the Commodities Futures Trading Commission (the "CFTC")
for entities which are not commodity pool operators, such as the Fund. In
entering a swap arrangement, a Fund is dependent upon the creditworthiness and
good faith of the counterparty. The Fund attempts to reduce the risks of
nonperformance by the counterparty by dealing only with established, reputable
institutions. The swap market is still relatively new and emerging; positions
in swap arrangements may become illiquid to the extent that nonstandard
arrangements with one counterparty are not readily transferable to another
counterparty or if a market for the transfer of swap positions does not develop.
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 the Investment Manager is incorrect in
its forecasts of market values, interest rates and other applicable factors, the
investment performance of a Fund would diminish compared with what it would have
been if these investment techniques were not used. Moreover, even if the
Investment Manager is correct in its forecasts, there is a risk that the swap
position may correlate imperfectly with the price of the asset or liability
being hedged.

REPURCHASE AGREEMENTS

All Funds may enter into repurchase agreements. Repurchase agreements
occur when the Fund acquires a security and the seller, which may be either (i)
a primary dealer in U.S. Government securities or (ii) an FDIC-insured bank
having gross assets in excess of $500 million, simultaneously commits to
repurchase it at an agreed-upon price on an agreed-upon date within a specified
number of days (usually not more than seven) from the date of purchase. The
repurchase price reflects the purchase price plus an agreed-upon market rate of

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interest which is unrelated to the coupon rate or maturity of the acquired
security. A Fund will only enter into repurchase agreements involving U.S.
Government securities. Repurchase agreements could involve certain risks in the
event of default or insolvency of the other party, including possible delays or
restrictions upon a Fund's ability to dispose of the underlying securities.

REVERSE REPURCHASE AGREEMENTS

All Funds may enter into reverse repurchase agreements. However, the Fund
has no present intention of engaging in reverse repurchase agreements in excess
of 5% of the Fund's total assets. In a reverse repurchase agreement, the Fund
transfers a portfolio instrument to another person, such as a financial
institution, broker or dealer, in return for a percentage of the instrument's
market value in cash, and agrees that on a stipulated date in the future the
Fund will repurchase the portfolio instrument by remitting the original
consideration plus interest at an agreed-upon rate. The ability to use reverse
repurchase agreements may enable, but does not ensure the ability of, the Fund
to avoid selling portfolio instruments at a time when a sale may be deemed to be
disadvantageous.

When effecting reverse repurchase agreements, assets of the Fund in a
dollar amount sufficient to make payment of the obligations to be purchased are
segregated on the Fund's records at the trade date and maintained until the
transaction is settled.

WHEN-ISSUED SECURITIES

All Funds may purchase "when-issued" securities, which are traded on a
price or yield basis prior to actual issuance. Such purchases will be made only
to achieve a Fund's investment objective and not for leverage. The when-issued
trading period generally lasts from a few days to months, or over a year or
more; during this period dividends or interest on the securities are not
payable. A frequent form of when-issued trading occurs when corporate
securities to be created by a merger of companies are traded prior to the actual
consummation of the merger. Such transactions may involve a risk of loss if the
value of the securities falls below the price committed to prior to actual
issuance. The Trust's custodian will establish a segregated account when a Fund
purchases securities on a when-issued basis consisting of cash or liquid
securities equal to the amount of the when-issued commitments. Securities
transactions involving delayed deliveries or forward commitments are frequently
characterized as when-issued transactions and are similarly treated by a Fund.

RESTRICTED SECURITIES

Although all Funds may invest in restricted securities, it is each Funds'
policy not to make an investment in restricted securities, including restricted
securities sold in accordance with Rule 144A under the Securities Act of 1933
("Rule 144A Securities") if, as a result, more than 50% of the Fund's total
assets are invested in restricted securities, provided not more than 15% of the
Fund's total assets are invested in illiquid securities.

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Securities may be resold pursuant to Rule 144A under certain circumstances
only to qualified institutional buyers as defined in the rule, and the markets
and trading practices for such securities are relatively new and still
developing; depending on the development of such markets, Rule 144A Securities
may be deemed to be liquid as determined by or in accordance with methods
adopted by the Trustees. Under such methods the following factors are
considered, among others: the frequency of trades and quotes for the security,
the number of dealers and potential purchasers in the market, market making
activity, and the nature of the security and marketplace trades. Investments in
Rule 144A Securities could have the effect of increasing the level of a Fund's
illiquidity to the extent that qualified institutional buyers become, for a
time, uninterested in purchasing such securities. Also, a Fund may be adversely
impacted by the subjective valuation of such securities in the absence of a
market for them. Restricted securities that are not resalable under Rule 144A
may be subject to risks of illiquidity and subjective valuations to a greater
degree than Rule 144A Securities.

OTHER INVESTMENT COMPANIES

All Funds may invest in securities of other investment companies, such as
closed-end management investment companies, hub and spoke (master/feeder) funds,
fund of funds, or in pooled accounts or other similar investment vehicles. As a
shareholder of an investment company, a Fund may indirectly bear fees and
expenses in addition to the fees the Fund pays its service providers.

MORTGAGE-RELATED SECURITIES

The Core Fixed Income and Core Plus Fixed Income Funds (the "Fixed Income
Funds") may invest in mortgage-related securities. Mortgage-related securities
represent interests in pools of commercial or residential mortgage loans. Some
mortgage-related securities provide a Fund with a flow-through of interest and
principal payments as such payments are received with respect to the mortgages
in the pool. Mortgage-related securities may be issued by U.S. Government
agencies, instrumentalities or mixed-ownership corporations or sponsored
enterprises, and the securities may or may not be supported by the credit of
such entities. Mortgage-related securities may also be issued by private
entities such as investment banking firms, insurance companies, mortgage bankers
and home builders. An issuer may offer senior or subordinated securities backed
by the same pool of mortgages. The senior securities have priority to the
interest and/or principal payments on the mortgages in the pool; the subordinate
securities have a lower priority with respect to such payments on the mortgages
in the pool.

Mortgage-related securities also include stripped securities which have
been divided into separate interest and principal components. Holders of the
interest components of mortgage related securities will receive payments of the
interest only on the current face amount of the mortgages and holders of the
principal components will receive payments of the principal on the mortgages.
"Interest only" securities are known as IOs; "principal only" securities are
known as POs.

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In the case of mortgage-related securities, the possibility of prepayment
of the underlying mortgages which might be motivated, for instance, by declining
interest rates, could lessen the potential for total return in mortgage-backed
securities. When prepayments of mortgages occur during periods of declining
interest rates, a Fund will have to reinvest the proceeds in instruments with
lower effective interest rates.

In the case of stripped securities, in periods of low interest rates and
rapid mortgage prepayments, the value of IOs for mortgage-related securities can
decrease significantly. There is no assurance that the market for IOs and POs
will operate efficiently or provide liquidity in the future. Stripped
securities are extremely volatile in certain interest rate environments.

INDEXED SECURITIES

A Fund may purchase securities the value of which is indexed to interest
rates, foreign currencies and various indices and financial indicators. These
securities are generally short- to intermediate-term debt securities. The
interest rates or values at maturity fluctuate with the
index to which they are connected and may be more volatile than such index.

ASSET-BACKED SECURITIES

The Fixed Income Funds may invest in asset-backed securities, which are
securities that represent interests in pools of consumer loans such as credit
card receivables, automobile loans and leases, leases on equipment such as
computers, and other financial instruments. These securities provide a
flow-through of interest and principal payments as payments are received on the
loans or leases and may be supported by letters of credit or similar guarantees
of payment by a financial institution.

FOREIGN INVESTMENTS

All Funds may invest in securities of foreign issuers denominated in U.S.
dollars. All Funds except the Core Fixed Income Fund may invest in securities
denominated in foreign currencies issued or guaranteed by governments,
governmental agencies and similar bodies, and supranational organizations,
corporations, financial institutions, trusts, and other entities.

The Funds invest in foreign securities based on the attractiveness of the
issuer, the general economic climate, the interest rate environment, and the
relative strength of the U.S. dollar and relevant currency. The securities of
foreign governmental entities have various kinds of government support and
include obligations issued or guaranteed by foreign governmental entities with
taxing powers. These obligations may or may not be supported by the full faith
and credit of a foreign government. The securities of foreign corporations are
subject to many of the same business, industry and other fundamental variables
that affect the creditworthiness of domestic corporations. All foreign
securities, both governmental and nongovernmental, are also affected by the
inter-relationships of interest rates in the U.S. and abroad and exchange rates
among currencies.

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Supranational debt may be denominated in U.S. dollars, a foreign currency
or a multi-national currently unit. Examples of supranational entities include
the World Bank, the European Investment Bank, the Asian Development Bank and the
Inter-American Development Bank. The governmental members, or "stockholders",
usually make initial capital contributions to the supranational entity and in
many cases are committed to make additional capital contributions if the
supranational entity is unable to repay its borrowings.

The Core Fixed Income and Core Plus Fixed Income Funds may also invest in
"Yankee" bonds. Yankee bonds are bonds denominated in U.S. dollars and issued
by foreign entities for sale in the United States. Yankee bonds are affected by
interest rates in the U.S. and by the economic, political and other forces which
impact the issuer locally.

The Funds may invest without limitation in securities of non-U.S. issuers
directly, or indirectly in the form of American Depositary Receipts ("ADRs"),
European Depositary Receipts ("EDRs") and Global Depositary Receipts ("GDRs").

ADRs are receipts, typically issued by a U.S. bank or trust company, which
evidence ownership of underlying securities issued by a foreign corporation or
other entity. EDRs are receipts issued in Europe which evidence a similar
ownership arrangement. GDRs are receipts issued in one country which also
evidence a similar ownership arrangement. Generally, ADRs in registered form
are designed for use in U.S. securities markets and EDRs are designed for use in
European securities markets. GDRs are designed for use when the issuer is
raising capital in more than one market simultaneously, such as the issuer's
local market and the U.S., and have been used to overcome local selling
restrictions to foreign investors. In addition, many GDRs are eligible for
book-entry settlement through Cedel, Euroclear and DTC. The underlying
securities are not always denominated in the same currency as the ADRs, EDRs or
GDRs. Although investment in the form of ADRs, EDRs or GDRs facilitates trading
in foreign securities, it does not mitigate all the risks associated with
investing in foreign securities.

ADRs are available through facilities which may be either "sponsored" or
"unsponsored." In a sponsored arrangement, the foreign issuer establishes the
facility, pays some or all of the depository's fees, and usually agrees to
provide shareholder communications. In an unsponsored arrangement, the foreign
issuer is not involved, and the ADR holders pay the fees of the depository.
Sponsored ADRs are generally more advantageous to the ADR holders and the issuer
than are unsponsored ADRs. More and higher fees are generally charged in an
unsponsored program compared to a sponsored facility. Only sponsored ADRs may
be listed on the New York or American Stock Exchanges. Unsponsored ADRs may
prove to be more risky due to (a) the additional costs involved to the Fund; (b)
the relative illiquidity of the issue in U.S. markets; and (c) the possibility
of higher trading costs in the over-the-counter market as opposed to exchange
based tradings. The Fund will take these and other risk considerations into
account before making an investment in an unsponsored ADR.

13
<PAGE>

The risks associated with investments in foreign securities include those
resulting from fluctuations in currency exchange rates, revaluation of
currencies, future political and economic developments, including the risks of
nationalization or expropriation, the possible imposition of currency exchange
blockages, higher operating expenses, foreign withholding and other taxes which
may reduce investment return, reduced availability of public information
concerning issuers, the difficulties in obtaining and enforcing a judgment
against a foreign issuer and the fact that foreign issuers are not generally
subject to uniform accounting, auditing and financial reporting standards or to
other regulatory practices and requirements comparable to those applicable to
domestic issuers. Moreover, securities of many foreign issuers may be less
liquid and their prices more volatile than those of securities of comparable
domestic issuers.

These risks are usually higher in less-developed countries. Such countries
include countries that have an emerging stock market on which trade a small
number of securities and/or countries with economies that are based on only a
few industries. The Core Plus Fixed Income Fund, for example, may invest in the
securities of issuers in countries with less developed economies.

CURRENCY TRANSACTIONS

A Fund may engage in currency exchange transactions in order to protect
against the effect of uncertain future exchange rates on securities denominated
in foreign currencies. A Fund will conduct its currency exchange transactions
either on a spot (i.e., cash) basis at the rate prevailing in the currency
exchange market, or by entering into forward contracts to purchase or sell
currencies. A Fund's dealings in forward currency contracts and other currency
transactions such as futures contracts, options, options on futures contracts
and swaps will be limited to hedging purposes, including transaction hedging and
position hedging, and also cross-hedging (as described in the next paragraph).
Transaction hedging is entering into a currency transaction with respect to
specific assets or liabilities of a Fund, which will generally arise in
connection with the purchase or sale of the Fund's portfolio securities or the
receipt of income from them. Position hedging is entering into a currency
transaction with respect to portfolio securities positions denominated or
generally quoted in that currency. A Fund will not enter into a transaction to
hedge currency exposure to an extent greater, after netting all transactions
intended wholly or partially to offset other transactions, than the aggregate
market value (at the time of entering into the transaction) of the securities
held by the Fund that are denominated or generally quoted in or currently
convertible into the currency, other than with respect to proxy hedging as
described below.

A Fund may cross-hedge currencies by entering into transactions to purchase
or sell one or more currencies that are expected to increase or decline in value
relative to other currencies to which the Fund has or in which the Fund expects
to have exposure. In most cases, the effect of cross-hedging is not to
eliminate currency risk, but to change exposure from one currency to another.
To reduce the effect of currency fluctuations on the value of existing or
anticipated holdings of its securities, a Fund may also engage in proxy hedging.
Proxy hedging is often used when the currency to which a Fund's holdings are
exposed is difficult to

14
<PAGE>

hedge generally or difficult to hedge against the dollar. Proxy hedging entails
entering into a forward contract to sell a currency, the changes in the value of
which are generally considered to be linked to a currency or currencies in which
some or all of a Fund's securities are or are expected to be denominated, and to
buy dollars. The amount of the contract would not exceed the market value of
the Fund's securities denominated in linked currencies.

A forward currency contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. These contracts are not commodities and are entered into in
the interbank market conducted directly between currency traders (usually large
commercial banks) and their customers. In entering a forward currency contract,
a Fund is dependent upon the creditworthiness and good faith of the
counterparty. A Fund attempts to reduce the risks of nonperformance by the
counterparty by dealing only with established, reputable institutions. Although
spot and forward contracts will be used primarily to protect a Fund from adverse
currency movements, they also involve the risk that anticipated currency
movements will not be accurately predicted, which may result in losses to the
Fund. This method of protecting the value of a Fund's portfolio securities
against a decline in the value of a currency does not eliminate fluctuations in
the underlying prices of the securities. It simply establishes a rate of
exchange that can be achieved at some future point in time. Although such
contracts tend to minimize the risk of loss due to a decline in the value of
hedged currency, they tend to limit any potential gain that might result should
the value of such currency increase.

Except for the Core Fixed Income Fund, the Funds may invest in securities
denominated in multi-national currencies.

SECURITIES LENDING

All Funds may lend portfolio securities with a value of up to 33 1/3% of
its total assets. A Fund will receive cash or cash equivalents (e.g., U.S.
Government obligations) as collateral in an amount equal to at least 100% of the
current market value of any loaned securities plus accrued interest. Collateral
received by a Fund will generally be held in the form tendered, although cash
may be invested in unaffiliated mutual funds with quality short-term portfolios,
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities or certain unaffiliated mutual funds, repurchase agreements or
other similar investments. The investing of cash collateral received from
loaning portfolio securities involves leverage which magnifies the potential for
gain or loss on monies invested and, therefore, results in an increase in the
volatility of a Fund's outstanding securities. Such loans may be terminated at
any time.

A Fund may receive a lending fee and will retain rights to dividends,
interest or other distributions, on the loaned securities. Voting rights pass
with the lending, although a Fund may call loans to vote proxies if desired.
Should the borrower of the securities fail financially, there is a risk of delay
in recovery of the securities or loss of rights in the collateral. Loans are
made only to borrowers which are deemed by the Investment Manager or its agents
to be of good financial standing.

15
<PAGE>

SHORT-TERM TRADING

All Funds may engage in short-term trading of securities and reserve full
freedom with respect to portfolio turnover. In periods where there are rapid
changes in economic conditions and security price levels or when reinvestment
strategy changes significantly, portfolio turnover may be higher than during
times of economic and market price stability or when investment strategy remains
relatively constant. A Fund's portfolio turnover rate may involve greater
transaction costs, relative to other funds in general, and may have tax and
other consequences.

TEMPORARY DEFENSIVE INVESTMENTS

A Fund may hold a significant portion of its assets in cash or high-quality
debt securities for temporary defensive purposes. A Fund may, but is not
required to, adopt a temporary defensive position when, in the opinion of the
Investment Manager, such a position is more likely to provide protection against
adverse market conditions than adherence to the Fund's other investment
policies. The types of high-quality instruments in which a Fund may invest for
such purposes include money market securities, such as repurchase agreements,
and securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, certificates of deposit, time deposits and bankers'
acceptances of certain qualified financial institutions and corporate commercial
paper, which at the time of purchase are rated at least within the "A" major
rating category by Standard & Poor's Ratings Service ("S&P") or the "Prime"
major rating category by Moody's Investor's Service, Inc. ("Moody's"), or, if
not rated, issued by companies having an outstanding long-term unsecured debt
issued rated at least within the "A" category by S&P or Moody's.

INDUSTRY AND SECTOR CLASSIFICATIONS

In determining how much of a Fund's portfolio is invested in a given
industry or sector, the following industry classifications are currently used.
Securities issued or guaranteed as to principal or interest by the U.S.
Government or its agencies or instrumentalities or mixed-ownership Government
corporations or sponsored enterprises (including repurchase agreements involving
U.S. Government securities to the extent excludable under relevant regulatory
interpretations) are excluded. Securities issued by foreign governments are
also excluded. Companies engaged in the business of financing may be classified
according to the industries of their parent or sponsor companies, or industries
that otherwise most affect such financing companies. Issuers of asset-backed
pools will be classified as separate industries based on the nature of the
underlying assets, such as mortgages and credit card receivables.
"Asset-backed--Mortgages" includes private pools of nongovernment backed
mortgages.

Autos & Transportation
- ----------------------
Air Transport
Auto Parts
Automobiles
Miscellaneous
Transportation
Railroad Equipment
Railroads
Recreational Vehicles & Boats
Tires & Rubber
Truckers

Consumer Directory
- ------------------
Advertising Agencies

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<PAGE>

Casino/Gambling,
Hotel/Motel
Commercial Services
Communication, Media & Entertainment
Consumer Electronics
Consumer Products
Consumer Services
Household Furnishings
Leisure Time
Photography
Printing & Publishing
Restaurants Retail
Shoes
Textile Apparel
Manufacturers
Toys

Consumer Staples
- ----------------
Beverages
Drug & Grocery Store
Chains
Foods
Household Products
Tobacco

Financial Services
- ------------------
Banks & Savings and Loans
Financial Data Processing Services & Systems
Insurance
Miscellaneous Financial
Real Estate Investment
Trusts
Rental & Leasing Services: Commercial
Securities Brokerage &Services

Health Care
- -----------
Drugs & Biotechnology
Health Care Facilities
Health Care Services
Hospital Supply
Service Miscellaneous

Integrated Oils
- ---------------
Oil: Integrated Domestic
Oil: Integrated International

Materials & Processing
- ----------------------
Agriculture
Building & Construction
Chemicals
Containers & Packaging
Diversified Manufacturing
Engineering & Contracting Serv.
Fertilizers
Forest Products
Gold & Precious Metals
Miscellaneous Materials & Processing
Non-Ferrous Metals
Office Supplies
Paper and Forest Productions
Real Estate & Construction
Steel
Textile Products

Other
- -----
Trust Certificates-Government Related
Lending
Asset-backed-Mortgages
Asset-backed-Credit Card Receivables
Asset-backed-Manufacturing & Housing
Asset-backed-Home Equity
Asset-backed-Commercial
Asset-backed-Other
Other Energy
Gas Pipelines
Miscellaneous Energy
Offshore Drilling
Oil and Gas Producers
Oil Well Equipment & Services

Producer Durables
Aerospace
Electrical Equipment & Components
Electronics: Industrial
Homebuilding
Industrial Products
Machine Tools
Machinery
Miscellaneous Equipment
Miscellaneous Producer Durables
Office Furniture & Business Equipment
Pollution Control and Environmental Services
Production Technology Equipment
Telecommunications
Equipment

Technology
Communications Technology
Computer Software
Computer Technology
Electronics
Electronics: Semi-Conductors/Components
Miscellaneous Technology

Utilities
Miscellaneous Utilities
Utilities: Cable TV & Radio
Utilities: Electrical
Utilities: Gas distribution
Utilities: Telecommunications
Utilities: Water

17
<PAGE>

COMPUTER-RELATED RISKS

Many mutual funds and other companies that issue securities, as well as
government entities upon whom those mutual funds and companies depend, may be
adversely affected by so called "Year 2000 issues" involving computer systems
(whether their own systems or systems of their service providers) that do not
properly process dates beginning with January 1, 2000 and information related to
those dates.

The Investment Manager currently is in the process of reviewing its
internal computer systems as they relate to the Funds, as well as the computer
systems of those service providers upon which the Funds rely, in order to obtain
reasonable assurances that the Funds will not experience a material adverse
impact as a result of any Year 2000 issues. The Trust does not currently
anticipate that any Year 2000 issues will have a material adverse impact on the
Funds' portfolio investments, taken as a whole. There can be no assurances in
this area, however, including the possibility that any Year 2000 issues could
negatively affect the investment markets or the economy generally.

DEBT INSTRUMENTS AND
PERMITTED CASH INVESTMENTS

The Fixed Income Funds, and in certain circumstances the Equity Funds, in
certain circumstances, may invest in debt securities to the extent described in
the Prospectus and in other sections of this Statement of Additional
Information. Certain debt securities and money market instruments in which the
Funds may invest are described below.

MANAGING VOLATILITY- FIXED INCOME FUNDS

In administering the Core Fixed Income and Core Plus Fixed Income Funds'
investments, the Investment Manager generally attempts to maintain volatility
within targeted ranges by managing the duration and weighted average maturity of
each Fund's bond position.

Duration is an indicator of the expected volatility of a bond position in
response to changes in interest rates. In calculating duration, a Fund measures
the average time required to receive all cash flows associated with those debt
securities -- representing payments of principal and interest -- by considering
the timing, frequency and amount of payment expected from each portfolio debt
security. The higher the duration, the greater the gains and losses when
interest rates change. Duration generally is a more accurate measure of
potential volatility with a portfolio composed of high-quality debt securities,
such as U.S. government securities, municipal securities and high-grade U.S.
corporate bonds, than with lower-grade securities.

The Investment Manager may use several methods to manage the duration of a
Fund's bond positions in order to increase or decrease its exposure to changes
in interest rates. First, the Investment Manager may adjust duration by
adjusting the mix of debt securities held by the

18
<PAGE>

Fund. For example, if the Investment Manager intends to shorten duration, it
may sell debt instruments that individually have a long duration and purchase
other debt instruments that individually have a shorter duration. Among the
factors that will affect a debt security's duration are the length of time to
maturity, the timing of interest and principal payments, and whether the terms
of the security give the issuer of the security the right to call the security
prior to maturity. Second, the Investment Manager may adjust bond duration
using derivative transactions, especially with interest rate futures and options
contracts. For example, if the Investment Manager wants to lengthen the
duration of a Fund's bond position, it could purchase interest rate futures
contracts instead of buying longer-term bonds or selling shorter-term bonds.
Similarly, during periods of lower interest rate volatility, the Investment
Manager may use a technique to extend duration in the event rates rise by
writing an out-of-the-money put option and receiving premium income with the
expectation that the option could be exercised. In managing duration, the use
of such derivatives may be faster and more efficient than trading specific
portfolio securities.

U.S. GOVERNMENT AND RELATED SECURITIES

U.S. Government securities are securities which are issued or guaranteed as
to principal or interest by the U.S. Government, a U.S. Government agency or
instrumentality, or certain mixed-ownership U.S. Government corporations or
sponsored enterprises as described herein. The U.S. Government securities in
which the Funds may invest include, among others:

- direct obligations of the U.S. Treasury, i.e., U.S. Treasury bills,
notes, certificates and bonds;

- obligations of U.S. Government agencies or instrumentalities such as
the Federal Home Loan Banks, the Federal Farm Credit Banks, the
Federal National Mortgage Association, the Government National
Mortgage Association and the Federal Home Loan Mortgage Corporation;
and

- obligations of mixed-ownership Government corporations such as
Resolution Funding Corporation.

U.S. Government securities which a Fund may buy are backed in a variety of
ways by the U.S. Government, its agencies or instrumentalities. Some of these
obligations, such as Government National Mortgage Association mortgage-backed
securities, are backed by the full faith and credit of the U.S. Treasury. Other
obligations, such as those of the Federal National Mortgage Association, are
backed by the discretionary authority of the U.S. Government to purchase certain
obligations of agencies or instrumentalities, although the U.S. Government has
no legal obligation to do so. Obligations such as those of the Federal Home
Loan Bank, the Federal Farm Credit Bank, the Federal National Mortgage
Association and the Federal Home Loan Mortgage Corporation are backed by the
credit of the agency or instrumentality issuing the obligations. Certain
obligations of Resolution Funding Corporation, a mixed-ownership Government
corporation, are backed with respect to interest payments by the U.S. Treasury,
and with respect to principal payments by U.S. Treasury obligations held in a

19
<PAGE>

segregated account with a Federal Reserve Bank. Except for certain
mortgage-related securities, a Fund will only invest in obligations issued by
mixed-ownership Government corporations where such securities are guaranteed as
to payment of principal or interest by the U.S. Government or a U.S. Government
agency or instrumentality, and any unguaranteed principal or interest is
otherwise supported by U.S. Government obligations held in a segregated account.

U.S. Government securities may be acquired by a Fund in the form of
separately traded principal and interest components of securities issued or
guaranteed by the U.S. Treasury. The principal and interest components of
selected securities are traded independently under the Separate Trading of
Registered Interest and Principal of Securities ("STRIPS") program. Under the
STRIPS program, the principal and interest components are individually numbered
and separately issued by the U.S. Treasury at the request of depository
financial institutions, which then trade the component parts independently.
Obligations of Resolution Funding Corporation are similarly divided into
principal and interest components and maintained as such on the book entry
records of the Federal Reserve Banks.

In addition, a Fund may invest in custodial receipts that evidence
ownership of future interest payments, principal payments or both on certain
U.S. Treasury notes or bonds in connection with programs sponsored by banks and
brokerage firms. Such notes and bonds are held in custody by a bank on behalf
of the owners of the receipts. These custodial receipts are known by various
names, including "Treasury Receipts" ("TRs"), "Treasury Investment Growth
Receipts" ("TIGRs") and "Certificates of Accrual on Treasury Securities"
("CATS"), and may not be deemed U.S. Government securities.

A Fund may also invest from time to time in collective investment vehicles,
the assets of which consist principally of U.S. Government securities or other
assets substantially collateralized or supported by such securities, such as
Government trust certificates.

BANK MONEY INVESTMENTS

Bank money investments include, but are not limited to, certificates of
deposit, bankers' acceptances and time deposits. Certificates of deposit are
generally short-term (i.e., less than one year), interest-bearing negotiable
certificates issued by commercial banks or savings and loan associations against
funds deposited in the issuing institution. A banker's acceptance is a time
draft drawn on a commercial bank by a borrower, usually in connection with an
international commercial transaction (to finance the import, export, transfer or
storage of goods). A banker's acceptance may be obtained from a domestic or
foreign bank, including a U.S. branch or agency of a foreign bank. The borrower
is liable for payment as well as the bank, which unconditionally guarantees to
pay the draft at its face amount on the maturity date. Most acceptances have
maturities of six months or less and are traded in secondary markets prior to
maturity. Time deposits are nonnegotiable deposits for a fixed period of time
at a stated interest rate. A Fund will not invest in any such bank money
investment unless the investment is issued by a U.S. bank that is a member of
the Federal Deposit Insurance Corporation ("FDIC"), including any foreign branch
thereof, a U.S. branch or agency of a

20
<PAGE>

foreign bank, a foreign branch of a foreign bank, or a savings bank or savings
and loan association that is a member of the FDIC and which at the date of
investment has capital, surplus and undivided profits (as of the date of its
most recently published financial statements) in excess of $50 million. The
Fund will not invest in time deposits maturing in more than seven days and will
not invest more than 15% of its total assets in time deposits maturing in two to
seven days.

U.S. branches and agencies of foreign banks are offices of foreign banks
and are not separately incorporated entities. They are chartered and regulated
either federally or under state law. U.S. federal branches or agencies of
foreign banks are chartered and regulated by the Comptroller of the Currency,
while state branches and agencies are chartered and regulated by authorities of
the respective states or the District of Columbia. U.S. branches of foreign
banks may accept deposits and thus are eligible for FDIC insurance; however, not
all such branches elect FDIC insurance. Unlike U.S. branches of foreign banks,
U.S. agencies of foreign banks may not accept deposits and thus are not eligible
for FDIC insurance. Both branches and agencies can maintain credit balances,
which are funds received by the office incidental to or arising out of the
exercise of their banking powers and can exercise other commercial functions,
such as lending activities.

CAPITAL SECURITIES

The Fixed Income Funds may invest in capital securities, which are
securities issued by a trust having as its only assets junior subordinated
debentures of a corporation, typically a bank holding company. This structure
provides tax advantages to a bank holding company while generally providing
investors, such as the Funds, a higher yield than is offered by investing
directly in a bank holding company's subordinated debt.

SHORT-TERM CORPORATE DEBT INSTRUMENTS

Short-term corporate debt instruments include commercial paper to finance
short-term credit needs (i.e., short-term, unsecured promissory notes) issued
by, among others, (a) corporations and (b) domestic or foreign bank holding
companies or their subsidiaries or affiliates where the debt instrument is
guaranteed by the bank holding company or an affiliated bank or where the bank
holding company or the affiliated bank is unconditionally liable for the debt
instrument. Commercial paper is usually sold on a discounted basis and has a
maturity at the time of issuance not exceeding nine months.

LOWER RATED DEBT SECURITIES

The Core Plus Fund may invest in lower quality debt securities not rated
above the BB major rating category by S&P or above the Ba major rating category
by Moody's, or above similar levels by other rating agencies, or debt securities
that are unrated but considered by the Investment Manager to be of equivalent
investment quality to comparable rated securities. Such securities generally
involve more credit risk than higher rated securities and are considered by S&P
and Moody's to be predominantly speculative with respect to capacity to

21
<PAGE>

pay interest and repay principal in accordance with the terms of the obligation.
Further, such securities may be subject to greater market fluctuations and risk
of loss of income and principal than lower yielding, higher rated debt
securities. Risk of lower quality debt securities include (i) limited liquidity
and secondary market support, (ii) substantial market price volatility resulting
from changes in prevailing interest rates and/or investor perception, (iii)
subordination to the prior claims of banks and other senior lenders, (iv) the
operation of mandatory sinking fund or call/redemption provisions during periods
of declining interest rates when the fund may be required to reinvest premature
redemption proceeds in lower yielding portfolio securities; (v) the possibility
that earnings of the issuer may be insufficient to meet its debt service; and
(vi) the issuer's low creditworthiness and potential for insolvency during
periods of rising interest rates and economic downturn. For further information
concerning the ratings of debt securities, see "--Commercial Paper Ratings"
below.

ZERO (OR STEP) COUPON SECURITIES

The Fixed Income Funds may invest in zero and step coupon securities. Zero
(or step) coupon securities are debt securities that may pay no interest for all
or a portion of their life but are purchased at a discount to face value at
maturity. Their return consists of the amortization of the discount between
their purchase price and their maturity value, plus, in the case of a step
coupon, any fixed rate interest income. Zero coupon securities pay no interest
to holders prior to maturity even though interest on these securities is
reported as income to the Fund. The Fund will be required to distribute all or
substantially all of such amounts annually to its shareholders. These
distributions may cause the Fund to liquidate portfolio assets in order to make
such distributions at a time when the Fund may have otherwise chosen not to sell
such securities. The market value of such securities may be more volatile than
that of securities which pay interest at regular intervals.

CERTAIN SECURITIES RATINGS

COMMERCIAL PAPER RATINGS

Commercial paper investments at the time of purchase will be rated within
the "A" major rating category by S&P, within the "Prime" major rating category
by Moody's, within comparable categories of other rating agencies or considered
to be of comparable quality by the Investment Manager, or, if not rated, issued
by companies having an outstanding long-term unsecured debt issue rated at least
within the "A" category by S&P, by Moody's, within comparable categories of
other rating agencies or considered to be of comparable quality by the
Investment Manager. The money market investments in corporate bonds and
debentures (which must have maturities at the date of settlement of one year or
less) must be rated at the time of purchase at least within the "A" category by
S&P, within the "Prime" category by Moody's, within comparable categories of
other rating agencies or considered to be of comparable quality by the
Investment Manager.

Commercial paper rated within the "A" category (highest quality) by S&P is
issued by entities which have liquidity ratios which are adequate to meet cash
requirements. Long-term

22
<PAGE>

senior debt is rated within the "A" category or better, although in some cases
credits within the "BBB" category may be allowed. The issuer has access to at
least two additional channels of borrowing. Basic earnings and cash flow have
an upward trend with allowance made for unusual circumstances. Typically, the
issuer's industry is well established and the issuer has a strong position
within the industry. The reliability and quality of management are
unquestioned. The relative strength or weakness of the above factors determines
whether the issuer's commercial paper is rated A-1, A-2 or A-3. (Those A-1
issues determined to possess overwhelming safety characteristics are denoted
with a plus (+) sign: A-1+.)

The rating "Prime" is the highest commercial paper rating category assigned
by Moody's. Among the factors considered by Moody's in assigning ratings are
the following: evaluation of the management of the issuer; economic evaluation
of the issuer's industry or industries and an appraisal of speculative-type
risks which may be inherent in certain areas; evaluation of the issuer's
products in relation to competition and customer acceptance; liquidity; amount
and quality of long-term debt; trend of earnings over a period of 10 years;
financial management of obligations which may be present or may arise as a
result of public interest questions and preparations to meet such obligations.
These factors are all considered in determining whether the commercial paper is
rated Prime-1, Prime-2 or Prime-3.

RATING CATEGORIES OF DEBT SECURITIES

Set forth below is a description of S&P corporate bond and debenture rating
categories:

AAA: An obligation rated within the AAA category has the highest rating
assigned by S&P. Capacity to meet the financial commitment on the obligation is
extremely strong.

AA: An obligation rated within the AA category differs from the highest
rated obligation only in small degree. Capacity to meet the financial
obligation is very strong.

A: An obligation rated within the A category is somewhat more susceptible
to the adverse effects of changes in circumstances and economic conditions than
debt in higher rated categories. However, capacity to meet the financial
commitment on the obligation is still strong.

BBB: An obligation rated within the BBB category exhibits adequate
protection parameters. However, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to meet the
financial commitment on the obligation.

Obligations rated within the BB, B, CCC, CC and C categories are regarded
as having significant speculative characteristics. BB indicates the least
degree of speculation and C the highest. While such obligations will likely
have some quality and protective characteristics, these may be outweighed by
large uncertainties or major exposures to adverse conditions.

BB: An obligation rated within the BB category is less vulnerable to
nonpayment than other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse

23
<PAGE>

business, financial or economic conditions which could lead to inadequate
capacity to meet the financial commitment on the obligation. The BB rating
category is also used for debt subordinated to senior debt that is assigned an
actual or implied BBB rating.

B: An obligation rated within the B category is more vulnerable to
nonpayment than obligations rated within the BB category, but currently has the
capacity to meet the financial commitment on the obligation. Adverse business,
financial or economic conditions will likely impair capacity or willingness to
meet the financial commitment on the obligation. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB- rating.

CCC: An obligation rated within the CCC category is vulnerable to
nonpayment and is dependent upon favorable business, financial and economic
conditions to meet the financial commitment on the obligation. In the event of
adverse business, financial or economic conditions, it is not likely to have the
capacity to meet the financial commitment on the obligation.

CC: An obligation rated within the CC category is currently highly
vulnerable to nonpayment.

C: The C rating may be used to cover a situation where a bankruptcy
petition has been filed, but payments on this obligation are being continued.

D: An obligation rated within the D category is in payment default. The D
rating category is used when payments on an obligation are not made on the date
due even if the applicable grace period has not expired, unless S&P believes
that such payments will be made during such grace period. The D rating also
will be used upon the filing of a bankruptcy petition or the taking of a similar
action if payments on an obligation are jeopardized.

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.

S&P may attach the "r" symbol to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or volatility of
expected returns which are not addressed in the credit rating. Examples
include: obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risks-such as interest only (IO) and
principal only (PO) mortgage securities; and obligations with unusually risky
terms, such as inverse floaters.

Set forth below is a description of Moody's corporate bond and debenture
rating categories:

Aaa: Bonds which are rated within the Aaa category are judged to be of the
best quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt-edge." Interest payments are protected by a
large or by an exceptionally stable margin,

24
<PAGE>

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 within the Aa category 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 risks appear somewhat larger
than in Aaa securities.

A: Bonds which are rated within the A category 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 within the Baa category 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.

Ba: Bonds which are rated within the Ba category are judged to have
speculative elements; their future cannot be considered as well assured. Often
the protection of interest and principal payments may be very moderate and
thereby not well safeguarded during other good and bad times over the future.
Uncertainty of position characterizes bonds in this class.

B: Bonds which are rated within the B category generally lack
characteristics of the desirable investment. Assurance of interest and
principal payments or of maintenance of other terms of the contract over any
long period of time may be small.

Caa: Bonds which are rated within the Caa category are of poor standing.
Such issues may be in default or there may be present elements of danger with
respect to principal or interest.

Ca: Bonds which are rated within the Ca category represent obligations
which are speculative in a high degree. Such issues are often in default or
have other marked shortcomings.

C: Bonds which are rated within the C category are the lowest rated class
of bonds, and issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.

1, 2 or 3: The ratings from Aa through B may be modified by the addition
of a numeral indicating a bond's rank within its rating category.

25
<PAGE>

CLASSES OF SHARES

The Trustees have authorized shares of each Fund to be issued in four
classes: Class I, Class II, Class III and Class IV shares. The Trustees may
authorize additional classes or terminate existing classes, without shareholder
approval, in the future.

The eligibility requirements for each class of shares are described in
detail in the Prospectus. Notwithstanding such eligibility requirements, the
Investment Manager and its affiliates may invest in any class of shares of any
Fund without regard to any stated minimum investment requirements.

Each share of each class of shares represents an identical legal interest
in the same portfolio of investments of a Fund, has the same rights and is
identical in all respects, except that the classes pay different levels of
shareholder service fees. Although the legal rights of holders of each class of
shares are identical, it is likely that the different expenses borne by each
class will result in different net asset values and dividends. Except for those
differences between classes of shares described above, in the Funds' Prospectus
and otherwise in this Statement of Additional Information, each share of a Fund
has equal dividend, redemption and liquidation rights with other shares of the
Fund and, when issued, is fully paid and nonassessable by the Fund.

Shareholder rights granted under the Agreement and Declaration of Trust may
be modified by the Trustees, provided, however, that the Agreement and
Declaration of Trust may not be amended if such amendment (a) repeals the
limitations on personal liability of any shareholder, or repeals the prohibition
of assessment upon the shareholders, without the express consent of each
shareholder involved or (b) materially adversely modifies any shareholder right
without the consent of the holders of a majority of the outstanding shares
entitled to vote. Under the Agreement and Declaration of Trust, the Trustees
may reorganize, merge or liquidate a Fund without prior shareholder approval and
subject to compliance with applicable law. On any matter submitted to the
shareholders of a Fund, the holder of a Fund share is entitled to one vote per
share (with proportionate voting for fractional shares) regardless of the
relative net asset value thereof. Except as provided by law, the Trustees may
otherwise modify the rights of shareholders at any time.

Under the Agreement and Declaration of Trust, no annual or regular meeting
of shareholders is required. Thus, there ordinarily will be no shareholder
meetings unless required by Investment Company Act of 1940, as amended (the
"1940 Act"). Except as otherwise provided under the 1940 Act, the Board of
Trustees will be a self-perpetuating body until fewer than two-thirds of the
Trustees serving as such are Trustees who were elected by shareholders of the
Trust. In the event less than a majority of the Trustees serving as such were
elected by shareholders of the Trust, a meeting of shareholders will be called
to elect Trustees. Under the Agreement and Declaration of Trust, any Trustee
may be removed by vote of two-thirds of the outstanding Trust shares. In
connection with such meetings called by shareholders, shareholders will be
assisted in shareholder communications to the extent required by applicable law.

26
<PAGE>

Under Massachusetts law, the shareholders of the Trust could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Agreement and Declaration of Trust disclaims shareholder liability
for acts or obligations of the Trust and provides for indemnification for all
losses and expenses of any shareholder of a Fund held personally liable for the
obligations of the Trust. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in which
the Fund would be unable to meet its obligations. The Investment Manager
believes that, in view of the above, the risk of personal liability to
shareholders is remote.

27
<PAGE>

TRUSTEES AND OFFICERS

The Trustees and principal officers of the Trust, their addresses, and
their principal occupations and positions with certain affiliates of the
Investment Manager are set forth below.

*+Peter C. Bennett, One Financial Center, Boston, MA 02111, serves as
Vice President of the Trust. He is 60. His principal occupation is
currently, and during the past five years has been, Executive Vice President,
Director and Chief Investment Officer - Equity of State Street Research &
Management Company. Mr. Bennett's other principal business affiliation is
Director, State Street Research Investment Services, Inc.

*+Thomas J. Dillman, One Financial Center, Boston, MA 02111 serves as Vice
President of the Trust. He is 49. His principal occupation is Senior Vice
President of State Street Research & Management Company. During the past five
years he has also served as research director at Bank of New York.

*+Catherine Dudley, One Financial Center, Boston, MA 02111, serves as Vice
President of the Trust. She is 39. Her principal occupation is Senior Vice
President of State Street Research & Management Company. During the past five
years she has also served as an investment manager at Chancellor Capital
Management and Phoenix Investment Counsel.

*+F. Gardner Jackson, Jr., One Financial Center, Boston, MA 02111,
serves as Vice President of the Trust. He is 58. His principal occupation
is currently, and during the past five years has been, Senior Vice President
of State Street Research & Management Company.

*+John H. Kallis, One Financial Center, Boston, MA 02111, serves as Vice
President of the Trust. He is 58. His principal occupation is currently, and
during the past five years has been, Senior Vice President of State Street
Research & Management Company.

Robert A. Lawrence, 175 Federal Street, Boston, MA 02110, serves as a
Trustee of the Trust. He is 72. He is retired and was formerly a Partner in
Saltonstall & Co., a private investment firm.

*+Gerard P. Maus, One Financial Center, Boston, MA 02111, serves as
Treasurer of the Trust. He is 48. His principal occupation is currently, and
during the past five years has been, Executive Vice President, Treasurer, Chief
Financial Officer, Chief Administrative Officer and Director of State Street
Research & Management Company. Mr. Maus's other principal business affiliations
include Executive Vice President, Treasurer, Chief Financial Officer, Chief
Administrative Officer and Director of State Street Research Investment
Services, Inc.

*Mark Marinella, One Financial Center, Boston, MA 02111, serves as Vice
President of the Trust. He is 41. His principal occupation is Senior Vice
President of State Street Research & Management Company. During the past five
years he has also served as a

28
<PAGE>

principal and senior portfolio manager at STW Fixed Income Management Ltd. and
director of fixed income at CS First Boston Corp.

_________________

* or + see footnotes on page 30

29
<PAGE>

*+Francis J. McNamara, III, One Financial Center, Boston, MA 02111, serves
as Secretary and General Counsel of the Trust. He is 43. His principal
occupation is Executive Vice President, General Counsel and Secretary of State
Street Research & Management Company. During the past five years he has also
served as Senior Vice President of State Street Research & Management Company,
Senior Vice President of State Street Research Investment Services, Inc. and as
Senior Vice President, General Counsel and Assistant Secretary of The Boston
Company, Inc., Boston Safe Deposit and Trust Company and The Boston Company
Advisors, Inc. Mr. McNamara's other principal business affiliations include
Executive Vice President, Clerk and General Counsel of State Street Research
Investment Services, Inc.

*James C. Pannell, One Financial Center, Boston, MA 02111, serves as
Vice President of the Trust. He is 45. His principal occupation is
Executive Vice President of State Street Research & Management Company.
During the past five years he has also served as Senior Vice President and
Vice President of State Street Research & Management Company.

*+Kim M. Peters, One Financial Center, Boston, MA 02111, serves as Vice
President of the Trust. He is 46. His principal occupation is Senior Vice
President of State Street Research & Management Company. During the past five
years he also served as Vice President of State Street Research & Management
Company.

*Jeffrey A. Rawlins, One Financial Center, Boston, MA 02111, serves as Vice
President of the Trust. He is 37. His principal occupation currently, and
during the past five years, has been Senior Vice President of State Street
Research & Management Company.

*+Thomas A. Shively, One Financial Center, Boston, MA 02111, serves as
Vice President of the Trust. He is 45. His principal occupation is
Executive Vice President, Director and Chief Investment Officer - Fixed
Income of State Street Research & Management Company. During the past five
years he has also served as Senior Vice President of State Street Research &
Management Company. Mr. Shively's other principal business affiliation is
Director of State Street Research Investment Services, Inc.

James M. Storey, Ten Post Office Square South, Boston, MA 02109, serves as
Trustee of the Trust. He is 68. He is retired and was formerly a partner at
Dechert, Price & Rhoads (1987-1993).

*Amy McDermott Swanson, One Financial Center, Boston, MA 02111, serves as
Vice President of the Trust. She is 41. Her principal occupation is currently,
and during the past five years has been, Senior Vice President of State Street
Research & Management Company.

_________________

* or + see footnotes on page 30

30
<PAGE>

*+Ralph F. Verni, One Financial Center, Boston, MA 02111, serves as
Chairman of the Board, President, Chief Executive Officer and Trustee of the
Trust. He is 56. His principal occupation is currently, and during the past
five years has been, Chairman of the Board, President, Chief Executive Officer
and Director of State Street Research & Management Company. Mr. Verni's other
principal business affiliations include Chairman of the Board and Director of
State Street Research Investment Services, Inc. (and until February 1996,
prior positions as President and Chief Executive Officer of that Company).

_________________

* or + see footnotes on page 30

31
<PAGE>

*+James M. Weiss, One Financial Center, Boston, MA 02111, serves as
Vice President of the Trust. He is 52. His principal occupation is
Executive Vice President of State Street Research & Management Company.
During the past five years he has also served as Senior Vice President of
State Street Research & Management Company and as President and Chief
Investment Officer of IDS Advisory Group, Inc.

*+Elizabeth M. Westvold, One Financial Center, Boston, MA 02111, serves as
Vice President of the Trust. She is 38. Her principal occupation is Senior
Vice President of State Street Research & Management Company. During the past
five years, she also has served as Vice President and as an analyst for State
Street Research & Management Company.

*+John T. Wilson, One Financial Center, Boston, MA 02111, serves as Vice
President of the Trust. He is 34. His principal occupation is Senior Vice
President of State Street Research & Management Company. During the past
five years he has also served as Vice President for State Street Research &
Management Company, as an analyst and portfolio manager at Phoenix Home Life
Mutual Insurance Company and, from 1995 to 1996, as a Vice President of
Phoenix Investment Counsel, Inc.

*+Kennard P. Woodworth, Jr., One Financial Center, Boston, MA 02111,
serves as Vice President of the Trust. He is 60. His principal occupation is
currently, and during the past five years has been, Senior Vice President of
State Street Research & Management Company.

_________________

* These Trustees and/or officers are or may be deemed to be "interested
persons" of the Trust under the 1940 Act because of their affiliations with
the Fund's investment adviser.

+ Serves as a Trustee/Director and/or officer of one or more of the following
investment companies, each of which has an advisory relationship with the
Investment Manager or its parent, Metropolitan Life Insurance Company:
State Street Research Equity Trust, State Street Research Financial Trust,
State Street Research Income Trust, State Street Research Money Market
Trust, State Street Research Tax-Exempt Trust, State Street Research
Capital Trust, State Street Research Exchange Trust, State Street Research
Growth Trust, State Street Research Master Investment Trust, State Street
Research Securities Trust, State Street Research Portfolios, Inc. and
Metropolitan Series Fund, Inc.

As of the approximate time of this Statement of Additional Information,
the Investment Manager and Metropolitan Life Insurance Company, its indirect
parent, were beneficial owners of all or a substantial amount of the
outstanding Class I, Class II, Class III, and Class IV shares of each of the
Funds, and may be deemed to be in control of the Funds as "control" is
defined in the 1940 Act. Such owners may acquire additional shares of the
Funds. Although sale of the Funds' shares to other investors will reduce
their percentage ownership, so long as 25% of the voting securities of a Fund
are so owned, such owners will be presumed to be in control of such Fund.

As of May 18, 1999, there were 10,000 shares of the Trust outstanding.

32
<PAGE>

Trustees Compensation:
- -----------------------------------------------------------------
Total
Compensation
Aggregate From Fund and Fund
Name of Compensation Complex Paid
Trustee From Trust(a) to Trustees(b)
- -----------------------------------------------------------------
<S> <C> <C>
Ralph F. Verni $ 0 $ 0
Robert A. Lawrence $7,500 $7,500
James M. Storey $7,500 $7,500
</TABLE>

____________________

(a) Estimated compensation for the Trust's first fiscal year ended January 31,
2000.

(b) Estimated Compensation from Fund and Fund Complex for the 12 months ended
January 31, 2000. The Trust does not provide any pension or retirement
benefits for the Trustees.

MANAGEMENT OF THE FUND AND INVESTMENT ADVISORY AND OTHER SERVICES

Under the provisions of the Trust's Agreement and Declaration of Trust and
the laws of Massachusetts, responsibility for the management and supervision of
the Funds rests with the Trustees.

State Street Research & Management Company, the Investment Manager, a
Delaware corporation, with offices at One Financial Center, Boston,
Massachusetts 02111-2690, acts as investment adviser to the Fund. The
Investment Manager was founded by Paul Cabot, Richard Saltonstall and Richard
Paine to serve as investment adviser to one of the nation's first mutual funds,
presently known as State Street Research Investment Trust, which they had formed
in 1924. Their investment management philosophy emphasized comprehensive
fundamental research and analysis, including meetings with the management of
companies under consideration for investment. The Investment Manager's
portfolio management group has extensive investment industry experience managing
equity and debt securities.

The Investment Manager is charged with the overall responsibility for
managing the investments and business affairs of the Funds, subject to the
authority of the Board of Trustees. The Advisory Agreement provides that the
Investment Manager will furnish each Fund with an investment program, suitable
office space and facilities and such investment advisory, research and
administrative services as may be required from time to time. The Investment
Manager compensates all executive and clerical personnel and Trustees of the
Trust if such persons are employees of the Investment Manager or its affiliates.
The Investment Manager is an indirect wholly-owned subsidiary of Metropolitan
Life Insurance Company ("Metropolitan").

33
<PAGE>

Metropolitan is a life insurance and financial services company which
sells insurance policies, annuity contracts, and retirement and investment
products.

The advisory fee payable monthly by each Fund to the Investment Manager is
computed as a percentage of the average of the value of the net assets of the
Fund as determined at the close of regular trading on the New York Stock
Exchange (the "NYSE") on each day the NYSE is open for trading, at the annual
rate of the percentage of the net assets of the Fund set forth below:

<TABLE>

<S> <C>
Core Fixed Income Fund 0.40%
Core Plus Fixed Income Fund 0.40%
Core Large Cap Growth Fund 0.55%
Large Cap Growth Fund 0.55%
</TABLE>

Pursuant to a Fee Waiver and Expense Limitation Agreement, the Investment
Manager agrees, with respect to the expense limitation applicable to each Fund,
to (i) waive a portion of its fee under the Advisory Agreement, (ii) reimburse
the Fund or (iii) directly pay expenses, such that the expense limitation for a
Fund will not be exceeded. The expense limitations are 0.20% for the Fixed
Income Funds and 0.35% for the Equity Funds, and do not include certain
commissions, taxes, shareholder servicing fees and other fees and other
expenses. The Fee Waiver and Expense Limitation Agreement has an initial term
ending June 1, 2000, and will automatically continue in effect thereafter unless
terminated following six months written notice by either party.

The Advisory Agreement provides that it shall continue in effect with
respect to the Fund for a period of two years after its initial effectiveness
and will continue from year to year thereafter as long as it is approved at
least annually both (i) by a vote of a majority of the outstanding voting
securities of the Fund (as defined in the 1940 Act) or by the Trustees of the
Trust, and (ii) in either event by a vote of a majority of the Trustees who are
not parties to the Advisory Agreement or "interested persons" of any party
thereto, cast in person at a meeting called for the purpose of voting on such
approval. The Advisory Agreement may be terminated on 60 days' written notice
by either party and will terminate automatically in the event of its assignment,
as defined under the 1940 Act and regulations thereunder. Such regulations
provide that a transaction which does not result in a change of actual control
or management of an adviser is not deemed an assignment.

Under the Code of Ethics of the Investment Manager, investment management
personnel are only permitted to engage in personal securities transactions in
accordance with certain conditions relating to such person's position, the
identity of the security, the timing of the transaction, and similar factors.
Such personnel must report their personal securities transactions quarterly and
supply broker confirmations of such transactions to the Investment Manager.

The Trust has entered into a Servicing Agreement with the Investment
Manager pursuant to which the Investment Manager provides shareholder and
administrative services in

34
<PAGE>

respect of the Funds. These services include, among others, informative
reporting, client account information maintenance, responding to shareholder
inquiries, and certain transaction related administration. As compensation for
providing such services, the Investment Manager is paid a monthly fee, computed
and accrued daily, at annual rate of each Class' average daily net asset value
as follows: Class I - 0.30%, Class II - 0.20%, Class III - 0.10% and Class IV -
0.05%.

PURCHASE AND REDEMPTION OF SHARES

Shares of the Fund may be purchased by contacting your State Street
Research client service representative or, if you are unable to reach your
representative, by calling 1-800-521-6548. The Fund offers four classes of
shares which may be purchased at the next determined net asset value per share.
General information on how to buy shares of the Fund is set forth in the
Prospectus. The following supplements that information.

PUBLIC OFFERING PRICE. The public offering price for each class of shares
is based on their net asset value determined as of the close of regular trading
on the NYSE on the day the purchase order is received by the Investment Manager,
provided that the order is received prior to the close of regular trading on the
NYSE on that day; otherwise the net asset value used is that determined as of
the close of the NYSE on the next day it is open for unrestricted trading.

RULE 18f-1 ELECTION. The Funds are committed to paying in cash all
requests for redemptions by any shareholder of record of a Fund, limited in
amount with respect to each shareholder during any 90-day period to the lesser
of (i) $250,000, or (ii) 1% of the net asset value of the Fund at the beginning
of such period. Although a Fund will normally redeem all shares for cash, it may
redeem amounts in excess of the lesser of (i) or (ii) above by payment in kind
of securities held by the particular Fund.

REORGANIZATIONS. In the event of mergers or reorganizations with other
public or private collective investment entities, including investment companies
as defined in the 1940 Act, a Fund may issue its shares at net asset value (or
more) to such entities or to their security holders.

DISHONORED CHECKS. If a purchaser's check is not honored for its full
amount, the purchaser could be subject to additional charges to cover collection
costs and any investment loss, and the purchase may be canceled.

SHAREHOLDER ACCOUNTS

General information on shareholder accounts is included in the Fund's
Prospectus. The following supplements that information.

35
<PAGE>

INVOLUNTARY REDEMPTION. Each Fund reserves the right to redeem at its
option any shareholder account which falls below $500,000 and remains below
$1,000,000 for a period of 60 days after notice is mailed to the applicable
shareholder. A Fund may increase such minimum account value above such amount
in the future after notice to affected shareholders. Involuntarily redeemed
shares will be priced at the net asset value on the date fixed for redemption by
a Fund, and the proceeds of the redemption will be mailed to the affected
shareholder at the address of record.

The Fund may not suspend the right of redemption or postpone the date of
payment of redemption proceeds for more than seven days, except that it may
elect to suspend the redemption of shares or postpone the date of payment of
redemption proceeds: (1) during any period that the NYSE is closed (other than
customary weekend and holiday closings) or trading on the NYSE is restricted;
(2) during any period in which an emergency exists as a result of which disposal
of portfolio securities is not reasonably practicable or it is not reasonably
practicable to fairly determine the Fund's net asset values; or (3) during such
other periods as the Securities and Exchange Commission (the "SEC") may by order
permit for the protection of investors.

Full and fractional shares of each Fund owned by shareholders are credited
to their accounts by the Transfer Agent, State Street Bank and Trust Company,
225 Franklin Street, Boston, Massachusetts 02110. Certificates will not be
issued. Shareholders will receive periodic statements of transactions in their
accounts.

ALTERNATIVE MEANS OF CONTACTING THE FUNDS. It is unlikely, during periods
of extraordinary market conditions, that a shareholder may have difficulty in
reaching the State Street Research client service representative. In that
event, however, the shareholder should contact the Service Center at
1-800-521-6548 or otherwise at the Funds' main office at One Financial Center,
Boston, Massachusetts 02111-2690.

NET ASSET VALUE

The net asset value of the shares of each Fund is determined once daily as
of the close of regular trading on the NYSE, ordinarily 4 p.m. New York City
time, Monday through Friday, on each day during which the NYSE is open for
unrestricted trading.

The net asset value per share of each Fund is computed by dividing the sum
of the value of the securities held by the Fund plus any cash or other assets
minus all liabilities by the total number of outstanding shares of the Fund at
such time. Any expenses, except for extraordinary or nonrecurring expenses,
borne by the Fund, including the investment management fee payable to the
Investment Manager, are accrued daily.

In determining the values of portfolio assets as provided below, the
Trustees may utilize one or more pricing services in lieu of market quotations
for certain securities which are not readily available on a daily basis. Such
services utilize information with respect to market

36
<PAGE>

transactions, quotations from dealers and various relationships among securities
in determining value and may provide prices determined as of times prior to the
close of the NYSE.

In general, securities are valued as follows. Securities which are listed
or traded on the New York or American Stock Exchange are valued at the price of
the last quoted sale on the respective exchange as of the close of regular
trading on such exchange for that day. Securities which are listed or traded on
a national securities exchange or exchanges, but not on the New York or American
Stock Exchange, are valued at the price of the last quoted sale on the exchange
for that day prior to the close of regular trading on the NYSE. Securities not
listed on any national securities exchange which are traded "over the counter"
and for which quotations are available on the National Association of Securities
Dealers, Inc.'s (the "NASD") NASDAQ System, or other system, are valued at the
closing price supplied through such system for that day at the close of regular
trading on the NYSE. Other securities are, in general, valued at the mean of
the bid and asked quotations last quoted prior to the close of regular trading
on the NYSE if there are market quotations readily available, or in the absence
of such market quotations, then at the fair value thereof as determined by or
under authority of the Trustees of the Trust with the use of such pricing
services as may be deemed appropriate or methodologies approved by the Trustees.
The Trustees also reserve the right to adopt other valuations based on fair
value pricing in unusual circumstances when use of other methods as described in
part above could otherwise have a material adverse effect on a Fund as a whole.

The Trustees have authorized the use of the amortized cost method to value
short-term debt instruments issued with a maturity of one year or less and
having a remaining maturity of 60 days or less when the value obtained is fair
value, provided that during any period in which more than 25% a the Fund's total
assets is invested in short-term debt securities the current market value of
such securities will be used in calculating net asset value per share in lieu of
the amortized cost method. Under the amortized cost method of valuation, the
security is initially valued at cost on the date of purchase (or in the case of
short-term debt instruments purchased with more than 60 days remaining to
maturity, the market value on the 61st day prior to maturity), and thereafter a
constant amortization to maturity of any discount or premium is assumed
regardless of the impact of fluctuating interest rates on the market value of
the security.

PORTFOLIO TRANSACTIONS

BROKERAGE ALLOCATION

The Investment Manager's policy is to seek for its clients, including each
Fund, what in the Investment Manager's judgment will be the best overall
execution of purchase or sale orders and the most favorable net prices in
securities transactions consistent with its judgment as to the business
qualifications of the various broker or dealer firms with whom the Investment
Manager may do business, and the Investment Manager may not necessarily choose
the broker offering the lowest available commission rate. Decisions with
respect to the market where the transaction is to be completed, to the form of
transaction (whether principal or

37
<PAGE>

agency), and to the allocation of orders among brokers or dealers are made in
accordance with this policy. In selecting brokers or dealers to effect
portfolio transactions, consideration is given to their proven integrity and
financial responsibility, their demonstrated execution experience and
capabilities both generally and with respect to particular markets or
securities, the competitiveness of their commission rates in agency transactions
(and their net prices in principal transactions), their willingness to commit
capital, and their clearance and settlement capability. The Investment Manager
makes every effort to keep informed of commission rate structures and prevalent
bid/ask spread characteristics of the markets and securities in which
transactions for a Fund occur. Against this background, the Investment Manager
evaluates the reasonableness of a commission or a net price with respect to a
particular transaction by considering such factors as difficulty of execution or
security positioning by the executing firm. The Investment Manager may or may
not solicit competitive bids based on its judgment of the expected benefit or
harm to the execution process for that transaction.

When it appears that a number of firms could satisfy the required standards
in respect of a particular transaction, consideration may also be given by the
Investment Manager to services other than execution services which certain of
such firms have provided in the past or may provide in the future. Negotiated
commission rates and prices, however, are based upon the Investment Manager's
judgment of the rate which reflects the execution requirements of the
transaction without regard to whether the broker provides services in addition
to execution. Among such other services are the supplying of supplemental
investment research; general economic, political and business information;
analytical and statistical data; relevant market information, quotation
equipment and services; reports and information about specific companies,
industries and securities; purchase and sale recommendations for stocks and
bonds; portfolio strategy services; historical statistical information; market
data services providing information on specific issues and prices; financial
publications; proxy voting data and analysis services; technical analysis of
various aspects of the securities markets, including technical charts; computer
hardware used for brokerage and research purposes; computer software and
databases (including those contained in certain trading systems used for
portfolio analysis and modeling, and also including software providing
investment personnel with efficient access to current and historical data from a
variety of internal and external sources); portfolio evaluation services, and
data relating to the relative performance of accounts.

In the case of each Fund and other registered investment companies advised
by the Investment Manager or its affiliates, the above services may include data
relating to performance, expenses and fees of those investment companies and
other investment companies; this information is used by the Trustees or
Directors of the investment companies to fulfill their responsibility to oversee
the quality of the Investment Manager's advisory contracts between the
investment companies and the Investment Manager. The Investment Manager
considers these investment company services only in connection with the
execution of transactions on behalf of its investment company clients and not
its other clients. Certain of the nonexecution services provided by
broker-dealers may in turn be obtained by the broker-dealers from third parties
who are paid for such services by the broker-dealers.

38
<PAGE>

The Investment Manager regularly reviews and evaluates the services
furnished by broker-dealers. The Investment Manager's investment management
personnel conduct internal surveys and use other methods to evaluate the quality
of the research and other services provided by various broker-dealer firms, and
the results of these efforts are made available to the equity trading department
which uses this information as a consideration to the extent described above in
the selection of brokers to execute portfolio transactions.

Some services furnished by broker-dealers may be used for research and
investment decision-making purposes, and also for marketing or administrative
purposes. Under these circumstances, the Investment Manager allocates the cost
of the services to determine the proportion which is allocable to research or
investment decision-making and the proportion allocable to other purposes. The
Investment Manager pays directly from its own funds for that portion allocable
to uses other than research or investment decision-making. Some research and
execution services may benefit the Investment Manager's clients as a whole,
while others may benefit a specific segment of clients. Not all such services
will necessarily be used exclusively in connection with the accounts which pay
the commissions to the broker-dealer providing the services.

The Investment Manager has no fixed agreements or understandings with any
broker-dealer as to the amount of brokerage business which the firm may expect
to receive for services supplied to the Investment Manager or otherwise. There
may be, however, understandings with certain firms that in order for such firms
to be able to continuously supply certain services, they need to receive an
allocation of a specified amount of brokerage business. These understandings
are honored to the extent possible in accordance with the policies set forth
above.

It is not the Investment Manager's policy to intentionally pay a firm a
brokerage commission higher than that which another firm would charge for
handling the same transaction in recognition of services (other than execution
services) provided. However, the Investment Manager is aware that this is an
area where differences of opinion as to fact and circumstances may exist, and in
such circumstances, if any, the Investment Manager relies on the provisions of
Section 28(e) of the Securities Exchange Act of 1934.

In the case of the purchase of fixed income securities in underwriting
transactions, the Investment Manager follows any instructions received from its
clients as to the allocation of new issue discounts, selling commissions and
designations to brokers or dealers which provide the client with research,
performance evaluation, master trustee and other services. In the absence of
instructions from the client, the Investment Manager may make such allocations
to broker-dealers which have provided the Investment Manager with research and
brokerage services.

In some instances, certain clients of the Investment Manager request that
it place all or part of the orders for their account with certain brokers or
dealers, which in some cases provide services to those clients. The Investment
Manager generally agrees to honor those requests to the extent practicable.
Clients may condition their requests by requiring the

39
<PAGE>

Investment Manager only to effect transactions with the specified broker-dealers
if the broker-dealers are competitive as to price and execution. In other
cases, the Investment Manager may be unable to negotiate commissions or obtain
volume discounts or best execution. In addition, a disparity may exist among
the commissions charged to clients who request the Investment Manager to use
particular brokers or dealers, and also between those clients and those who do
not make such requests. A client who requests the use of a particular
broker-dealer should understand that it may lose the possible advantage which
non-requesting clients derive from aggregation of orders for several clients as
a single transaction for the purchase or sale of a particular security. Among
other reasons why best execution may not be achieved with directed brokerage is
that, in an effort to achieve orderly execution of transactions, execution of
orders that have designated particular brokers may, at the discretion of the
trading desk, be delayed until execution of other non-designated orders has been
completed.

When more than one client of the Investment Manager is seeking to buy or
sell the same security, the sale or purchase is carried out in a manner which is
considered fair and equitable to all accounts. In allocating investments among
various clients (including in what sequence orders for trades are placed), the
Investment Manager will use its best business judgment and will take into
account such factors as the investment objectives of the clients, the amount of
investment funds available to each, the size of the order, the amount already
committed for each client to a specific investment and the relative risks of the
investments, all in order to provide on balance a fair and equitable result to
each client over time. Although sharing in large transactions may sometimes
affect price or volume of shares acquired or sold, overall it is believed there
may be an advantage in execution. The Investment Manager may follow the
practice of grouping orders of various clients for execution to get the benefit
of lower prices or commission rates. In certain cases where the aggregate order
may be executed in a series of transactions at various prices, the transactions
are allocated as to amount and price in a manner considered equitable to each so
that each receives, to the extent practicable, the average price of such
transactions. Exceptions may be made based on such factors as the size of the
account and the size of the trade. For example, the Investment Manager may not
aggregate trades where it believes that it is in the best interests of clients
not to do so, including situations where aggregation might result in a large
number of small transactions with consequent increased custodial and other
transactional costs which may disproportionately impact smaller accounts. Such
disaggregation, depending on the circumstances, may or may not result in such
accounts receiving more or less favorable execution relative to other clients.

CERTAIN TAX MATTERS

TAXATION OF THE FUNDS--IN GENERAL

Each Fund intends to qualify and elect to be treated each taxable year as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"), although it cannot give complete assurance
that it will qualify to do so. Each Fund also intends to meet all requirements
necessary to be entitled to the beneficial tax treatment accorded regulated
investment companies and their shareholders. Accordingly, each

40
<PAGE>

Fund must, among other things, (a) derive at least 90% of its gross income in
each taxable year from dividends, interest, payments with respect to securities
loans, gains from the sale or other disposition of stock, securities or foreign
currencies, or other income (including, but not limited to, gains from options,
futures or forward contracts) derived with respect to its business of investing
in such stock, securities or currencies (the "90% test"); (b) diversify its
holdings so that, at the close of each quarter of the taxable year, (i) at least
50% of the market value of its total assets consists of cash, cash items, U.S.
government securities, securities of other regulated investment companies, and
other securities limited generally with respect to any one issuer to not more
than 5% of the total assets of the Fund and not more than 10% of the outstanding
voting securities of such issuer, and (ii) not more than 25% of the value of its
total assets is invested in the securities (other than those of the U.S.
government or other regulated investment companies) of any issuer or of two or
more issuers which the Fund controls and which are engaged in the same, similar
or related trades or businesses; and (c) distribute at least 90% of the sum of
its taxable net investment income, its net tax-exempt income, and the excess, if
any, of net short-term capital gains over net long-term capital losses for each
taxable year.

If a Fund should fail to qualify as a regulated investment company accorded
beneficial tax treatment under the Code in any year, all of its taxable income
would be subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions would be taxable to
shareholders as ordinary income to the extent of the Fund's current or
accumulated earnings and profits. Also, the shareholders, if they received a
distribution in excess of current or accumulated earnings and profits, would
receive a return of capital that would reduce the basis of their shares of the
Fund to the extent thereof. Any distribution in excess of a shareholder's basis
in the shareholder's shares would be taxable as gain realized from the sale of
such shares.

Each Fund will be liable for a nondeductible 4% excise tax on amounts not
distributed on a timely basis in accordance with a calendar year distribution
requirement. To avoid the tax, during each calendar year, a Fund must
distribute an amount equal to at least the sum of 98% of its ordinary income
(not taking into account any capital gains or losses) for the calendar year, and
98% of its capital gain net income for the 12-month period ending on October 31,
in addition to any undistributed portion of the respective balances from the
prior year. Each Fund intends to make sufficient distributions to avoid this 4%
excise tax.

TAXATION OF CERTAIN INVESTMENTS

ORIGINAL ISSUE DISCOUNT; MARKET DISCOUNT. For federal income tax purposes,
debt securities purchased by a Fund may be treated as having original issue
discount. Original issue discount represents interest for federal income tax
purposes and can generally be defined as the excess of the stated redemption
price at maturity of a debt obligation over the issue price. Original issue
discount is treated for federal income tax purposes as income earned by the
Fund, whether or not any income is actually received, and therefore is subject
to the distribution requirements of the Code. Generally, the amount of original
issue discount is determined on the basis of a constant yield to maturity which
takes into account the

41
<PAGE>

compounding of accrued interest. Under section 1286 of the Code, an investment
in a stripped bond or stripped coupon may result in original issue discount.
Because a Fund must include original issue discount in income as it accrues, it
will be more difficult for the Fund to make the distributions required for the
Fund to maintain its status as a regulated investment company accorded
beneficial tax treatment under Subchapter M of the Code or to avoid the 4%
excise tax described above, and the Fund may be required to sell securities in
its portfolio that it otherwise would have continued to hold.

Debt securities may be purchased by a Fund at a discount that exceeds the
original issue discount, if any, at the time the Fund purchases the securities.
This additional discount represents market discount for income tax purposes. In
the case of any debt security having a maturity date of more than one year from
the date of issue and having market discount, the gain realized on disposition
will be treated as interest to the extent it does not exceed the accrued market
discount on the security (unless the Fund elects to include such accrued market
discount in income in the tax year to which it is attributable). Generally,
market discount is accrued on a daily basis. A Fund may be required to
capitalize, rather than deduct currently, part or all of any direct interest
expense incurred or continued to purchase or carry any debt security having
market discount, unless the Fund makes the election to include market discount
in income currently.

OPTIONS AND FUTURES TRANSACTIONS. Certain of a Fund's investments
(including hedging transactions in options, futures and straddles, or other
similar transactions) may be subject to provisions of the Code that (i) require
inclusion of unrealized gains or losses in the Fund's income for purposes of the
90% test and require inclusion of unrealized gains in the Fund's income for
purposes of the excise tax and the distribution requirements applicable to
regulated investment companies; (ii) defer recognition of realized losses; and
(iii) characterize both realized and unrealized gain or loss as short-term and
long-term gain or loss irrespective of the holding period of the investment.
Such provisions generally apply to, among other investments, options on debt
securities, indices on securities and futures contracts. Each Fund will monitor
its transactions and may make certain tax elections available to it in order to
mitigate the impact of these rules and prevent disqualification of the Fund as a
regulated investment company.

INVESTMENTS IN FOREIGN CURRENCIES AND FOREIGN SECURITIES. Gains or losses
attributable to foreign currency contracts or fluctuations in exchange rates
that occur between the time a Fund accrues income or expenses denominated in a
foreign currency and the time the Fund actually collects such income or pays
such expenses are treated as ordinary income or loss. The portion of any gain
or loss on the disposition of a debt security denominated in a foreign currency
that is attributable to fluctuations in the value of the foreign currency during
the holding period of the debt security will likewise be treated as ordinary
income or loss. Such ordinary income or loss will increase or decrease the
amount of the Fund's net investment income.

If a Fund invests in the stock of certain "passive foreign investment
companies" ("PFICs"), ordinary income taxes and interest charges may be imposed
on the Fund on

42
<PAGE>

"excess distributions" received by the Fund or on gain from the disposition of
such investments by the Fund. In certain circumstances, this tax treatment can
be avoided by making an election to mark such investments to market annually or
to treat the PFIC as a "qualified electing fund." The Funds do not intend to
invest in PFICs. Because of the broad scope of the PFIC rules, however, there
can be no assurance that the Funds can avoid doing so.

TAXATION OF SHAREHOLDERS

Distributions from a Fund will be taxable to shareholders as ordinary
income to the extent derived from the Fund's investment income and net
short-term capital gain. The Fund's net long-term capital gain that is
distributed and designated as a capital gain dividend will be taxable to
shareholders as long-term capital gain, regardless of the length of time the
Fund's shares have been held by a shareholder. Distributions from a Fund will
be taxable to a shareholder regardless of whether they are received in cash or
reinvested in additional shares.

Distributions by a Fund result in a reduction in the fair market value of
the Fund's shares. Should a distribution reduce the fair market value below a
shareholder's cost basis, such distribution nevertheless may be taxable to the
shareholder as ordinary income or long-term capital gain, even though, from an
investment standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax implications of
buying shares just prior to a taxable distribution. The price of shares
purchased at that time includes the amount of any forthcoming distribution.
Those investors purchasing shares just prior to a taxable distribution will
receive a return of investment upon distribution which nevertheless will be
taxable to them.

Each of the Funds may be subject to foreign taxes, including foreign income
or withholding taxes. Since it is likely that, with respect to each Fund, less
than 50% of the value of the Fund's total assets will consist of stock or
securities of foreign corporations, shareholders generally will not be entitled
to claim a credit or deduction with respect to such foreign taxes.

If dividends from domestic corporations are earned by a Fund, then a
portion of the dividends paid by the Fund may qualify for the 70% deduction for
dividends received which is available to corporate shareholders of the Fund.
Shareholders will be informed of any portion of the dividends paid by the Fund
which qualifies for this deduction. The dividends-received deduction is reduced
to the extent the dividends received are treated as debt-financed under the
Code, and is eliminated if the stock is held for less than 46 days.

Any dividend declared in October, November or December and made payable to
shareholders of record in any such month is treated as received by the
shareholders on December 31, if the Fund pays the dividend during January of the
following calendar year.

The sale, exchange or redemption of a Fund's shares may give rise to a gain
or loss. In general, any gain realized upon a taxable disposition of shares
held for more than one year will

43
<PAGE>

be taxed as long-term capital gain. If a shareholder sells shares at a loss
within six months of purchase, any loss will be treated as long-term, rather
than short-term, capital loss to the extent of any long-term capital gain
distributions received by the shareholder with respect to the shares. All or a
portion of any loss realized upon a taxable disposition of a Fund's shares will
be disallowed if other shares of the Fund are purchased within 30 days before or
after the disposition. In such a case, the basis of the newly purchased shares
will be adjusted to reflect the disallowed loss.

Special tax rules apply to investments through defined contribution plans
and other tax-qualified plans. Shareholders should consult their tax advisers
to determine the suitability of shares of a Fund as an investment through such
plans and the precise effect of an investment on their particular tax
situations.

The foregoing discussion of United States federal income tax law relates
solely to the application of that law to United States persons, that is, United
States citizens and residents and United States corporations, partnerships,
trusts and estates. Each shareholder who is not a United States person should
consider the United States and foreign tax consequences of ownership of shares
of a Fund, including the possibility that such a shareholder may be subject to
United States withholding at a rate of 30% (or at a lower rate under an
applicable treaty) on distributions.

Shareholders should consult their tax advisers about the application of the
provisions of federal tax law described in this Statement of Additional
Information in light of their particular tax situations and about the possible
applicability of state, local or foreign taxes.

CALCULATION OF PERFORMANCE DATA

From time to time, in advertisements or in communications to shareholders
or prospective investors, each Fund may compare the performance of its Class I,
Class II, Class III or Class IV shares to the performance of other mutual funds
with similar investment objectives, to certificates of deposit and/or to other
financial alternatives. A Fund may also compare its performance to appropriate
indices, such as Standard & Poor's 500 Index, Russell 1000 Growth Index, Lehman
Brothers Aggregate Bond Index, Consumer Price Index and Dow Jones Industrial
Average and/or to appropriate rankings and averages such as those compiled by
Lipper Analytical Services, Inc., Morningstar, Inc., Money Magazine, Business
Week, Forbes Magazine, The Wall Street Journal and Investor's Daily.

The average annual total return ("standard total return") of the Class I,
Class II, Class III and Class IV shares of a Fund will be calculated as set
forth below. Total return is computed separately for each class of shares of a
Fund.

All calculations of performance data in this section will reflect the
voluntary measures, if any, by the Fund's affiliates to reduce fees or expenses
relating to the Fund; see "Accrued Expenses and Recurring Charges" later in this
section.

44
<PAGE>

TOTAL RETURN

Standard total return will be computed separately for each class of shares
by determining the average annual compounded rates of return over the designated
periods that, if applied to the initial amount invested, would produce the
ending redeemable value in accordance with the following formula:

n
P(1+T) = ERV

Where: P = a hypothetical initial payment of $1,000

T = average annual total return

n = number of years

ERV = ending redeemable value at the end of the designated period
assuming a hypothetical $1,000 payment made at the beginning
of the designated period

The calculation is based on the further assumptions that the highest
applicable initial or contingent deferred sales charge is deducted, and that all
dividends and distributions by the Fund are reinvested at net asset value on the
reinvestment dates during the periods. All accrued expenses and recurring
charges are also taken into account as described later herein.

YIELD

Yield for each of the Fixed Income Fund's Class I, Class II, Class III and
Class IV shares is computed by dividing the net investment income per share
earned during a recent month or other specified 30-day period by the maximum
offering price per share on the last day of the period and annualizing the
result in accordance with the following formula:

6
YIELD = 2[(A-B + 1) -1]
---
cd

Where a = dividends and interest earned during the period

b = expenses accrued for the period (net of voluntary expense
reductions by the Investment Manager)

c = the average daily number of shares outstanding during the
period that were entitled to receive dividends

d = the maximum offering price per share on the last day of the
period

To calculate interest earned (for the purpose of "a" above) on debt
obligations, a Fund computes the yield to effective maturity of each obligation
held by the Fund based on the

45
<PAGE>

market value of the obligation (including actual accrued interest) at the close
of the last business day of the preceding period, or, with respect to
obligations purchased during the period, the purchase price (plus actual accrued
interest). The yield to effective maturity is then divided by 360 and the
quotient is multiplied by the market value of the obligation (including actual
accrued interest) to determine the interest income on the obligation for each
day of the period that the obligation is in the portfolio. Dividend income is
recognized daily based on published rates.

With respect to the treatment of discount and premium on mortgage or other
receivables-backed obligations which are expected to be subject to monthly
payments of principal and interest ("paydowns"), a Fund accounts for gain or
loss attributable to actual monthly paydowns as a realized capital gain or loss
during the period. The Funds have elected not to amortize discount or premium
on such securities.

Undeclared earned income, computed in accordance with generally accepted
accounting principles, may be subtracted from the maximum offering price.
Undeclared earned income is the net investment income which, at the end of the
base period, has not been declared as a dividend, but is reasonably expected to
be declared as a dividend shortly thereafter.

All accrued expenses are taken into account as described later herein.

Yield information is useful in reviewing a Fund's performance, but because
yields fluctuate, such information cannot necessarily be used to compare an
investment in the Fund's shares with bank deposits, savings accounts and similar
investment alternatives which often are insured and/or provide an agreed or
guaranteed fixed yield for a stated period of time. Shareholders should
remember that yield is a function of the kind and quality of the instruments in
a Fund's portfolio, portfolio maturity and operating expenses and market
conditions.

ACCRUED EXPENSES AND RECURRING CHARGES

Accrued expenses include all recurring charges that are charged to all
shareholder accounts during the length of the performance period. The standard
total return results do not take into account recurring and nonrecurring charges
for optional services which only certain shareholders elect and which involve
nominal fees.

In calculating performance, the accrued expenses are reduced by the amount
of subsidy, if any, of fees or expenses during the subject period, paid by
affiliates. In the absence of such subsidization, the performance of a Fund
would have been lower.

NONSTANDARDIZED TOTAL RETURN

Each Fund may provide the above described standard total return results for
Class I, Class II, Class III and Class IV shares for periods which end no
earlier than the most recent calendar quarter end and which begin twelve months
before and at the time of commencement

46
<PAGE>

of such Fund's operations. In addition, a Fund may provide nonstandardized
total return results for differing periods, such as for the most recent six
months, and/or without taking sales charges into account. Such nonstandardized
total return is computed as otherwise described under "Total Return" except the
result may or may not be annualized, and as noted any applicable sales charge,
if any, may not be taken into account and therefore not deducted from the
hypothetical initial payment of $10,000.

DISTRIBUTION RATES

A Fund may also quote its distribution rate for each class of shares. The
distribution rate is calculated by annualizing the latest per-share distribution
from ordinary income and dividing the result by the offering price per share as
of the end of the period to which the distribution relates. A distribution can
include gross investment income from debt obligations purchased at a premium and
in effect include a portion of the premium paid. A distribution can also
include nonrecurring, gross short-term capital gains without recognition of any
unrealized capital losses. Further, a distribution can include income from the
sale of options by a Fund even though such option income is not considered
investment income under generally accepted accounting principles.

Because a distribution can include such premiums, capital gains and option
income, the amount of the distribution may be susceptible to control by the
Investment Manager through transactions designed to increase the amount of such
items. Also, because the distribution rate is calculated in part by dividing
the latest distribution by the offering price, which is based on net asset value
plus any applicable sales charge, the distribution rate will increase as the net
asset value declines. A distribution rate can be greater than the yield rate
calculated as described above.

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, is the Trust's transfer agent and dividend disbursing
agent. State Street Bank and Trust Company is not an affiliate of the
Investment Manager or its affiliates.

CUSTODIAN

State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, is the Trust's custodian. As custodian State Street Bank
and Trust Company is responsible for, among other things, safeguarding and
controlling each Fund's cash and securities, handling the receipt and delivery
of securities and collecting interest and dividends on each Fund's investments.
State Street Bank and Trust Company is not an affiliate of the Investment
Manager or its affiliates.

47
<PAGE>

DISTRIBUTOR

State Street Research Investment Services, Inc. ("SSR Investment Services")
serves as principal distributor of the Trust's shares under a Distribution
Agreement. Pursuant to the Distribution Agreement, SSR Investment Services
agrees to bear the expenses of printing and distributing the Trust's prospectus
and any other literature used in connection with the continuous offering of the
Trust's shares for sale to the public, and any advertising in connection with
such offering. The Trust or SSR Investment Services may terminate the
Distribution Agreement on 60 days written notice without penalty.

INDEPENDENT ACCOUNTANTS

PricewaterhouseCoopers LLP, 160 Federal Street, Boston, Massachusetts
02110, serves as the Trust's independent accountants, providing professional
services including (1) audits of the Fund's annual financial statements, (2)
assistance and consultation in connection with SEC filings and (3) review of the
annual income tax returns filed on behalf of the Funds.

48
<PAGE>

State Street Research Institutional Funds
Statements of Assets and Liabilities
May 18, 1999

<TABLE>
<CAPTION>
State Street State Street State Street State Street
Research Research Research Research
Core Fixed Core Plus Core Large Cap Large Cap
Income Fund Fixed Income Fund Growth Fund Growth Fund
<S> <C> <C> <C> <C>
ASSETS
Cash $25,000 $25,000 $25,000 $25,000
Receivable from Distributor 26,500 26,500 26,500 26,500
Other Assets 17,000 17,000 17,000 17,000
-------- ------- ------- -------
68,500 68,500 68,500 68,500
LIABILITIES
Accrued legal fees 25,000 25,000 25,000 25,000
Accrued registration fees 17,000 17,000 17,000 17,000
Accrued audit fee 1,500 1,500 1,500 1,500
-------- ------- ------- -------
43,500 43,500 43,500 43,500
-------- ------- ------- -------
NET ASSETS $25,000 $25,000 $25,000 $25,000
-------- ------- ------- -------
-------- ------- ------- -------

NET ASSETS CONSIST OF:
Shares of beneficial interest
outstanding (unlimited number
of shares authorized, no par
value per share) $25,000 $25,000 $25,000 $25,000
-------- ------- ------- -------
-------- ------- ------- -------

Net asset value, offering price and
redemption price per share
of Class IV shares
($25,000 / 2,500 shares) $10.00 $10.00 $10.00 $10.00
-------- ------- ------- -------
-------- ------- ------- -------
</TABLE>

The accompanying notes are an integral part of the financial statements.

<PAGE>

State Street Research Institutional Funds
Statements of Operations
For the period March 3, 1999 (organization date) to May 18, 1999

<TABLE>
<CAPTION>
State Street State Street State Street State Street
Research Research Research Research
Core Fixed Core Plus Core Large Cap Large Cap
Income Fund Fixed Income Fund Growth Fund Growth Fund
<S> <C> <C> <C> <C>
EXPENSES
Legal fees 25,000 25,000 25,000 25,000
Audit fee 1,500 1,500 1,500 1,500
-------- ------- ------- -------
26,500 26,500 26,500 26,500
Expenses borne by the Distributor (26,500) (26,500) (26,500) (26,500)
-------- ------- ------- -------
Net investment income 0 0 0 0
-------- ------- ------- -------
-------- ------- ------- -------
</TABLE>

Note:
State Street Research Institutional Funds (the "Trust") was organized on
March 3, 1999 as a Massachusetts business trust. The Trust is registered
under the Investment Company Act of 1940 as an open-end, diversified
management company and consists of four separate funds: State Street Research
Core Fixed Income Fund, State Street Research Core Plus Fixed Income Fund,
State Street Research Core Large Cap Growth Fund and State Street Research
Large Cap Growth Fund. The Trust intends to enter into an investment advisory
agreement with State Street Research & Management Company (the "Investment
Manager"), as discussed under "Management of the Fund and Investment Advisory
and Other Services" in the prospectus. At May 18, 1999, the Investment
Manager owned all of the outstanding shares of each fund.

Legal and audit fees incurred and to be incurred in connection with
organizing the Trust will be paid by the funds and will be reimbursed by the
Investment Manager upon commencement of operations. Prepaid registration fees
incurred in connection with organizing the Trust will be amortized over a period
of twelve months.

<PAGE>

Report of Independent Accountants

To the Board of Trustees and Shareholder of
State Street Research Institutional Funds

In our opinion, the accompanying statements of assets and liabilities and the
related statements of operations present fairly, in all material respects,
the financial position of State Street Research Core Fixed Income Fund, State
Street Research Core Plus Fixed Income Fund, State Street Research Core Large
Cap Growth Fund and State Street Research Large Cap Growth Fund (each a
series of State Street Research Institutional Funds, hereafter referred to as
the "Trust") at May 18, 1999, and the results of each of their operations for
the period from March 3, 1999 (organization date) to May 18, 1999 in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.

PricewaterhouseCoopers LLP
Boston, Massachusetts
May 18, 1999

<PAGE>

PART C
------

<PAGE>

Item 23. Exhibits
--------

(1) Agreement and Declaration of Trust of the Registrant.(1)

(2) Bylaws of the Registrant.(1)

(3) Please refer to Article 5 of the Registrant's Declaration of Trust,
which is hereby incorporated by reference.

(4) Form of Advisory Agreement between the Registrant, on behalf of each
of its Core Fixed Income, Core Plus Fixed Income, Core Large Cap
Growth and Large Cap Growth Funds, and State Street Research &
Management Company.(1)

(5) Form of Distribution Agreement between the Registrant and State Street
Research Investment Services, Inc.(1)

(6) Not applicable.

(7) Form of Custodian Agreement.(2)

(8) (a) Form of Servicing Agreement between the Trust and State Street
Research & Management Company;(1)
(c) Form of Fee Waiver and Expense Limitation Agreement.(1)

(9) Form of Opinion of Ropes & Gray regarding the Core Fixed Income,
Core Plus Fixed Income, Core Large Cap Growth and Large Cap Growth
Funds.(2)

(10) Consent of Independent Accountants.(2)

(11) None.

(12) None.

(13) Not applicable.

(14) Not applicable

(15) Form of Rule 18f-3 Plan.(2)

C-1
<PAGE>

(16) Not applicable

(1) Incorporated by reference to the Registrant's initial Registration
Statement filed on March 5, 1999.

(2) Filed herewith

Item 24. Persons Controlled by or Under Common Control with Registrant
-------------------------------------------------------------
None.

Item 25. Indemnification
---------------

Article IV of the Bylaws of the Registrant provides that the Registrant
shall indemnify each of its Trustees and officers against all liabilities and
expenses, including but not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and against all expenses,
including but not limited to accountants and counsel fees, reasonably incurred
in connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
legislative body, in which such trustee or officer may be or may have been
involved as a party or otherwise or with which such person may be or may have
been threatened, while in office or thereafter, by reason of being or having
been such a trustee or officer, except that indemnification shall not be
provided if it shall have been finally adjudicated in any such action, suit or
proceeding that such trustee or officer (i) did not act in good faith in the
reasonable belief that his or her action was in the best interests of the
Registrant or (ii) is liable to the Registrant or its shareholders by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such person's office.

Item 26. Business and Other Connections of Investment Adviser
----------------------------------------------------

Describe any other business, profession, vocation or employment of a
substantial nature in which each investment adviser of the Registrant, and each
director, officer or partner of any such investment adviser, is or has been, at
any time during the past two fiscal years, engaged for his own account or in the
capacity of director, officer, employee, partner or trustee.

<TABLE>
<CAPTION>
Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
<S> <C> <C> <C>
State Street Research & Investment Adviser Various investment advisory Boston, MA
Management Company clients

Arpiarian, Tanya None
Vice President

Bangs, Linda L. None
Vice President

Barnwell, Amy F. Vice President State Street Research Boston, MA
Vice President Investment Services, Inc.

Beaudry, Matthew F. Senior Vice President State Street Research Boston, MA
Senior Vice President Investment Services, Inc.
(Vice President
until 4/99)
</TABLE>
C-2

<PAGE>

<TABLE>
<CAPTION>
Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
<S> <C> <C> <C>

Bennett, Peter C. Vice President State Street Research Capital Trust Boston, MA
Director and Vice President State Street Research Exchange Trust Boston, MA
Executive Vice Vice President State Street Research Financial Trust Boston, MA
President Vice President State Street Research Growth Trust Boston, MA
Vice President State Street Research Master Investment Trust Boston, MA
Vice President State Street Research Equity Trust Boston, MA
Director State Street Research Investment Services, Inc. Boston, MA
Vice President State Street Research Income Trust Boston, MA
Vice President State Street Research Portfolios, Inc. Boston, MA
Vice President State Street Research Securities Trust Boston, MA
Vice President State Street Research Institutional Funds Boston, MA
President and Director Christian Camps & Conferences, Inc. Boston, MA
Director and Chairman Boston Private Bank & Trust Co. Boston, MA
of Exec. Comm.
Chairman and Trustee Gordon College Wenham, MA

Bochman, Kathleen None
Vice President

Borzilleri, John Vice President Montgomery Securities San Francisco, CA
Senior Vice President (until 6/97)
(Vice President
until 4/98)

Bray, Michael J. None
Senior Vice President
(Vice President
until 4/98)

Brezinski, Karen None
Vice President

Brown, Susan H. None
Vice President

Buffum, Andrea L. None
Vice President

Burbank, John F. None
Senior Vice President

Cabrera, Jesus A. Vice President State Street Research Capital Trust Boston, MA
Senior Vice President
(Vice President
until 4/98)
</TABLE>

C-3
<PAGE>

<TABLE>
<CAPTION>
Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
<S> <C> <C>
Calame, Mara D. Vice President and State Street Research Energy, Inc. Boston, MA
Vice President and Assistant Counsel
Assistant Secretary Assistant Secretary State Street Research Institutional Funds Boston, MA

Canavan, Joseph W. Assistant Treasurer State Street Research Equity Trust Boston, MA
Senior Vice President Assistant Treasurer State Street Research Financial Trust Boston, MA
(Vice President Assistant Treasurer State Street Research Income Trust Boston, MA
until 4/98) Assistant Treasurer State Street Research Money Market Trust Boston, MA
Assistant Treasurer State Street Research Tax-Exempt Trust Boston, MA
Assistant Treasurer State Street Research Capital Trust Boston, MA
Assistant Treasurer State Street Research Exchange Trust Boston, MA
Assistant Treasurer State Street Research Growth Trust Boston, MA
Assistant Treasurer State Street Research Master Investment Trust Boston, MA
Assistant Treasurer State Street Research Securities Trust Boston, MA
Assistant Treasurer State Street Research Portfolios, Inc. Boston, MA
Assistant Treasurer State Street Research Institutional Funds Boston, MA

Carstens, Linda C. Vice President State Street Research Investment Boston, MA
Vice President Services, Inc.

Clifford, Jr., Paul J. Vice President State Street Research Tax-Exempt Trust Boston, MA
Senior Vice President
(Vice President
until 4/99)

Coleman, Thomas J. None
Vice President

Cullen, Terrence J. Vice President Keystone-Evergreen Boston, MA
Vice President and Counsel
and Counsel, and (until 2/98)
Assistant Secretary Vice President and State Street Research Boston, MA
Assistant Clerk Investment Services, Inc.

D'Vari, Ronald None
Senior Vice President
(Vice President
until 4/99)

Depp, Maureen G. Vice President Wellington Management Company Boston, MA
Vice President (until 9/97)

DeVeuve, Donald None
Vice President

DiFazio, Susan M.W. Senior Vice President State Street Research Investment Services, Inc. Boston, MA
Vice President

Dillman, Thomas J. Vice President State Street Research Securities Trust Boston, MA
Senior Vice President

Drake, Susan W. None
Vice President

Dudley, Catherine Senior Portfolio Manager Chancellor Capital Management Boston, MA
Senior Vice President (until 2/98)
Vice President State Street Research Boston, MA
Institutional Funds

Duggan, Peter J. None
Senior Vice President

Ebel, Bruce A. None
Senior Vice President

Egel, David J. Vice President State Street Research Boston, MA
Vice President Investment Services, Inc.

Even, Karen K. None
Vice President

Fazo, Steven A. None
Vice President

Federoff, Alex G. None
Vice President
</TABLE>
C-4

<PAGE>
<TABLE>
<CAPTION>
Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
<S> <C> <C> <C>
Fee, Richard E. Vice President CIGNA Retirement and Investment Services Hartford, CT
Vice President (until 3/97)
Vice President State Street Research Investment Services, Inc. Boston, MA

Feliciano, Rosalina None
Vice President

Ficco, Bonnie A. None
Vice President

Fochtman, Jr., Leo None
Vice President
</TABLE>

C-5

<PAGE>

<TABLE>
<CAPTION>
Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
<S> <C> <C>
Gardner, Michael D. None
Senior Vice President

Geer, Bartlett R. Vice President State Street Research Equity Trust Boston, MA
Senior Vice President Vice President State Street Research Income Trust Boston, MA
Vice President State Street Research Securities Trust Boston, MA

Giroux, June M. None
Vice President

Goodman, Stephanie B. Vice President State Street Research Investment Services, Inc. Boston, MA
Vice President

Govoni, Electra None
Vice President

Grace, Evan None
Vice President

Granger, Allison None
Vice President

Haggerty, Bryan D. None
Vice President

Hamilton, Jr., William A. Treasurer and Director Ellis Memorial and Eldredge House Boston, MA
Senior Vice President Treasurer and Director Nautical and Aviation Publishing Company, Inc. Baltimore, MD
Treasurer and Director North Conway Institute Boston, MA

Hasson, Ira P. Vice President State Street Research Investment Services, Inc. Boston, MA
Vice President

Haverty, Jr., Lawrence J. Vice President State Street Research Capital Trust Boston, MA
Senior Vice President

Healy, Laura J. None
Vice President

Heineke, George R. None
Vice President

Hickman, Joanne Managing Director Zurich Investment Management Chicago, IL
Senior Vice President (until 1/98)
Senior Vice President State Street Research Investment Services, Inc. Boston, MA

Huang, Jesse C. None
Vice President

Jackson, Jr., Vice President State Street Research Equity Trust Boston, MA
F. Gardner Trustee Certain trusts of related and
Senior Vice President non-related individuals
Trustee and Chairman of the Vincent Memorial Hospital Boston, MA
Board

Jamieson, Frederick H. Vice President and
Senior Vice President Asst. Treasurer State Street Research Investment Services, Inc. Boston, MA
Vice President and Asst.
Treasurer SSRM Holdings, Inc. Boston, MA
Vice President and MetLife Securities, Inc. New York, NY
Controller (until 1/97)
</TABLE>

C-6
<PAGE>

<TABLE>
<CAPTION>
Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
<S> <C> <C>
Jodka, Richard Portfolio Manager Frontier Capital Management Boston, MA
Senior Vice President (until 1/98)
Vice President State Street Research Capital Trust Boston, MA

Joseph, Robert I. None
Vice President
</TABLE>

C-7
<PAGE>

Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
<S> <C> <C>
Kallis, John H. Vice President State Street Research Financial Trust Boston, MA
Senior Vice President Vice President State Street Research Income Trust Boston, MA
Vice President State Street Research Money Market Trust Boston, MA
Vice President State Street Research Portfolios, Inc. Boston, MA
(until 11/98)
Vice President State Street Research Tax-Exempt Trust Boston, MA
Vice President State Street Research Securities Trust Boston, MA
Trustee 705 Realty Trust Washington, D.C.
Vice President State Street Research Institutional Funds Boston, MA

Kasper, M. Katherine Vice President State Street Research Investment Services, Inc. Boston, MA
Vice President

Kern, Stephen None
Vice President

Kiessling, Dyann H. Vice President State Street Research Money Market Trust Boston, MA
Vice President

Kluiber, Rudolph K. Vice President State Street Research Capital Trust Boston, MA
Senior Vice President
(Vice President
until 4/98)

Kuhn, Stephen P. None
Vice President

Langholm, Knut Director State Street Research Luxembourg
Senior Vice President
(Vice President
until 4/99)

Leary, Eileen M. None
Vice President

Levanson, David E. None
Vice President

Lomasney, Mary T. Business Analyst Fidelity Investments Boston, MA
Vice President (until 6/97)

Marinella, Mark A. Portfolio Manager STW Fixed Income Management, Ltd. Boston, MA
Senior Vice President (Until 8/98)
Vice President State Street Research Institutional Funds Boston, MA

Markel, Gregory S. None
Vice President

Maurer, Jacqueline J. None
Vice President

McKown, Elizabeth G. Vice President State Street Research Investment Services, Inc. Boston, MA
Vice President
</TABLE>

C-8
<PAGE>

Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
<S> <C> <C>
McNamara, III, Francis J. Executive Vice President, State Street Research Investment Services, Inc. Boston, MA
Executive Vice Clerk and General Counsel
President, Secretary Secretary and General Counsel State Street Research Master Investment Trust Boston, MA
and General Counsel Secretary and General Counsel State Street Research Capital Trust Boston, MA
Secretary and General Counsel State Street Research Exchange Trust Boston, MA
Secretary and General Counsel State Street Research Growth Trust Boston, MA
Secretary and General Counsel State Street Research Securities Trust Boston, MA
Secretary and General Counsel State Street Research Equity Trust Boston, MA
Secretary and General Counsel State Street Research Financial Trust Boston, MA
Secretary and General Counsel State Street Research Income Trust Boston, MA
Secretary and General Counsel State Street Research Money Market Trust Boston, MA
Secretary and General Counsel State Street Research Tax-Exempt Trust Boston, MA
Secretary and General Counsel State Street Research Portfolios, Inc. Boston, MA
Secretary and General Counsel SSRM Holdings, Inc. Boston, MA
Secretary and General Counsel State Street Research Institutional Funds Boston, MA

Maus, Gerard P. Treasurer State Street Research Equity Trust Boston, MA
Director, Executive Treasurer State Street Research Financial Trust Boston, MA
Vice President Treasurer State Street Research Income Trust Boston, MA
Treasurer, Chief Treasurer State Street Research Money Market Trust Boston, MA
Financial Officer and Treasurer State Street Research Tax-Exempt Trust Boston, MA
Chief Administrative Treasurer State Street Research Capital Trust Boston, MA
Officer Treasurer State Street Research Exchange Trust Boston, MA
Treasurer State Street Research Growth Trust Boston, MA
Treasurer State Street Research Master Investment Trust Boston, MA
Treasurer State Street Research Portfolios, Inc. Boston, MA
Treasurer State Street Research Securities Trust Boston, MA
Director, Executive Vice State Street Research Investment Services, Inc. Boston, MA
President, Treasurer and
Chief Financial Officer
Director Metric Holdings, Inc. San Francisco, CA
Director Certain wholly-owned subsidiaries
of Metric Holdings, Inc.
Treasurer and Chief SSRM Holdings, Inc. Boston, MA
Financial Officer
Treasurer (until 1/97) MetLife Securities, Inc. New York, NY
Director State Street Research Luxembourg
Treasurer State Street Research Institutional Funds Boston, MA

Milder, Judith J. None
Senior Vice President

Miller, Joan D. Senior Vice President State Street Research Investment Services, Inc. Boston, MA
Senior Vice President
</TABLE>

C-9
<PAGE>
<TABLE>
<CAPTION>
Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
<S> <C> <C> <C>
Moore, Jr., Thomas P.
Senior Vice Vice President State Street Research Capital Trust Boston, MA
President (until 11/96)
Vice President State Street Research Exchange Trust Boston, MA
(until 2/97)
Vice President State Street Research Growth Trust Boston, MA
(until 2/97)
Vice President State Street Research Master Investment Trust Boston, MA
(until 2/97)
Vice President State Street Research Equity Trust Boston, MA
Director Hibernia Savings Bank Quincy, MA
Governor on the Board Association for Investment Management Charlottesville, VA
of Governors and Research
Vice President State Street Research Portfolios, Inc. Boston, MA

Morey, Andrew None
Vice President

Mulligan, JoAnne C. None
Senior Vice President

Orr, Stephen C. Member Technology Analysts of Boston Boston, MA
Vice President Member Electro-Science Analysts (of NYC) New York, NY

Paddon, Steven W. None
Vice President

Pannell, James C. Vice President State Street Research Institutional Funds Boston, MA
Executive Vice President
(Senior Vice President
until 4/97)

Peters, Kim M. Vice President State Street Research Securities Trust Boston, MA
Senior Vice President Vice President State Street Research Institutional Funds Boston, MA

Pierce, James D. None
Vice President

Poritzky, Dean E. Portfolio Manager Fidelity Management Boston, MA
Vice President (until 4/97)

Pyle, David J. Analyst Oak Value Capital Management Durham, NC
Vice President (until 4/97)

Ragsdale, E.K. Easton Vice President State Street Research Financial Trust Boston, MA
Senior Vice President

Ranson, Clifford Director of NatWest Markets
Vice President Special Situations

Rawlins, Jeffrey A. Vice President State Street Research Institutional Funds Boston, MA
Senior Vice President

Rice III, Daniel Joseph Vice President State Street Research Equity Trust Boston, MA
Senior Vice President
</TABLE>
C-10
<PAGE>
<TABLE>
<CAPTION>

Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
<S> <C> <C> <C>
Romich, Douglas A. Assistant Treasurer State Street Research Equity Trust Boston, MA
Senior Vice President Assistant Treasurer State Street Research Financial Trust Boston, MA
(Vice President Assistant Treasurer State Street Research Income Trust Boston, MA
until 4/98) Assistant Treasurer State Street Research Money Market Trust Boston, MA
Assistant Treasurer State Street Research Tax-Exempt Trust Boston, MA
Assistant Treasurer State Street Research Capital Trust Boston, MA
Assistant Treasurer State Street Research Exchange Trust Boston, MA
Assistant Treasurer State Street Research Growth Trust Boston, MA
Assistant Treasurer State Street Research Master Investment Trust Boston, MA
Assistant Treasurer State Street Research Securities Trust Boston, MA
Assistant Treasurer State Street Research Portfolios, Inc. Boston, MA
Assistant Treasurer State Street Research Institutional Funds Boston, MA

Ryan, Michael J. Vice President Delaware Management Philadelphia, PA
Senior Vice President (until 1/98)

Sanderson, Derek Senior Vice President Freedom Capital Management Boston, MA
Senior Vice President (until 10/97)

Saperstone, Paul None
Vice President

Schrage, Michael None
Vice President
Shaver, Jr. C. Troy President, Chief State Street Research Investment Services, Inc. Boston, MA
Executive Vice Executive Officer and
President Executive Vice President

Shean, William G. None
Vice President

Shively, Thomas A. Vice President State Street Research Income Trust Boston, MA
Director and Vice President State Street Research Financial Trust Boston, MA
Executive Vice Vice President State Street Research Money Market Trust Boston, MA
President Vice President State Street Research Tax-Exempt Trust Boston, MA
Director State Street Research Investment Services, Inc Boston, MA
Vice President State Street Research Securities Trust Boston, MA
Vice President State Street Research Portfolios, Inc. Boston, MA
(until 11/98)
Vice President State Street Research Institutional Funds Boston, MA

Shoemaker, Richard D. None
Senior Vice President

Simi, Susan None
Vice President

Stambaugh, Kenneth None
Vice President
(Assistant Vice
President until 9/97)

Strelow, Dan R. None
Senior Vice President
</TABLE>
C-11
<PAGE>

Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
<S> <C> <C> <C>
Stolberg, Thomas None
Vice President

Swanson, Amy McDermott Vice President State Street Research Institutional Funds Boston, MA
Senior Vice President

Tice, Robin S. None
Vice President

Trebino, Anne M. Vice President SSRM Holdings, Inc. Boston, MA
Senior Vice President

Verni, Ralph F. Chairman, President, Chief State Street Research Capital Trust Boston, MA
Chairman, President, Executive Officer and Trustee
Chief Executive Chairman, President, Chief State Street Research Exchange Trust Boston, MA
Officer and Executive Officer and Trustee
Director Chairman, President, Chief State Street Research Growth Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Master Investment Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Securities Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Equity Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Financial Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Income Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Money Market Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Portfolios, Inc. Boston, MA
Executive Officer and Director
Chairman, President, Chief State Street Research Tax-Exempt Trust Boston, MA
Executive Officer and Trustee
Chairman and Director State Street Research Investment Services, Inc. Boston, MA
(President and Chief Executive
Officer until 2/96)
Chairman, President,
Chief Executive Officer
and Trustee State Street Research Institutional Funds Boston, MA

Chairman and Director Metric Holdings, Inc. San Francisco, CA
Director and Officer Certain wholly-owned subsidiaries
of Metric Holdings, Inc.
Chairman of the Board MetLife Securities, Inc. New York, NY
and Director (until 1/97)
President, Chief Executive SSRM Holdings, Inc. Boston, MA
Officer and Director
Director Colgate University Hamilton, NY
Director State Street Research Luxembourg
Chairman and Director SSR Realty Advisors, Inc. San Francisco, CA
</TABLE>

C-12
<PAGE>

<TABLE>
<CAPTION>
Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
<S> <C> <C> <C>
Wade, Dudley Vice President State Street Research Growth Trust Boston, MA
Freeman Vice President State Street Research Master Investment Trust Boston, MA
Senior Vice
President

Wallace, Julie K. None
Vice President

Walsh, Dennis J. None
Vice President

Walsh, Tucker None
Vice President

Watts, Evan D., Jr. Vice President State Street Research Investment Services, Inc. Boston, MA
Vice President

Weiss, James M. Vice President State Street Research Exchange Trust Boston, MA
Executive Vice President Vice President State Street Research Financial Trust Boston, MA
(Senior Vice President) Vice President State Street Research Growth Trust Boston, MA
until 6/98) Vice President State Street Research Securities Trust Boston, MA
Vice President State Street Research Capital Trust Boston, MA
Vice President State Street Research Equity Trust Boston, MA
Vice President State Street Research Income Trust Boston, MA
Vice President State Street Research Master Investment Trust Boston, MA
Vice President State Street Research Portfolios, Inc. Boston, MA
Vice President State Street Research Institutional Funds Boston, MA

Welch, Timothy None
Vice President

Westvold, Vice President State Street Research Securities Trust Boston, MA
Elizabeth McCombs Vice President State Street Research Institutional Funds Boston, MA
Senior Vice President

Wilkins, Kevin Senior Vice President State Street Research Investment Boston, MA
Senior Vice President (Vice President until 9/98) Services, Inc.
(Vice President Vice President Fidelity Investments Boston, MA
until 9/98) (until 7/97)

Wilson, John T. Vice President State Street Research Equity Trust Boston, MA
Senior Vice President Vice President State Street Research Master Investment Trust Boston, MA
(Vice President Vice President State Street Research Institutional Funds Boston, MA
until 4/98)
</TABLE>

C-13
<PAGE>

Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
<S> <C> <C> <C>
Wing, Darman A. Senior Vice President and State Street Research Investment Services, Inc. Boston, MA
Senior Vice President, Asst. Clerk
Assistant Secretary Assistant Secretary and State Street Research Capital Trust Boston, MA
and Assistant Assistant General Counsel
General Counsel Assistant Secretary and State Street Research Exchange Trust Boston, MA
(Vice President Assistant General Counsel
until 4/98) Assistant Secretary and State Street Research Growth Trust Boston, MA
Assistant General Counsel
Assistant Secretary and State Street Research Master Investment Trust Boston, MA
Assistant General Counsel
Assistant Secretary and State Street Research Securities Trust Boston, MA
Assistant General Counsel
Assistant Secretary and State Street Research Equity Trust Boston, MA
Assistant General Counsel
Assistant Secretary and State Street Research Financial Trust Boston, MA
Assistant General Counsel
Assistant Secretary and State Street Research Income Trust Boston, MA
Assistant General Counsel
Assistant Secretary and State Street Research Money Market Trust Boston, MA
Assistant General Counsel
Assistant Secretary and State Street Research Tax-Exempt Trust Boston, MA
Assistant General Counsel
Assistant Secretary and State Street Research Portfolios, Inc. Boston, MA
Assistant General Counsel
Assistant Secretary and SSRM Holdings, Inc. Boston, MA
Assistant General Counsel

Woodbury, Robert S. None
Vice President

Woodworth, Jr., Kennard Vice President State Street Research Exchange Trust Boston, MA
Senior Vice Vice President State Street Research Growth Trust Boston, MA
President Vice President State Street Research Securities Trust Boston, MA
Vice President State Street Research Institutional Funds Boston, MA

Wu, Norman N. Partner Atlantic-Acton Realty Framingham, MA
Senior Vice President Director Bond Analysts Society of Boston Boston, MA

Zuger, Peter A. Vice President State Street Research Equity Trust Boston, MA
Senior Vice Portfolio Manager American Century
President (until 9/98) Investment Management
</TABLE>

C-14
<PAGE>

Item 27. Principal Underwriters

(a) State Street Research Investment Services, Inc., Registrant's
principal underwriter, also acts as principal underwriter for State
Street Research Financial Trust, State Street Research Income Trust,
State Street Research Money Market Trust, State Street Research
Tax-Exempt Trust, State Street Research Capital Trust, State Street
Research Master Investment Trust, State Street Research Equity Trust,
State Street Research Securities Trust, State Street Research Growth
Trust, and State Street Research Portfolios, Inc.

(b) Directors and Officers of State Street Research Investment Services,
Inc. are as follows:

<TABLE>
<CAPTION>
(1) (2) (3)
Name And Principal Positions and Positions and
Business Address Offices with Offices with
Underwriter Registrant
<S> <C> <C>
Ralph F. Verni Chairman of the Board Chairman of the Board,
One Financial Center and Director President, Chief Executive
Boston, MA 02111 Officer and Director

Peter C. Bennett Director Vice President
One Financial Center
Boston, MA 02111

Gerard P. Maus Executive Vice President, Treasurer
One Financial Center Treasurer, Chief Financial
Boston, MA 02111 Officer, Chief Administrative
Officer and Director

Thomas A. Shively Director Vice President
One Financial Center
Boston, MA 02111

C. Troy Shaver, Jr. President, Chief None
One Financial Center Executive Officer and
Boston, MA 02111 Executive Vice President

Francis J. McNamara, III Executive Vice President, Secretary and General
One Financial Center General Counsel and Counsel
Boston, MA 02111 Clerk
</TABLE>

C-15
<PAGE>

Matthew F. Beaudry Senior Vice President None
One Financial Center
Boston, MA 02111

Peter Borghi Senior Vice President None
One Financial Center
Boston, MA 02111

Paul V. Daly Senior Vice President None
One Financial Center
Boston, MA 02111

Susan M.W. DiFazio Senior Vice President None
One Financial Center
Boston, MA 02111

Joanne Hickman Senior Vice President None
One Financial Center
Boston, MA 02111

Russell A. LaBrasea Senior Vice President None
One Financial Center
Boston, MA 02111

Joan D. Miller Senior Vice President None
One Financial Center
Boston, MA 02111

Kevin Wilkins Senior Vice President None
One Financial Center
Boston, MA 02111

Darman A. Wing Senior Vice President, None
One Financial Center Assistant General Counsel
Boston, MA 02111 and Assistant Clerk

Amy F. Barnwell Vice President None
One Financial Center
Boston, MA 02111

Linda C. Carstens Vice President None
One Financial Center
Boston, MA 02111

C-16
<PAGE>
<TABLE>
<S> <C> <C>
Terrence J. Cullen Vice President, None
One Financial Center Counsel and
Boston, MA 02111 Assistant Clerk

David J. Egel Vice President None
One Financial Center
Boston, MA 02111

Richard E. Fee Vice President None
One Financial Center
Boston, MA 02111

Stuart Fromm Vice President None
One Financial Center
Boston, MA 02111

Stephanie B. Goodman Vice President None
One Financial Center
Boston, MA 02111

Ira P. Hasson Vice President None
One Financial Center
Boston, MA 02111

Frederick H. Jamieson Vice President and None
One Financial Center Assistant Treasurer
Boston, MA 02111

M. Katharine Kasper Vice President None
One Financial Center
Boston, MA 02111

Elizabeth G. McKown Vice President None
One Financial Center
Boston, MA 02111

Amy L. Simmons Vice President None
One Financial Center
Boston, MA 02111

Evan D. Watts, Jr. Vice President None
One Financial Center
Boston, MA 02111
</TABLE>

C-17
<PAGE>

Item 28. Location of Accounts and Records
--------------------------------

Gerard P. Maus, State Street Research & Management Company, One Financial
Center, Boston, Massachusetts 02211.

Item 29. Management Services
-------------------

Not applicable.

Item 30. Undertakings
------------

The Registrant undertakes to furnish to each person to whom a prospectus of
the Registrant is delivered a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.

C-18
<PAGE>

*********************

NOTICE

A copy of the Agreement and Declaration of Trust of State Street Research
Institutional Funds (the "Trust") is on file with the Secretary of The
Commonwealth of Massachusetts and notice is hereby given that this Registration
Statement has been executed on behalf of the Trust by an officer of the Trust as
an officer and by its Trustees as trustees and not individually and the
obligations of or arising out of this Registration Statement are not binding
upon any of the Trustees, officers or shareholders individually but are binding
only upon the assets and property of the Trust.

C-19
<PAGE>

SIGNATURES
----------

Pursuant to the requirements of the Securities Act of 1933 (the "Securities
Act") and the Investment Company Act of 1940 (the "1940 Act"), the Fund has duly
caused this registration statement to be signed on its behalf by the
undersigned, duly authorized, in the City of Boston, and the Commonwealth of
Massachusetts on the 2nd day of June, 1999.

STATE STREET RESEARCH
INSTITUTIONAL FUNDS

By: /s/ Ralph F. Verni
---------------------------------
Name: Ralph F. Verni
Title: President

Pursuant to the requirements of the Securities Act, this registration
statement has been signed on the above date by the following persons in the
capacities indicated.

Signature Title
--------- -----

/s/ Ralph F. Verni Sole Trustee, Chairman of the Board,
- ------------------------------- President and Chief Executive Officer
Ralph F. Verni

/s/ Gerard P. Maus Treasurer (Principal Financial and
- ------------------------------- Accounting Officer)
Gerard P. Maus

C-20
<PAGE>

Exhibit Index
-------------

(7) Form of Custodian Agreement

(9) Form of Opinion of Ropes & Gray

(10) Consent of Independent Accountants

(15) Form of Rule 18f-3 Plan

<PAGE>

Exhibit 7

CUSTODIAN CONTRACT

This Contract between State Street Research Institutional Funds, a
business trust organized and existing under the laws of The Commonwealth of
Massachusetts, hereinafter called the "Fund," and State Street Bank and Trust
Company, a Massachusetts trust company, hereinafter called the "Custodian"

WITNESSETH:

WHEREAS, the Fund is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets; and

WHEREAS, the Fund intends to initially offer shares in four (4)
series, the State Street Research Core Fixed Income Fund, the State Street
Research Core Plus Fixed Income Fund, the State Street Research Core Large
Cap Growth Fund and the State Street Research Large Cap Growth Fund (such
series together with all other series subsequently established by the Fund
and made subject to this Contract in accordance with paragraph 18, being
herein referred to as the "Portfolio(s)").

NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:

1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT

The Fund hereby employs the Custodian as the custodian of the assets
of the Portfolios of the Fund, including securities which the Fund, on behalf
of the applicable Portfolio desires to be held in places within the United
States ("domestic securities") and securities it desires to be held outside
the United States ("foreign securities") pursuant to the provisions of the
Agreement and Declaration of Trust. The Fund on behalf of the Portfolio(s)
agrees to deliver to the Custodian all securities and cash of the Portfolios,
and all payments of income, payments of principal or capital distributions
received by it with respect to all securities owned by the Portfolio(s) from
time to time, and the cash consideration received by it for such new or
treasury shares of beneficial interest of the Fund representing interests in
the Portfolios, ("Shares") as may be issued or sold from time to time. The
Custodian shall not be responsible for any property of a Portfolio held or
received by the Portfolio and not delivered to the Custodian.

Upon receipt of "Proper Instructions" (within the meaning of Article
5), the Custodian shall on behalf of the applicable Portfolio(s) from time to
time employ one or more sub-custodians, located in the United States but only
in accordance with an applicable vote by the Board of Trustees of the Fund on
behalf of the applicable Portfolio(s), and provided that the Custodian shall
have no more or less responsibility or liability to the Fund on account of
any actions or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian. The Custodian may employ as sub-custodian
for the Fund's foreign securities on behalf of the applicable Portfolio(s) the

<PAGE>

foreign banking institutions and foreign securities depositories
designated in Schedule A hereto but only in accordance with the provisions of
Article 3.

2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD BY
THE CUSTODIAN IN THE UNITED STATES

2.1 HOLDING SECURITIES. The Custodian shall hold and physically segregate
for the account of each Portfolio all non-cash property, to be held by
it in the United States including all domestic securities owned by such
Portfolio, other than (a) securities which are maintained pursuant to
Section 2.10 in a clearing agency which acts as a securities depository
or in a book-entry system authorized by the U.S. Department of the
Treasury (each, a "U.S. Securities System") and (b) commercial paper of
an issuer for which State Street Bank and Trust Company acts as issuing
and paying agent ("Direct Paper") which is deposited and/or maintained
in the Direct Paper System of the Custodian (the "Direct Paper System")
pursuant to Section 2.11.

2.2 DELIVERY OF SECURITIES. The Custodian shall release and deliver
domestic securities owned by a Portfolio held by the Custodian or in a
U.S. Securities System account of the Custodian or in the Custodian's
Direct Paper book entry system account ("Direct Paper System Account")
only upon receipt of Proper Instructions from the Fund on behalf of the
applicable Portfolio, which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:

1) Upon sale of such securities for the account of the Portfolio
and receipt of payment therefor;

2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the
Portfolio;

3) In the case of a sale effected through a U.S. Securities
System, in accordance with the provisions of Section 2.10
hereof;

4) To the depository agent in connection with tender or other
similar offers for securities of the Portfolio;

5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;

6) To the issuer thereof, or its agent, for transfer into the
name of the Portfolio or into the name of any nominee or
nominees of the Custodian or into the name or nominee name of
any agent appointed pursuant to Section 2.9 or into the name
or nominee name of any sub-custodian appointed pursuant to
Article 1; or for exchange for a different number of bonds,
certificates or other evidence representing the same

2
<PAGE>

aggregate face amount or number of units; PROVIDED that, in
any such case, the new securities are to be delivered to
the Custodian;

7) Upon the sale of such securities for the account of the
Portfolio, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street delivery"
custom; provided that in any such case, the Custodian shall
have no responsibility or liability for any loss arising from
the delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's own
negligence or willful misconduct;

8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and cash,
if any, are to be delivered to the Custodian;

9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that,
in any such case, the new securities and cash, if any, are to
be delivered to the Custodian;

10) For delivery in connection with any loans of securities made
by the Portfolio, BUT ONLY against receipt of adequate
collateral as agreed upon from time to time by the Custodian
and the Fund on behalf of the Portfolio, which may be in the
form of cash or obligations issued by the United States
government, its agencies or instrumentalities, except that in
connection with any loans for which collateral is to be
credited to the Custodian's account in the book-entry system
authorized by the U.S. Department of the Treasury, the
Custodian will not be held liable or responsible for the
delivery of securities owned by the Portfolio prior to the
receipt of such collateral;

11) For delivery as security in connection with any borrowings by
the Fund on behalf of the Portfolio requiring a pledge of
assets by the Fund on behalf of the Portfolio, BUT ONLY
against receipt of amounts borrowed;

12) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act") and a member of The
National Association of Securities Dealers, Inc. ("NASD"),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities
exchange, or of any similar organization or organizations,
regarding escrow or other arrangements in connection with
transactions by the Portfolio of the Fund;

<PAGE>

13) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian, and a Futures Commission Merchant registered under
the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any
Contract Market, or any similar organization or organizations,
regarding account deposits in connection with transactions by
the Portfolio of the Fund;

14) Upon receipt of instructions from the transfer agent
("Transfer Agent") for the Fund, for delivery to such Transfer
Agent or to the holders of shares in connection with
distributions in kind, as may be described from time to time
in the currently effective prospectus and statement of
additional information of the Fund, related to the Portfolio
("Prospectus"), in satisfaction of requests by holders of
Shares for repurchase or redemption; and

15) For any other proper corporate purpose, BUT ONLY upon receipt
of Proper Instructions from the Fund on behalf of the
applicable Portfolio specifying the securities of the
Portfolio to be delivered, setting forth the purpose for which
such delivery is to be made, declaring such purpose to be a
proper corporate purpose, and naming the person or persons to
whom delivery of such securities shall be made.

2.3 REGISTRATION OF SECURITIES. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the
Portfolio or of any nominee of the Custodian which nominee shall be
assigned exclusively to the Portfolio, UNLESS the Fund has authorized
in writing the appointment of a nominee to be used in common with other
registered investment companies having the same investment adviser as
the Portfolio, or in the name or nominee name of any agent appointed
pursuant to Section 2.9 or in the name or nominee name of any
sub-custodian appointed pursuant to Article 1. All securities accepted
by the Custodian on behalf of the Portfolio under the terms of this
Contract shall be in "street name" or other good delivery form. If,
however, the Fund directs the Custodian to maintain securities in
"street name", the Custodian shall utilize its best efforts only to
timely collect income due the Fund on such securities and to notify the
Fund on a best efforts basis only of relevant corporate actions
including, without limitation, pendency of calls, maturities, tender or
exchange offers.

2.4 BANK ACCOUNTS. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of each Portfolio
of the Fund, subject only to draft or order by the Custodian acting
pursuant to the terms of this Contract, and shall hold in such account
or accounts, subject to the provisions hereof, all cash received by it
from or for the account of the Portfolio, other than cash maintained by
the Portfolio in a bank account established and used in accordance with
Rule 17f-3 under the Investment Company Act of 1940. Funds held by the
Custodian for a Portfolio may be deposited by it to its credit as
Custodian in the Banking Department of the Custodian or in such other
banks or trust companies as it may in its discretion deem necessary or
desirable; PROVIDED, HOWEVER, that every such bank or trust company
shall be qualified to act as a custodian under the

<PAGE>

Investment Company Act of 1940 and that each such bank or trust
company and the funds to be deposited with each such bank or trust
company shall on behalf of each applicable Portfolio be approved by
vote of a majority of the Board of Trustees of the Fund. Such funds
shall be deposited by the Custodian in its capacity as Custodian
and shall be withdrawable by the Custodian only in that capacity.

2.5 AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement between the Fund
on behalf of each applicable Portfolio and the Custodian, the Custodian
shall, upon the receipt of Proper Instructions from the Fund on behalf
of a Portfolio, make federal funds available to such Portfolio as of
specified times agreed upon from time to time by the Fund and the
Custodian in the amount of checks received in payment for Shares of
such Portfolio which are deposited into the Portfolio's account.

2.6 COLLECTION OF INCOME. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments
with respect to registered domestic securities held hereunder to which
each Portfolio shall be entitled either by law or pursuant to custom in
the securities business, and shall collect on a timely basis all income
and other payments with respect to bearer domestic securities if, on
the date of payment by the issuer, such securities are held by the
Custodian or its agent and shall credit such income, as collected, to
such Portfolio's custodian account. Without limiting the generality of
the foregoing, the Custodian shall detach and present for payment all
coupons and other income items requiring presentation as and when they
become due and shall collect interest when due on securities held
hereunder. Income due each Portfolio on securities loaned pursuant to
the provisions of Section 2.2 (10) shall be the responsibility of the
Fund. The Custodian will have no duty or responsibility in connection
therewith, other than to provide the Fund with such information or data
as may be necessary to assist the Fund in arranging for the timely
delivery to the Custodian of the income to which the Portfolio is
properly entitled.

2.7 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions from the
Fund on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, the Custodian
shall pay out monies of a Portfolio in the following cases only:

1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of
the Portfolio but only (a) against the delivery of such
securities or evidence of title to such options, futures
contracts or options on futures contracts to the Custodian (or
any bank, banking firm or trust company doing business in the
United States or abroad which is qualified under the
Investment Company Act of 1940, as amended, to act as a
custodian and has been designated by the Custodian as its
agent for this purpose) registered in the name of the
Portfolio or in the name of a nominee of the Custodian
referred to in Section 2.3 hereof or in proper form for
transfer; (b) in the case of a purchase effected through a
U.S. Securities System, in accordance with the conditions set
forth in Section 2.10 hereof; (c) in the case of a purchase
involving the Direct Paper System, in accordance with the
conditions set forth in Section 2.11; (d) in the case of
repurchase agreements entered into between the Fund on behalf
of the Portfolio and

<PAGE>

the Custodian, or another bank, or a broker-dealer which
is a member of NASD, (i) against delivery of the securities
either in certificate form or through an entry crediting
the Custodian's account at the Federal Reserve Bank with
such securities or (ii) against delivery of the receipt
evidencing purchase by the Portfolio of securities owned
by the Custodian along with written evidence of the
agreement by the Custodian to repurchase such securities from
the Portfolio; or (e) for transfer to a time deposit account
of the Fund in any bank, whether domestic or foreign; such
transfer may be effected prior to receipt of a confirmation
from a broker and/or the applicable bank pursuant to Proper
Instructions from the Fund as defined in Article 5;

2) In connection with conversion, exchange or surrender of
securities owned by the Portfolio as set forth in Section 2.2
hereof;

3) For the redemption or repurchase of Shares issued by
the Portfolio as set forth in Article 4 hereof;

4) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following payments
for the account of the Portfolio: interest, taxes, management,
accounting, transfer agent and legal fees, and operating
expenses of the Fund whether or not such expenses are to be in
whole or part capitalized or treated as deferred expenses;

5) For the payment of any dividends on Shares of the Portfolio
declared pursuant to the governing documents of the Fund;

6) For payment of the amount of dividends received in respect of
securities sold short; and

7) For any other proper corporate purpose, BUT ONLY upon receipt
of Proper Instructions from the Fund on behalf of the
Portfolio specifying the amount of such payment, setting forth
the purpose for which such payment is to be made, declaring
such purpose to be a proper corporate purpose, and naming the
person or persons to whom such payment is to be made.

2.8 LIABILITY FOR PAYMENT ON ADVANCE OF RECEIPT OF SECURITIES PURCHASED.
Except as specifically stated otherwise in this Contract, in any and
every case where payment for purchase of domestic securities for the
account of a Portfolio is made by the Custodian in advance of receipt
of the securities purchased in the absence of specific written
instructions from the Fund on behalf of such Portfolio to so pay in
advance, the Custodian shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had been received by
the Custodian.

2.9 APPOINTMENT OF AGENTS. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified

<PAGE>

under the Investment Company Act of 1940, as amended, to act as
a custodian, as its agent to carry out such of the provisions of
this Article 2 as the Custodian may from time to time direct;
PROVIDED, HOWEVER, that the appointment of any agent shall not
relieve the Custodian of its responsibilities or liabilities
hereunder.

2.10 DEPOSIT OF FUND ASSETS IN U.S. SECURITIES SYSTEMS. The Custodian may
deposit and/or maintain securities owned by a Portfolio in a clearing
agency registered with the Securities and Exchange Commission under
Section 17A of the Securities Exchange Act of 1934, which acts as a
securities depository, or in the book-entry system authorized by the
U.S. Department of the Treasury and certain federal agencies,
collectively referred to herein as "U.S. Securities System" in
accordance with applicable Federal Reserve Board and Securities and
Exchange Commission rules and regulations, if any, and subject to the
following provisions:

1) The Custodian may keep securities of the Portfolio in a U.S.
Securities System provided that such securities are
represented in an account ("Account") of the Custodian in the
U.S. Securities System which shall not include any assets of
the Custodian other than assets held as a fiduciary, custodian
or otherwise for customers;

2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a U.S. Securities System
shall identify by book-entry those securities belonging to the
Portfolio;

3) The Custodian shall pay for securities purchased for the
account of the Portfolio upon (i) receipt of advice from the
U.S. Securities System that such securities have been
transferred to the Account, and (ii) the making of an entry on
the records of the Custodian to reflect such payment and
transfer for the account of the Portfolio. The Custodian shall
transfer securities sold for the account of the Portfolio upon
(i) receipt of advice from the U.S. Securities System that
payment for such securities has been transferred to the
Account, and (ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the account
of the Portfolio. Copies of all advices from the U.S.
Securities System of transfers of securities for the account
of the Portfolio shall identify the Portfolio, be maintained
for the Portfolio by the Custodian and be provided to the Fund
at its request. Upon request, the Custodian shall furnish the
Fund on behalf of the Portfolio confirmation of each transfer
to or from the account of the Portfolio in the form of a
written advice or notice and shall furnish to the Fund on
behalf of the Portfolio copies of daily transaction sheets
reflecting each day's transactions in the U.S. Securities
System for the account of the Portfolio;

4) The Custodian shall provide the Fund for the Portfolio with
any report obtained by the Custodian on the U.S. Securities
System's accounting system, internal accounting control and
procedures for safeguarding securities deposited in the U.S.
Securities System; and

<PAGE>

5) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the
Portfolio for any loss or damage to the Portfolio resulting
from use of the U.S. Securities System by reason of any
negligence, misfeasance or misconduct of the Custodian or any
of its agents or of any of its or their employees or from
failure of the Custodian or any such agent to enforce
effectively such rights as it may have against the U.S.
Securities System; at the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with
respect to any claim against the U.S. Securities System or any
other person which the Custodian may have as a consequence of
any such loss or damage if and to the extent that the
Portfolio has not been made whole for any such loss or damage.

2.11 FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM. The Custodian
may deposit and/or maintain securities owned by a Portfolio in the
Direct Paper System of the Custodian subject to the following
provisions:

1) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper Instructions
from the Fund on behalf of the Portfolio;

2) The Custodian may keep securities of the Portfolio in the
Direct Paper System only if such securities are represented in
an account ("Account") of the Custodian in the Direct Paper
System which shall not include any assets of the Custodian
other than assets held as a fiduciary, custodian or otherwise
for customers;

3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System
shall identify by book-entry those securities belonging to the
Portfolio;

4) The Custodian shall pay for securities purchased for the
account of the Portfolio upon the making of an entry on the
records of the Custodian to reflect such payment and transfer
of securities to the account of the Portfolio. The Custodian
shall transfer securities sold for the account of the
Portfolio upon the making of an entry on the records of the
Custodian to reflect such transfer and receipt of payment for
the account of the Portfolio;

5) The Custodian shall furnish the Fund on behalf of the
Portfolio confirmation of each transfer to or from the account
of the Portfolio, in the form of a written advice or notice,
of Direct Paper on the next business day following such
transfer and shall furnish to the Fund on behalf of the
Portfolio copies of daily transaction sheets reflecting each
day's transaction in the U.S. Securities System for the
account of the Portfolio; and

<PAGE>

6) The Custodian shall provide the Fund on behalf of the
Portfolio with any report on its system of internal accounting
control as the Fund may reasonably request from time to time.

2.12 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio
establish and maintain a segregated account or accounts for and on
behalf of each such Portfolio, into which account or accounts may be
transferred cash and/or securities, including securities maintained in
an account by the Custodian pursuant to Section 2.10 hereof, (i) in
accordance with the provisions of any agreement among the Fund on
behalf of the Portfolio, the Custodian and a broker-dealer registered
under the Exchange Act and a member of the NASD (or any futures
commission merchant registered under the Commodity Exchange Act),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered contract
market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Portfolio, (ii) for purposes of segregating cash or government
securities in connection with options purchased, sold or written by the
Portfolio or commodity futures contracts or options thereon purchased
or sold by the Portfolio, (iii) for the purposes of compliance by the
Portfolio with the procedures required by Investment Company Act
Release No. 10666, or any subsequent release or releases of the
Securities and Exchange Commission relating to the maintenance of
segregated accounts by registered investment companies and (iv) for
other proper corporate purposes, BUT ONLY, in the case of clause (iv),
upon receipt of Proper Instructions from the Fund on behalf of the
applicable Portfolio setting forth the purpose or purposes of such
segregated account and declaring such purposes to be a proper corporate
purpose.

2.13 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to domestic securities of each Portfolio held by
it and in connection with transfers of securities.

2.14 PROXIES. The Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the registered holder
of such securities, if the securities are registered otherwise than in
the name of the Portfolio or a nominee of the Portfolio, all proxies,
without indication of the manner in which such proxies are to be voted,
and shall promptly deliver to the Fund on behalf of the Portfolio such
proxies, all proxy soliciting materials and all notices relating to
such securities.

2.15 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. Subject to the
provisions of Section 2.3, the Custodian shall transmit promptly to the
Fund for each Portfolio all written information (including, without
limitation, pendency of calls and maturities of domestic securities and
expirations of rights in connection therewith and notices of exercise
of call and put options written by the Fund on behalf of the Portfolio
and the maturity of futures contracts purchased or sold by the
Portfolio) received by the Custodian from issuers of the securities
being held for the Fund on behalf of the Portfolio. With respect to
tender or exchange

<PAGE>

offers, the Custodian shall transmit promptly to the Fund on
behalf of the Portfolio all written information received by the
Custodian from issuers of the securities whose tender or exchange is
sought and from the party (or his agents) making the tender or exchange
offer. If the Fund on behalf of the Portfolio desires to take action
with respect to any tender offer, exchange offer or any other similar
transaction, the Fund shall notify the Custodian at least three
business days prior to the date on which the Custodian is to take such
action.

3. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD
OUTSIDE OF THE UNITED STATES

3.1 APPOINTMENT OF FOREIGN SUB-CUSTODIANS. The Fund hereby authorizes and
instructs the Custodian to employ as sub-custodians for the Portfolio's
securities and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories
designated on Schedule A hereto ("foreign sub-custodians"). Upon
receipt of "Proper Instructions", as defined in Section 5 of this
Contract, the Custodian and the Fund may agree to amend Schedule A
hereto from time to time to designate additional foreign banking
institutions and foreign securities depositories to act as
sub-custodian. Upon receipt of Proper Instructions, the Fund may
instruct the Custodian to cease the employment of any one or more such
sub-custodians for maintaining custody of the Portfolio's assets.

3.2 ASSETS TO BE HELD. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(1) of Rule 17f-5
under the Investment Company Act of 1940, and (b) cash and cash
equivalents in such amounts as the Custodian or the Fund may determine
to be reasonably necessary to effect the Portfolio's foreign securities
transactions. The Custodian shall identify on its books as belonging to
the Fund, the foreign securities of the Fund held by each foreign
sub-custodian.

3.3 FOREIGN SECURITIES SYSTEMS. Except as may otherwise be agreed upon in
writing by the Custodian and the Fund, assets of the Portfolios shall
be maintained in a clearing agency which acts as a securities
depository or in a book-entry system for the central handling of
securities located outside the United States (each a "Foreign
Securities System") only through arrangements implemented by the
foreign banking institutions serving as sub-custodians pursuant to the
terms hereof (Foreign Securities Systems and U.S. Securities Systems
are collectively referred to herein as the "Securities Systems"). Where
possible, such arrangements shall include entry into agreements
containing the provisions set forth in Section 3.5 hereof.

3.4 HOLDING SECURITIES. The Custodian may hold securities and other
non-cash property for all of its customers, including the Fund, with a
foreign sub-custodian in a single account that is identified as
belonging to the Custodian for the benefit of its customers, PROVIDED
HOWEVER, that (i) the records of the Custodian with respect to
securities and other non-cash property of the Fund which are maintained
in such account shall identify by book-entry those securities and other
non-cash property belonging to the Fund and (ii) the Custodian shall
require that

<PAGE>

securities and other non-cash property so held by the foreign
sub-custodian be held separately from any assets of the foreign
sub-custodian or of others.

3.5 AGREEMENTS WITH FOREIGN BANKING INSTITUTIONS. Each agreement with a
foreign banking institution shall provide that: (a) the assets of each
Portfolio will not be subject to any right, charge, security interest,
lien or claim of any kind in favor of the foreign banking institution
or its creditors or agent, except a claim of payment for their safe
custody or administration; (b) beneficial ownership for the assets of
each Portfolio will be freely transferable without the payment of money
or value other than for custody or administration; (c) adequate records
will be maintained identifying the assets as belonging to each
applicable Portfolio; (d) officers of or auditors employed by, or other
representatives of the Custodian, including to the extent permitted
under applicable law the independent public accountants for the Fund,
will be given access to the books and records of the foreign banking
institution relating to its actions under its agreement with the
Custodian; and (e) assets of the Portfolios held by the foreign
sub-custodian will be subject only to the instructions of the Custodian
or its agents.

3.6 ACCESS OF INDEPENDENT ACCOUNTANTS OF THE FUND. Upon request of the
Fund, the Custodian will use its best efforts to arrange for the
independent accountants of the Fund to be afforded access to the books
and records of any foreign banking institution employed as a foreign
sub-custodian insofar as such books and records relate to the
performance of such foreign banking institution under its agreement
with the Custodian.

3.7 REPORTS BY CUSTODIAN. The Custodian will supply to the Fund from time
to time, as mutually agreed upon, statements in respect of the
securities and other assets of the Portfolio(s) held by foreign
sub-custodians, including but not limited to an identification of
entities having possession of the Portfolio(s) securities and other
assets and advices or notifications of any transfers of securities to
or from each custodial account maintained by a foreign banking
institution for the Custodian on behalf of each applicable Portfolio
indicating, as to securities acquired for a Portfolio, the identity of
the entity having physical possession of such securities.

3.8 TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. (a) Except as otherwise
provided in paragraph (b) of this Section 3.8, the provision of
Sections 2.2 and 2.7 of this Contract shall apply, MUTATIS MUTANDIS to
the foreign securities of the Fund held outside the United States by
foreign sub-custodians.

(b) Notwithstanding any provision of this Contract to the contrary,
settlement and payment for securities received for the account of each
applicable Portfolio and delivery of securities maintained for the
account of each applicable Portfolio may be effected in accordance with
the customary established securities trading or securities processing
practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivering
securities to the purchaser thereof or to a dealer therefor (or an
agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities from such
purchaser or dealer.

<PAGE>

(c) Securities maintained in the custody of a foreign sub-custodian may
be maintained in the name of such entity's nominee to the same extent
as set forth in Section 2.3 of this Contract, and the Fund agrees to
hold any such nominee harmless from any liability as a holder of record
of such securities.

3.9 LIABILITY OF FOREIGN SUB-CUSTODIANS. Each agreement pursuant to which
the Custodian employs a foreign banking institution as a foreign
sub-custodian shall require the institution to exercise reasonable care
in the performance of its duties and to indemnify, and hold harmless,
the Custodian and the Fund from and against any loss, damage, cost,
expense, liability or claim arising out of or in connection with the
institution's performance of such obligations. At the election of the
Fund, it shall be entitled to be subrogated to the rights of the
Custodian with respect to any claims against a foreign banking
institution as a consequence of any such loss, damage, cost, expense,
liability or claim if and to the extent that the Fund has not been made
whole for any such loss, damage, cost, expense, liability or claim.

3.10 LIABILITY OF CUSTODIAN. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set
forth with respect to sub-custodians generally in this Contract and,
regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a
U.S. bank as contemplated by paragraph 3.13 hereof, the Custodian shall
not be liable for any loss, damage, cost, expense, liability or claim
resulting from nationalization, expropriation, currency restrictions,
or acts of war or terrorism or any loss where the sub-custodian has
otherwise exercised reasonable care.

3.11 REIMBURSEMENT FOR ADVANCES. If the Fund requires the Custodian to
advance cash or securities for any purpose for the benefit of a
Portfolio including the purchase or sale of foreign exchange or of
contracts for foreign exchange, or in the event that the Custodian or
its nominee shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the performance
of this Contract, except such as may arise from its or its nominee's
own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the applicable
Portfolio shall be security therefor and should the Fund fail to repay
the Custodian promptly, the Custodian shall be entitled to utilize
available cash and to dispose of such Portfolio's assets to the extent
necessary to obtain reimbursement.

3.12 MONITORING RESPONSIBILITIES. The Custodian shall furnish annually to
the Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in connection
with the initial approval of this Contract. In addition, the Custodian
will promptly inform the Fund in the event that the Custodian learns of
a material adverse change in the financial condition of a foreign
sub-custodian or any material loss of the assets of the Fund or in the
case of any foreign sub-custodian not the subject of an exemptive order
from the Securities and Exchange Commission is notified by such foreign

<PAGE>

sub-custodian that there appears to be a substantial likelihood that
its shareholders' equity will decline below $200 million (U.S. dollars
or the equivalent thereof) or that its shareholders' equity has
declined below $200 million (in each case computed in accordance with
generally accepted U.S. accounting principles).

3.13 BRANCHES OF U.S. BANKS. (a) Except as otherwise set forth in this
Contract, the provisions hereof shall not apply where the custody of
the Portfolios assets are maintained in a foreign branch of a banking
institution which is a "bank" as defined by Section 2(a)(5) of the
Investment Company Act of 1940 meeting the qualification set forth in
Section 26(a) of said Act. The appointment of any such branch as a
sub-custodian shall be governed by paragraph 1 of this Contract.

(b) Cash held for each Portfolio of the Fund in the United Kingdom
shall be maintained in an interest bearing account established for the
Fund with the Custodian's London branch, which account shall be subject
to the direction of the Custodian, State Street London Ltd. or both.

3.14 TAX LAW. The Custodian shall have no responsibility or liability for
any obligations now or hereafter imposed on the Fund or the Custodian
as custodian of the Fund by the tax law of the United States of America
or any state or political subdivision thereof. It shall be the
responsibility of the Fund to notify the Custodian of the obligations
imposed on the Fund or the Custodian as custodian of the Fund by the
tax law of jurisdictions other than those mentioned in the above
sentence, including responsibility for withholding and other taxes,
assessments or other governmental charges, certifications and
governmental reporting. The sole responsibility of the Custodian with
regard to such tax law shall be to use reasonable efforts to assist the
Fund with respect to any claim for exemption or refund under the tax
law of jurisdictions for which the Fund has provided such information.

4. PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES OF THE FUND

The Custodian shall receive from the distributor for the Shares or from
the Transfer Agent of the Fund and deposit into the account of the appropriate
Portfolio such payments as are received for Shares of that Portfolio issued or
sold from time to time by the Fund. The Custodian will provide timely
notification to the Fund on behalf of each such Portfolio and the Transfer Agent
of any receipt by it of payments for Shares of such Portfolio.

From such funds as may be available for the purpose but subject to the
limitations of the Agreement and Declaration of Trust and any applicable votes
of the Board of Trustees of the Fund pursuant thereto, the Custodian shall, upon
receipt of instructions from the Transfer Agent, make funds available for
payment to holders of Shares who have delivered to the Transfer Agent a request
for redemption or repurchase of their Shares. In connection with the redemption
or repurchase of Shares of a Portfolio, the Custodian is authorized upon receipt
of instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the redemption
or repurchase of Shares of the Fund, the Custodian shall honor checks drawn on
the Custodian by a holder of Shares, which checks have

<PAGE>

been furnished by the Fund to the holder of Shares, when presented to the
Custodian in accordance with such procedures and controls as are mutually
agreed upon from time to time between the Fund and the Custodian.

5. PROPER INSTRUCTIONS

Proper Instructions as used throughout this Contract means a writing
signed or initialed by one or more person or persons as the Board of Trustees
shall have from time to time authorized. Each such writing shall set forth
the specific transaction or type of transaction involved, including a
specific statement of the purpose for which such action is requested. Oral
instructions will be considered Proper Instructions if the Custodian
reasonably believes them to have been given by a person authorized to give
such instructions with respect to the transaction involved. The Fund shall
cause all oral instructions to be confirmed in writing. Proper Instructions
may include communications effected directly between electro-mechanical or
electronic devices; provided that the Fund has followed any security
procedures agreed to from time to time by Fund and the Custodian, including,
but not limited to, the security procedures selected by the Fund in the Funds
Transfer Addendum attached hereto. For purposes of this Section, Proper
Instructions shall include instructions received by the Custodian pursuant to
any three-party agreement which requires a segregated asset account in
accordance with Section 2.12.

6. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY

The Custodian may in its discretion, without express authority from the
Fund on behalf of each applicable Portfolio:

1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Contract, PROVIDED that all such payments
shall be accounted for to the Fund on behalf of the Portfolio;

2) surrender securities in temporary form for securities in
definitive form;

3) endorse for collection, in the name of the Fund on behalf of
the Portfolio, checks, drafts and other negotiable
instruments; and

4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property
of the Fund on behalf of the Portfolio except as otherwise
directed by the Board of Trustees of the Fund.

7. EVIDENCE OF AUTHORITY

The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed by
it to be genuine and to have been properly executed by or on behalf of the Fund.
The Custodian may receive and accept a certified copy of a vote of the Board of
Trustees of the Fund as conclusive evidence (a) of the authority of any person

<PAGE>

to act in accordance with such vote or (b) of any determination or of any action
by the Board of Trustees pursuant to the Agreement and Declaration of Trust as
described in such vote, and such vote may be considered as in full force and
effect until receipt by the Custodian of written notice to the contrary.

8. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND
CALCULATION OF NET ASSET VALUE AND NET INCOME

The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of Trustees of the Fund to keep
the books of account of each Portfolio and/or compute the net asset value per
Share of the outstanding Shares of each Portfolio or, if directed in writing to
do so by the Fund on behalf of the Portfolio, shall itself keep such books of
account and/or compute such net asset value per Share. If so directed, the
Custodian shall also calculate daily the net income of the Portfolio as
described in the Fund's currently effective prospectus related to such Portfolio
and shall advise the Fund and the Transfer Agent daily of the total amounts of
such net income and, if instructed in writing by an officer of the Fund to do
so, shall advise the Transfer Agent periodically of the division of such net
income among its various components. The calculations of the net asset value per
Share and the daily income of each Portfolio shall be made at the time or times
described from time to time in the Fund's currently effective prospectus related
to such Portfolio.

9. RECORDS

The Custodian shall with respect to each Portfolio create and maintain
all records relating to its activities and obligations under this Contract in
such manner as will meet the obligations of the Fund under the Investment
Company Act of 1940, with particular attention to Section 31 thereof and Rules
31a-1 and 31a-2 thereunder. All such records shall be the property of the Fund
and shall at all times during the regular business hours of the Custodian be
open for inspection by duly authorized officers, employees or agents of the Fund
and employees and agents of the Securities and Exchange Commission. The
Custodian shall, at the Fund's request, supply the Fund with a tabulation of
securities owned by each Portfolio and held by the Custodian and shall, when
requested to do so by the Fund and for such compensation as shall be agreed upon
between the Fund and the Custodian, include certificate numbers in such
tabulations.

10. OPINION OF FUND'S INDEPENDENT ACCOUNTANT

The Custodian shall take all reasonable action, as the Fund on behalf
of each applicable Portfolio may from time to time request, to obtain from year
to year favorable opinions from the Fund's independent accountants with respect
to its activities hereunder in connection with the preparation of the Fund's
Form N-1A, and Form N-SAR or other annual reports to the Securities and Exchange
Commission and with respect to any other requirements of such Commission.

<PAGE>

11. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS

The Custodian shall provide the Fund, on behalf of each of the
Portfolios at such times as the Fund may reasonably require, with reports by
independent public accountants on the accounting system, internal accounting
control and procedures for safeguarding securities, futures contracts and
options on futures contracts, including securities deposited and/or
maintained in a Securities System, relating to the services provided by the
Custodian under this Contract; such reports, shall be of sufficient scope and
in sufficient detail, as may reasonably be required by the Fund to provide
reasonable assurance that any material inadequacies would be disclosed by
such examination, and, if there are no such inadequacies, the reports shall
so state.

12. COMPENSATION OF CUSTODIAN

The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between
the Fund on behalf of each applicable Portfolio and the Custodian.

13. RESPONSIBILITY OF CUSTODIAN

So long as and to the extent that it is in the exercise of
reasonable care, the Custodian shall not be responsible for the title,
validity or genuineness of any property or evidence of title thereto received
by it or delivered by it pursuant to this Contract and shall be held harmless
in acting upon any notice, request, consent, certificate or other instrument
reasonably believed by it to be genuine and to be signed by the proper party
or parties, including any futures commission merchant acting pursuant to the
terms of a three-party futures or options agreement. The Custodian shall be
held to the exercise of reasonable care in carrying out the provisions of
this Contract, but shall be kept indemnified by and shall be without
liability to the Fund for any action taken or omitted by it in good faith
without negligence. It shall be entitled to rely on and may act upon advice
of counsel (who may be counsel for the Fund) on all matters, and shall be
without liability for any action reasonably taken or omitted pursuant to such
advice.

Except as may arise from the Custodian's own negligence or willful
misconduct or the negligence or willful misconduct of a sub-custodian or
agent, the Custodian shall be without liability to the Fund for any loss,
liability, claim or expense resulting from or caused by; (i) events or
circumstances beyond the reasonable control of the Custodian or any
sub-custodian or Securities System or any agent or nominee of any of the
foregoing, including, without limitation, nationalization or expropriation,
imposition of currency controls or restrictions, the interruption, suspension
or restriction of trading on or the closure of any securities market, power
or other mechanical or technological failures or interruptions, computer
viruses or communications disruptions, acts of war or terrorism, riots,
revolutions, work stoppages, natural disasters or other similar events or
acts; (ii) errors by the Fund or the Investment Advisor in their instructions
to the Custodian provided such instructions have been in accordance with this
Contract; (iii) the insolvency of or acts or omissions by a Securities
System; (iv) any delay or failure of any broker, agent or intermediary,
central bank or other commercially prevalent payment or clearing system to
deliver to the Custodian's sub-custodian or agent securities purchased or in
the remittance or

<PAGE>

payment made in connection with securities sold; (v) any delay or failure of
any company, corporation, or other body in charge of registering or
transferring securities in the name of the Custodian, the Fund, the
Custodian's sub-custodians, nominees or agents or any consequential losses
arising out of such delay or failure to transfer such securities including
non-receipt of bonus, dividends and rights and other accretions or benefits;
(vi) delays or inability to perform its duties due to any disorder in market
infrastructure with respect to any particular security or Securities System;
and (vii) any provision of any present or future law or regulation or order
of the United States of America, or any state thereof, or any other country,
or political subdivision thereof or of any court of competent jurisdiction.

The Custodian shall be liable for the acts or omissions of a foreign
banking institution to the same extent as set forth with respect to
sub-custodians generally in this Contract.

If the Fund on behalf of a Portfolio requires the Custodian to take
any action with respect to securities, which action involves the payment of
money or which action may, in the opinion of the Custodian, result in the
Custodian or its nominee assigned to the Fund or the Portfolio being liable
for the payment of money or incurring liability of some other form, the Fund
on behalf of the Portfolio, as a prerequisite to requiring the Custodian to
take such action, shall provide indemnity to the Custodian in an amount and
form satisfactory to it.

If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not
limited to securities settlements, foreign exchange contracts and assumed
settlement) or in the event that the Custodian or its nominee shall incur or
be assessed any taxes, charges, expenses, assessments, claims or liabilities
in connection with the performance of this Contract, except such as may arise
from its or its nominee's own negligent action, negligent failure to act or
willful misconduct, any property at any time held for the account of the
applicable Portfolio shall be security therefor and should the Fund fail to
repay the Custodian promptly, the Custodian shall be entitled to utilize
available cash and to dispose of such Portfolio's assets to the extent
necessary to obtain reimbursement.

In no event shall the Custodian be liable for indirect, special or
consequential damages.

14. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT

This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided,
may be amended at any time by mutual agreement of the parties hereto and may
be terminated by either party by an instrument in writing delivered or
mailed, postage prepaid to the other party, such termination to take effect
not sooner than thirty (30) days after the date of such delivery or mailing;
PROVIDED, HOWEVER that the Fund shall not amend or terminate this Contract in
contravention of any applicable federal or state regulations, or any
provision of the Agreement and Declaration of Trust, and further provided,
that the Fund on behalf of one or more of the Portfolios may at any time by
action of its Board of Trustees (i) substitute another bank or trust company
for the Custodian by giving notice as described above to the Custodian, or
(ii) immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of the Currency
or upon the happening of a like event at the direction of an appropriate
regulatory agency or court of competent jurisdiction.

<PAGE>

Upon termination of the Contract, the Fund on behalf of each
applicable Portfolio shall pay to the Custodian such compensation as may be
due as of the date of such termination and shall likewise reimburse the
Custodian for its costs, expenses and disbursements.

15. NOTICES

Except as otherwise provided under this Contract, notices and other
writings shall be delivered or mailed postage prepaid to:

If to the Fund: State Street Research Institutional Funds
One Financial Center
Boston, Massachusetts 02111
Attention: Joseph W. Canavan

If to the Custodian: State Street Bank and Trust Company
One Heritage Drive/JPB4N
North Quincy, Massachusetts 02171
Attention: Timothy J. Panaro

or to such other address as the parties may hereafter specify in writing and
any notice or other writing when mailed shall be deemed to have been received
on the fifth business day after it was mailed.

Telephone and facsimile notices shall be sufficient if communicated
to the party entitled to receive such notice at the following numbers:

If to the Fund:

Telephone: (617) 357-1326 Facsimile: (617) 357-7426

If to the Custodian:

Telephone: (617) 985-4513 Facsimile: (617) 985-5271

or to such other numbers as the parties may specify by written notice under
this Section and any facsimile notice shall be deemed to have been received
on the date of its transmission provided that if such day is not a business
day or it is received after normal business hours on the day of its
transmission, it shall be deemed to have been received at the opening of
business on the first business day next following the transmission thereof.

<PAGE>

16. SUCCESSOR CUSTODIAN

If a successor custodian for the Fund, of one or more of the
Portfolios shall be appointed by the Board of Trustees of the Fund, the
Custodian shall, upon termination, deliver to such successor custodian at the
office of the Custodian, duly endorsed and in the form for transfer, all
securities and other assets of each applicable Portfolio then held by it
hereunder and shall transfer to an account of the successor custodian all of
the securities and other assets of each such Portfolio held in a Securities
System.

If no such successor custodian shall be appointed, the Custodian
shall, in like manner, upon receipt of a certified copy of a vote of the
Board of Trustees of the Fund, deliver at the office of the Custodian and
transfer such securities, funds and other properties in accordance with such
vote.

In the event that no written order designating a successor custodian
or certified copy of a vote of the Board of Trustees shall have been
delivered to the Custodian on or before the date when such termination shall
become effective, then the Custodian shall have the right to deliver to a
bank or trust company, which is a "bank" as defined in the Investment Company
Act of 1940, doing business in Boston, Massachusetts, of its own selection,
having an aggregate capital, surplus, and undivided profits, as shown by its
last published report, of not less than $25,000,000, all securities, funds
and other properties held by the Custodian on behalf of each applicable
Portfolio and all instruments held by the Custodian relative thereto and all
other property held by it under this Contract on behalf of each applicable
Portfolio and to transfer to an account of such successor custodian all of
the securities of each such Portfolio held in any Securities System.
Thereafter, such bank or trust company shall be the successor of the
Custodian under this Contract.

In the event that securities, funds and other properties remain in
the possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or
of the Board of Trustees to appoint a successor custodian, the Custodian
shall be entitled to fair compensation for its services during such period as
the Custodian retains possession of such securities, funds and other
properties and the provisions of this Contract relating to the duties and
obligations of the Custodian shall remain in full force and effect.

17. INTERPRETIVE AND ADDITIONAL PROVISIONS

In connection with the operation of this Contract, the Custodian and
the Fund on behalf of each of the Portfolios, may from time to time agree on
such provisions interpretive of or in addition to the provisions of this
Contract as may in their joint opinion be consistent with the general tenor
of this Contract. Any such interpretive or additional provisions shall be in
a writing signed by both parties and shall be annexed hereto, PROVIDED that
no such interpretive or additional provisions shall contravene any applicable
federal or state regulations or any provision of the Agreement and
Declaration of Trust of the Fund. No interpretive or additional provisions
made as provided in the preceding sentence shall be deemed to be an amendment
of this Contract.

<PAGE>

18. ADDITIONAL FUNDS

In the event that the Fund establishes one or more series of Shares
in addition to the State Street Research Core Fixed Income Fund, the State
Street Research Core Plus Fixed Income Fund, the State Street Research Core
Large Cap Growth Fund and the State Street Research Large Cap Growth Fund
with respect to which it desires to have the Custodian render services as
custodian under the terms hereof, it shall so notify the Custodian in
writing, and if the Custodian agrees in writing to provide such services,
such series of Shares shall become a Portfolio hereunder.

19. MASSACHUSETTS LAW TO APPLY

This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth of
Massachusetts.

20. PRIOR CONTRACTS

This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Fund on behalf of each of the Portfolios and the
Custodian relating to the custody of the Fund's assets.

21. COUNTERPARTS

This Contract may be executed in several counterparts, each of which
shall be deemed to be an original, and all such counterparts taken together
shall constitute but one and the same Contract.

22. REPRODUCTION OF DOCUMENTS

This Contract and all schedules, exhibits, attachments and
amendments hereto may be reproduced by any photographic, photostatic,
microfilm, micro-card, miniature photographic or other similar process. The
parties hereto all/each agree that any such reproduction shall be admissible
in evidence as the original itself in any judicial or administrative
proceeding, whether or not the original is in existence and whether or not
such reproduction was made by a party in the regular course of business, and
that any enlargement, facsimile or further reproduction of such reproduction
shall likewise be admissible in evidence.

23. SHAREHOLDER COMMUNICATIONS ELECTION

Securities and Exchange Commission Rule 14b-2 requires banks which
hold securities for the account of customers to respond to requests by
issuers of securities for the names, addresses and holdings of beneficial
owners of securities of that issuer held by the bank unless the beneficial
owner has expressly objected to disclosure of this information. In order to
comply with the rule, the Custodian needs the Fund to indicate whether it
authorizes the Custodian to provide the Fund's name, address, and share
position to requesting companies whose securities the Fund owns. If the Fund
tells the Custodian "no", the Custodian will not provide this information to
requesting

<PAGE>

companies. If the Fund tells the Custodian "yes" or does not check either
"yes" or "no" below, the Custodian is required by the rule to treat the Fund
as consenting to disclosure of this information for all securities owned by
the Fund or any funds or accounts established by the Fund. For the Fund's
protection, the Rule prohibits the requesting company from using the Fund's
name and address for any purpose other than corporate communications. Please
indicate below whether the Fund consents or objects by checking one of the
alternatives below.

YES [ ] The Custodian is authorized to release the Fund's name,
address, and share positions.

NO [X] The Custodian is not authorized to release the Fund's name,
address, and share positions.

24. LIMITATIONS OF LIABILITY OF TRUSTEES AND SHAREHOLDERS

The Agreement and Declaration of Trust as the same may be amended
from time to time is on file with the Secretary of State of the Commonwealth
of Massachusetts. It is expressly agreed that the execution and delivery of
this Contract and the obligations of the Fund hereunder shall not be binding
upon any of the Trustees, shareholders, nominees, officers, agents or
employees of the Fund as individuals or personally, but shall bind only the
property of the Fund. This Contract shall not be deemed to have been made
individually or to impose any personal liability, but shall bind only the
trust property of the Fund. The Agreement and Declaration of Trust provides,
and it is expressly agreed, that each series of the Fund shall be solely and
exclusively responsible for the payments of its debts, liabilities and
obligations, and that no other series shall be responsible for the same.

<PAGE>

IN WITNESS WHEREOF, each of the parties has caused this instrument
to be executed in its name and behalf by its duly authorized representative
and its seal to be hereunder affixed as of the -- day of June, 1999.

ATTEST STATE STREET RESEARCH INSTITUTIONAL FUNDS

By:
- -------------------- -----------------------------------------
Name:
Its:

ATTEST STATE STREET BANK AND TRUST COMPANY

By:
- -------------------- --------------------------------------
Marc L. Parsons Name: Ronald E. Logue
Associate Counsel Its: Vice Chairman

<PAGE>
ROPES & GRAY
ONE INTERNATIONAL PLACE ONE FRANKLIN SQUARE
BOSTON, MASSACHUSETTS 02110-2624 1301 K STREET, N.W.
30 KENNEDY PLAZA (617) 951-7000 SUITE 800 EAST
PROVIDENCE, RI 02903-2358 FAX: (617) 951-7050 WASHINGTON, DC 20008-3333
(401) 455-4400 (202) 626-3900
FAX: (401) 455-4401 FAX: (202) 626-3961

June __, 1999

State Street Research Institutional Funds
One Financial Center
Boston, MA 02111-2690

Ladies and Gentlemen:

You have informed us that you propose to register under the Securities Act
of 1933, as amended (the "Act"), and offer and sell from time to time shares of
beneficial interest, without par value ("Shares"), of each of your Core Fixed
Income Fund series, Core Plus Fixed Income Fund series, Core Large Cap Growth
Fund series and Large Cap Growth Fund series (each such series, a "Series").

We have examined an executed copy of your Agreement and Declaration of
Trust dated March 3, 1999 (the "Declaration of Trust") on file in the office of
the Secretary of State of The Commonwealth of Massachusetts. We are familiar
with the actions taken by your trustees to authorize the issue and sale to the
public from time to time of authorized and unissued Shares of each Series. We
have also examined a copy of your By-Laws and such other documents as we have
deemed necessary for the purpose of this opinion.

Based on the foregoing, we are of the opinion that:

1. The beneficial interest of each Series is divided into an unlimited
number of Shares.

2. The issue and sale of the authorized but unissued Shares of each Series
has been duly authorized under Massachusetts law. Upon the original issue and
sale of any of such authorized but unissued Shares and upon receipt by State
Street Research Institutional Funds (the "Trust") of the authorized
consideration therefor in an amount not less than the applicable net asset
value, the Shares so issued will be validly issued, fully paid and nonassessable
by the Trust.

The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders could, under certain
circumstances, be held personally

<PAGE>

ROPES & GRAY

State Street Research Institutional Funds -2- June __, 1998

liable for the obligations of the Trust. However, the Declaration of Trust
disclaims shareholder liability for acts or obligations of the Trust and
requires that notice of such disclaimer be given in each agreement, obligation
or instrument entered into or executed by the Trust or its trustees. The
Declaration of Trust provides for indemnification out of the property of the
particular series of shares for all loss and expense of any shareholder held
personally liable solely by reason of his or her being or having been a
shareholder of that series. Thus, the risk of a shareholder incurring financial
loss on account of being such a shareholder is limited to circumstances in which
that series of shares itself would be unable to meet its obligations.

We understand that this opinion is to be used in connection with the
registration of an indefinite number of Shares for offering and sale pursuant to
the Act. We consent to the filing of this opinion with and as part of your
Registration Statement on Form N-lA (File No. 333-73433) relating to such
offering and sale.

Very truly yours,

<PAGE>

Exhibit 10

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Statement of Additional
Information constituting part of this Pre-Effective Amendment No. 1 to the
Registration Statement (No. 333-73433) on Form N-1A (the "Registration
Statement") of our report dated May 18, 1999, relating to the statements of
assets and liabilities and the statements of operations of State Street
Research Core Fixed Income Fund, State Street Research Core Plus Fixed Income
Fund, State Street Research Core Large Cap Growth Fund and State Street
Research Large Cap Growth Fund, which appears in such Statement of Additional
Information, and to the incorporation by reference of our report into the
Prospectus which constitutes part of this Registration Statement. We also
consent to the reference to us under the heading "Independent Accountants" in
such Statement of Additional Information.

PricewaterhouseCoopers LLP
Boston, Massachusetts
May 27, 1999

<PAGE>

STATE STREET RESEARCH INSTITUTIONAL FUNDS

Plan pursuant to Rule 18f-3 under the
Investment Company Act of 1940
-------------------------------------

June__, 1999

This Plan (the "Plan") is adopted by State Street Research Institutional
Funds (the "Trust") pursuant to Rule 18f-3 under the Investment Company Act of
1940 (the "Act") and sets forth the general characteristics of, and the general
conditions under which the Trust may offer, multiple classes of shares of its
now existing and hereafter created portfolios ("Funds"). This Plan may be
revised or amended from time to time as provided below.

CLASS DESIGNATIONS

Each Fund of the Trust may from time to time issue one or more of the
following classes of shares: Class I Shares, Class II Shares, Class III Shares
and Class IV Shares. Each of the classes of shares of any Fund will represent
interests in the same portfolio of investments and, except as described herein,
shall have the same rights and obligations as each other class. Each class
shall be subject to such investment minimums and other conditions of eligibility
as are set forth in the Trust's prospectus or statement of additional
information as from time to time in effect (the "Prospectus").

CLASS ELIGIBILITY

A shareholder's class eligibility is generally dependent on the aggregate
size of the shareholder's total investment in all Funds of the Trust ("Total
Investment"), as described from time to time in the Prospectus. Notwithstanding
any such eligibility requirements, State Street Research & Management Company
("State Street Research") and its affiliates shall always be eligible to invest
in any class of shares of any Fund, without regard to any Total Investment or
other minimum investment requirements.

A shareholder's Total Investment will be determined by State Street
Research, the Trust's investment adviser and shareholder servicer as of the last
business day of each calendar quarter and on such other dates as may be
determined by State Street Research (each a "Measuring Date"). A shareholder's
Total Investment as of any Measuring Date will equal the aggregate net asset
value of the shareholder's assets invested in all Funds of the Trust as of such
Measuring Date.

In addition, each Fund may establish a separate minimum investment
requirement, based on assets in that Fund only, as described from time to time
in the Prospectus. Each Fund may also impose special eligibility requirements
relating to the type of investor (e.g., natural person,

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partnership, corporation, ERISA plan, etc.), including eligibility restrictions
and/or imposing special minimum investment requirements, as described from time
to time in the Prospectus.

CLASS CHARACTERISTICS

The sole difference among the various classes of shares is the level of
shareholder service fee ("Shareholder Service Fee") borne by the class for
client and shareholder service, reporting and other support provided to such
class by State Street Research, acting in its capacity as the Trust's
shareholder servicer.

The multiple class structure is designed to reflect that, as the size of a
particular shareholder's Total Investment increases, the cost to service that
shareholder is expected to decrease as a percentage of the shareholder's Total
Investment. Thus, the Shareholder Service Fee is lower for classes for which
eligibility criteria generally require greater assets invested in the Trust.

INCOME AND EXPENSE ALLOCATIONS

Shareholder Service Fees payable by the Trust to the shareholder servicer
of the Trust's shares (the "Shareholder Servicer") shall be allocated on a
class-by-class basis and are therefore "Class Expenses" under this Plan. Upon
any future approval by the Trust's Board of Trustees, including a majority of
the independent Trustees, the following expenses may be deemed to be "Class
Expenses" and upon such approval may (if such expense is properly assessable at
the class level) in the future be allocated on a class-by-class basis: (a)
transfer agency costs attributable to each class, (b) printing and postage
expenses related to preparing and distributing materials such as shareholder
reports, prospectuses and proxy statements to current shareholders of a specific
class, (c) SEC registration fees incurred with respect to a specific class, (d)
blue sky and foreign registration fees and expenses incurred with respect to a
specific class, (e) the expenses of administrative personnel and services
required to support shareholders of a specific class (including, but not limited
to, maintaining telephone lines and personnel to answer shareholder inquiries
about their accounts or about the Trust), (f) litigation and other legal
expenses relating to a specific class of shares, (g) Trustees' fees or expenses
incurred as a result of issues relating to a specific class of shares, (h)
accounting and consulting expenses relating to a specific class of shares, and
(i) any additional expenses, not including advisory or custodial fees or other
expenses related to the management of the Trust's assets, if these expenses are
actually incurred in a different amount with respect to a class, or if services
are provided with respect to a class that are of a different kind or to a
different degree than with respect to one or more other classes.

Each Fund's income, expenses, gain and loss accounts will be allocated to
each class of shares of the relevant Fund. On a daily basis, net investment
income and realized and unrealized gains and losses will be allocated to each
class based upon the relative percentage of net assets or "dividend assets", as
appropriate, at the beginning of the day in each class, after such assets are
adjusted for the prior business day's capital share transactions. Dividend
assets

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are defined as the aggregate net asset value of those shares eligible to receive
a dividend in the current day as set forth in the Fund's prospectus. The
balances of each Fund's income, expenses, gain and loss accounts will be
accumulated by class of shares.

On a daily basis, the allocation of expenses to each class of shares will
depend upon the nature of each expenditure. Expenditures fall into two
categories:

1. Class Expenses (defined above); and

2. Fund Expenses (all expenses not now or hereafter designated as Class
Expenses).

Notwithstanding the foregoing, each Fund may allocate all expenses other
than Class Expenses and income and realized and unrealized capital gains and
losses to each class on the basis of any methodology permitted by Rule 18f-3(c)
under the Act, provided, however, that until such time as this Plan is amended
with respect to the Fund's allocation methodology, the Fund will allocate all
expenses other than Class Expenses on the basis of relative net assets or
dividend assets.

WAIVERS AND REIMBURSEMENTS

State Street Research may choose to waive or reimburse Shareholder Service
Fees, Fund Expenses or any other Class Expenses, on a voluntary or temporary
basis.

CONVERSION AND EXCHANGE FEATURES

The value of each shareholder's Total Investment in the Trust will be
determined by State Street Research on each Measuring Date. Based on that
determination, each shareholder's shares of each Fund will be automatically
converted to the class of shares of such Fund which is then being offered with
the lowest Shareholder Service Fee for which the shareholder is eligible based
on the amount of the shareholder's Total Investment on the Measuring Date. The
conversion will occur within 10 business days following the Measuring Date, with
the precise date of the conversion to be determined by State Street Research in
its sole discretion. Notwithstanding the foregoing, (i) there will be no
automatic conversion from a class of shares with a lower Shareholder Service Fee
to a class of shares with a higher Shareholder Service Fee unless appropriate
disclosure regarding the higher Shareholder Service Fee has been given to the
affected shareholder(s) in the Prospectus or otherwise, and (ii) from time to
time, the Trustees may determine that there will be no conversion from a class
of shares with a lower Shareholder Service Fee to a class of shares with a
higher Shareholder Service Fee unless the shareholder's Total Investment is at
least a specified dollar amount less than the minimum Total Investment for the
shareholder's then existing class of shares on such Measuring Date, as described
in the Prospectus from time to time.

Shares of one class will always convert into shares of another class on the
basis of the relative net asset value of the two classes, without the imposition
of any sales load, fee or other

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<PAGE>

charge. The conversion of a shareholder's investment from one class of shares to
another is not a taxable event, and will not result in the realization of gain
or loss that may exist in Fund shares held by the shareholder. The
shareholder's tax basis in the new class of shares will equal its tax basis in
the old class before conversion. The conversion of shares from one class to
another class of shares may be suspended if, in the opinion of counsel obtained
by the Trust, the conversion from one class of shares to another may constitute
a taxable event under then current federal income tax law.

Notwithstanding anything to the contrary in this Plan, pursuant to Article
VI, Section 3 of the Trust's Agreement and Declaration of Trust, the Trust has
the right to redeem unilaterally any shareholder of any Fund if at such time
such shareholder owns shares of any Fund or class thereof "having an aggregate
net asset value less than an amount determined from time to time by the
Trustees."

NAV AND DIVIDENDS/DISTRIBUTIONS

Net Asset Value ("NAV") by class will be determined by dividing the ending
total net assets by class by the number of shares outstanding in each class. The
calculation of dividends and distributions will be dependent upon the dividend
and distribution policy of that Fund:

1. Periodic Dividend Funds

Dividends from net investment income for periodic dividend Funds will be
determined as follows: Dividends will be determined pursuant to authority of
the Fund's Trustees, before the deduction of Class Expenses, for all classes of
shares combined. From this amount, an amount equal to the per share amount of
Class Expenses accrued during the period to which the dividend relates is
subtracted. The result is the rate per share payable to each class.

Distributions from net realized capital gains will be determined by
dividing the total amount of gains to be distributed as declared pursuant to
authority of the Trustees by the total number of shares outstanding on the
ex-dividend date.

2. Daily Dividend Funds

Dividends from net investment income for daily dividend Funds will be
determined as follows: A daily dividend per share for each class will be
determined pursuant to authority of the Trustees. From this amount, an amount
equal to the per share amount of the difference in Class Expenses for the day is
added or subtracted as appropriate. The result is the dividend per share
payable to each class.

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<PAGE>

3. Money Market Funds

Daily dividends for money market Funds will be calculated as follows: The
amount of realized gain or loss for each class of shares will be added or
subtracted, as appropriate, to the daily amount of net investment income for
each class of shares, after the recording of all Fund and Class Expenses. The
result is the daily dividend for each class of shares.

VOTING RIGHTS

Each share of the Trust entitles the shareholder of record to one vote.
Each class of shares of the Trust will vote separately as a class on matters for
which class voting is required under applicable law.

RESPONSIBILITIES OF THE TRUSTEES

On an ongoing basis, the Trustees will monitor the Trust for the existence
of any material conflicts among the interests of the classes of shares. The
Trustees, including a majority of the independent Trustees, shall take such
action as is reasonably necessary to eliminate any such conflict that may
develop.

REPORTS TO THE TRUSTEES

State Street Research will be responsible for reporting any potential or
existing conflicts among the classes of shares to the Trustees.

AMENDMENTS

The Plan may be amended from time to time in accordance with the provisions
and requirements of Rule 18f-3 under the Act.

Adopted this ____ day of ___________, 1999

By:
------------------------
Name:
Title:

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