Supplement Dated January 1, 1999
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To
This is Statement of Additional
Supplement # Information dated For
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1 November 1, 1998 State Street Research Equity Investment Fund
State Street Research Alpha Fund
State Street Research Global Resources Fund
State Street Research Athletes Fund
series of State Street Research Equity Trust
1 March 1, 1998 State Street Research Government Income Fund
a series of State Street Research Financial Trust
1 August 1, 1998 State Street Research High Income Fund
State Street Research Managed Assets
series of State Street Research Income Trust
1 May 1, 1998 State Street Research Tax-Exempt Fund
State Street Research New York Tax-Free Fund
series of State Street Research Tax-Exempt Trust
1 February 1, 1998 State Street Research Capital Fund
State Street Research Emerging Growth Fund
State Street Research Aurora Fund
series of State Street Research Capital Trust
1 May 1, 1998 State Street Research Growth Fund
a series of State Street Research Growth Trust
2* May 1, 1998 State Street Research Investment Trust
a series of State Street Research Master Investment Trust
1 September 1, 1998 State Street Research Strategic Income Fund
State Street Research Galileo Fund
State Street Research Legacy Fund
series of State Street Research Securities Trust
2 March 1, 1998 State Street Research International Equity Fund
a series of State Street Research Portfolios, Inc.
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*Supplanting Supplement No. 1 dated October 1, 1998
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TRUSTEES AND OFFICERS
For the above listed series of State Street Research Equity Trust,
State Street Research Income Trust, State Street Research Growth Trust, State
Street Research Master Investment Trust and State Street Research Securities
Trust, the following information is added in the appropriate alphabetical
position in the listing of persons under the caption "Trustees and Officers:"
+Bruce R. Bond, 100 Minuteman Road, Andover, MA 01810, serves as
Trustee of the Trust. He is 51. His principal occupation is President, Chief
Executive Officer and Director of PictureTel Corporation. His other principal
business affiliation is Director of WITCO Corporation, a specialty chemical
company. During the past five years, he has also served as Chief Executive
Officer of ANS Communications (the networking subsidiary of America Online,
Inc.) and as an executive of British Telecom.
For the above listed series of State Street Research Financial Trust,
State Street Research Tax-Exempt Trust, State Street Research Capital Trust and
State Street Research Master Investment Trust, the following information is
added in the appropriate alphabetical position in the listing of persons under
the caption "Trustees and Officers:"
+Susan M. Phillips, The George Washington University, 710 21st Street,
Suite 206, Washington, DC 20052, serves as Trustee of the Trust. She is 55. Her
principal occupation is currently Dean and Professor of Finance and
Administration, School of Business and Public Management, The George Washington
University. Previously, she was a member of the Board of Governors of the
Federal Reserve System and Chairman and Commissioner of the Commodity Futures
Trading Commission.
GENERAL NOTE
The remainder of this Supplement sets forth revisions to the Statement
of Additional Information to reflect changes in the pricing of sales of Fund
shares, including the introduction of new Class B(1) and a Rule 12b-1 Plan for
Class B(1), and limitations on the availability of existing Class B, among other
changes. While the revisions set forth below relate to specific parts of the
Statement of Additional Information directly affected by the changes, the entire
Statement of Additional Information is deemed revised to give effect to the
pricing changes.
PURCHASE AND REDEMPTION OF SHARES
The first paragraph under the caption "Purchase and Redemption of
Shares" is revised in its entirety as follows:
Shares of the Fund are distributed by State Street Research Investment
Services, Inc., the Distributor. The Fund offers five classes of shares. Class
A, Class B(1), Class C and Class S shares are available to all eligible
investors. Class B shares are available only to current Class B shareholders
through reinvestment of dividends and capital gains distributions or through
exchanges from existing Class B accounts of the State Street Research Funds.
Class A, Class B(1), Class C and Class S shares of the Fund may be purchased at
the next determined net asset value per share plus, in the case of all classes
except Class S shares, a sales charge which, at the election of the investor,
may be imposed (i) at the time of purchase (the Class A shares) or (ii) on a
deferred basis (the Class B(1) and Class C shares). General information on how
to
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buy shares of the Fund, as well as sales charges involved, are set forth under
"Your Account" or "Your Investment" in the Prospectus. The following supplements
that information.
The sub-caption "Purchase and Redemption of Shares - Conversion of
Class B Shares to Class A Shares" is revised in its entirety to read as follows:
Conversion of Class B(1) and Class B Shares to Class A Shares. A
shareholder's Class B(1) and Class B shares of the Fund, including all shares
received as dividends or distributions with respect to such shares, will
automatically convert to Class A shares of the Fund at the end of eight years
following the issuance of such shares; consequently, they will no longer be
subject to the higher expenses borne by Class B(1) and Class B shares. The
conversion rate will be determined on the basis of the relative per share net
asset values of the two classes and may result in a shareholder receiving either
a greater or fewer number of Class A shares than the shares so converted. As
noted above, holding periods for Class B(1) shares received in exchange for
Class B(1) shares of other eligible Funds and for Class B shares received in
exchange for Class B shares of other Eligible Funds, will be counted toward the
eight-year period.
The subcaption "Purchase and Redemption of Shares - Contingent Deferred
Sales Charges" is revised in its entirety to read as follows:
Contingent Deferred Sales Charges. The amount of any contingent
deferred sales charge paid on Class A shares (on sales of $1 million or more and
which do not involve an initial sales charge) or on Class B(1), Class B or Class
C shares of the Fund will be paid to the Distributor. The Distributor will pay
dealers at the time of sale a 4% commission for selling Class B(1) shares and a
1% commission for selling Class C shares. In certain cases, a dealer may elect
to waive the 4% commission on Class B(1) shares and receive in lieu thereof an
annual fee, usually 1%, with respect to such outstanding shares. The proceeds of
the contingent deferred sales charges and the distribution fees are used to
offset distribution expenses and thereby permit the sale of Class B(1), Class B
and Class C shares without an initial sales charge.
In determining the applicability and rate of any contingent deferred
sales charge of Class B(1), Class B or Class C shares, it will be assumed that a
redemption of the shares is made first of those shares having the greatest
capital appreciation, next of shares representing reinvestment of dividends and
capital gains distributions and finally of remaining shares held by the
shareholder for the longest period of time. Class B(1) shares that are redeemed
within a six-year period after purchase, Class B shares that are redeemed within
a five-year period after their purchase, and Class C shares that are redeemed
within a one-year period after their purchase, will not be subject to a
contingent deferred sales charge to the extent that the value of such shares
represents (1) capital appreciation of Fund assets or (2) reinvestment of
dividends or capital gains distributions. The holding period for purposes of
applying a contingent deferred sales charge for a particular class of shares of
the Fund acquired through an exchange from another Eligible Fund will be
measured from the date that such shares were initially acquired in the other
Eligible Fund, and shares of the same class being redeemed will be considered to
represent, as applicable, capital appreciation or dividend and capital gains
distribution reinvestments in such other Eligible Fund. These determinations
will result in any contingent deferred sales charge being imposed at the lowest
possible rate. For federal income tax purposes, the amount of
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the contingent deferred sales charge will reduce the gain or increase the loss,
as the case may be, on the amount realized on redemption.
The subcaption "Purchase and Redemption of Shares - Contingent Deferred
Sales Charge Waivers" is revised in its entirety to read as follows:
Contingent Deferred Sales Charge Waivers. With respect to Class A
shares (on sales of $1 million or more and which do not involve an initial sales
charge), and Class B(1), Class B and Class C shares of the Fund, the contingent
deferred sales charge does not apply to exchanges or to redemptions under a
systematic withdrawal plan which meets certain conditions. The contingent
deferred sales charge will be waived for participant initiated distributions
from State Street Research prototype employee retirement plans. In addition, the
contingent deferred sales charge will be waived for: (i) redemptions made within
one year of the death or total disability, as defined by the Social Security
Administration, of all shareholders of an account; (ii) redemptions made after
attainment of a specific age in an amount which represents the minimum
distribution required at such age under Section 401(a)(9) of the Internal
Revenue Code of 1986, as amended, for retirement accounts or plans (e.g., age 70
1/2 for Individual Retirement Accounts and Section 403(b) plans), calculated
solely on the basis of assets invested in the Fund or other Eligible Funds; and
(iii) a redemption resulting from a tax-free return of an excess contribution to
an Individual Retirement Account. (The foregoing waivers do not apply to a
tax-free rollover or transfer of assets out of the Fund.) The Fund may modify or
terminate the waivers at any time; for example, the Fund may limit the
application of multiple waivers and establish other conditions for employee
benefit plans. Certain employee benefit plans sponsored by a financial
professional may be subject to other conditions for waivers under which the
plans may initially invest in Class B(1) or Class B shares and then Class A
shares of certain funds upon meeting specific criteria.
SHAREHOLDER ACCOUNTS
The first paragraph under the subcaption "Shareholder Accounts -
Exchange Privileges" is revised in its entirety to read as follows:
Exchange Privileges. Shareholders of the Fund may exchange their shares
for available shares with corresponding characteristics of any of the other
Eligible Funds, subject to any applicable initial holding period, on the basis
of the relative net asset values of the respective shares to be exchanged,
subject to compliance with applicable securities laws. Shareholders of any other
Eligible Fund may similarly exchange their shares for Fund shares with
corresponding characteristics. Prior to making an exchange, shareholders should
obtain the Prospectus of the Eligible Fund into which they are exchanging. Under
the Direct Program, subject to certain conditions, shareholders may make
arrangements for regular exchanges from the Fund into other Eligible Funds. To
effect an exchange, Class A, Class B(1), Class B and Class C shares may be
redeemed without the payment of any contingent deferred sales charge that might
otherwise be due upon an ordinary redemption of such shares. The State Street
Research Money Market Fund issues Class E shares which are sold without any
sales charge. Exchanges of State Street Research Money Market Fund Class E
shares into Class A shares of the Fund or any other Eligible Fund are subject to
the initial sales charge or contingent deferred sales charge applicable to an
initial investment in such Class A shares, unless a prior Class A sales charge
has been paid directly or indirectly with respect to the shares redeemed. Class
A shares acquired through new investment after January 1, 1999, are subject to
an incremental sales charge if exchanged within 30 days of acquisition for Class
A shares of a Fund with a higher applicable sales charge. For purposes of
computing the contingent deferred sales charge that may be payable upon
disposition of any acquired
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Class A, Class B(1), Class B and Class C shares, the holding period of the
redeemed shares is "tacked" to the holding period of any acquired shares. No
exchange transaction fee is currently imposed on any exchange.
DISTRIBUTION OF SHARES OF THE FUND
The fifth and all subsequent paragraphs up to the paragraph which
starts "During the fiscal year ended (xxx), the Fund paid the Distributor ...,"
are revised in their entirety to read as follows:
The Fund has adopted a "Plan of Distribution Pursuant to Rule 12b-1"
(the "Class A/B/C Distribution Plan") under which the Fund may engage, directly
or indirectly, in financing any activities primarily intended to result in the
sale of Class A, Class B and Class C shares, including, but not limited to, (1)
the payment of commissions and/or reimbursement to underwriters, securities
dealers and others engaged in the sale of shares, including payments to the
Distributor to be used to pay commissions and/or reimbursement to securities
dealers (which securities dealers may be affiliates of the Distributor) engaged
in the distribution and marketing of shares and furnishing ongoing assistance to
investors, (2) reimbursement of direct out-of-pocket expenditures incurred by
the Distributor in connection with the distribution and marketing of shares and
the servicing of investor accounts and (3) reimbursement of expenses incurred by
the Distributor in connection with the servicing of shareholder accounts
including payments to securities dealers and others in consideration of the
provision of personal service to investors and/or the maintenance or servicing
of shareholder accounts. In addition, the Class A/B/C Distribution Plan is
deemed to authorize the Distributor and the Investment Manager to make payments
out of general profits, revenues or other sources to underwriters, securities
dealers and others in connection with sales of shares, to the extent, if any,
that such payments may be deemed to be within the scope of Rule 12b-1 under the
1940 Act.
The expenditures to be made pursuant to the Class A/B/C Distribution
Plan may not exceed (i) with respect to Class A shares, an annual rate of 0.25%
of the average daily value of net assets represented by such Class A shares, and
(ii) with respect to Class B and Class C shares, an annual rate of 0.75% of the
average daily value of the net assets represented by such Class B or Class C
shares (as the case may be) to finance sales or promotion expenses and an annual
rate of 0.25% of the average daily value of the net assets represented by such
Class B or Class C shares (as the case may be), to make payments for personal
services and/or the maintenance or servicing of shareholder accounts.
The Fund also has adopted a Rule 12b-1 Plan for Class B(1) shares (the
"Class B(1) Distribution Plan") under which the Fund shall pay the Distributor
(a) a service fee at the end of each month at the annual rate of 0.25% of
average daily net assets attributable to the Class B(1) shares to compensate the
Distributor and any securities firms or other third parties who render personal
services to and/or maintain shareholder accounts for the shareholders of the
respective class and (b) a distribution fee under the Class B(1) Distribution
Plan at the end of each month at the annual rate of 0.75% of average daily net
assets attributable to the Class B(1) shares to compensate the Distributor for
services provided and expenses incurred by it in connection with sales,
promotional and marketing activities relating to the respective class. To the
extent that any payments made by the Fund to the Distributor or the Investment
Manager, including payment of investment management fees, should be deemed to be
an indirect financing of any activity primarily resulting in the sale of shares
of the Fund within the scope of Rule 12b-1 under the 1940 Act, then such
payments shall be deemed to be authorized by the Class B(1) Distribution Plan.
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A rule of the National Association of Securities Dealers, Inc. ("NASD")
limits annual expenditures that the Fund may incur to 0.75% for distribution
expenses and 0.25% for service fees. The NASD Rule also limits the aggregate
amount that the Fund may pay for such distribution costs to 6.25% of gross share
sales of a class since the inception of any asset-based sales charge plus
interest at the prime rate plus 1% on unpaid amounts thereof (less any
contingent deferred sales charges). Such limitation does not apply to
shareholder service fees. Payments to the Distributor or to dealers funded under
either the Class A/B/C Distribution Plan or the Class B(1) Distribution Plan may
be discontinued at any time.
Some or all of the service fees are used to pay or reimburse dealers
(including dealers that are affiliates of the Distributor) or others for
personal services and/or the maintenance of shareholder accounts. A portion of
any initial commission paid to dealers for the sale of shares of the Fund
represents payment for personal services and/or the maintenance or servicing of
shareholder accounts by such dealers. Dealers who have sold Class A shares are
eligible for further reimbursement commencing as of the time of such sale.
Dealers who have sold Class B(1), Class B and Class C shares are eligible for
further reimbursement after the first year during which such shares have been
held of record by such dealer as nominee for its clients (or by such clients
directly).
The distribution fees are used primarily to offset initial and ongoing
commissions paid to dealers for selling such shares and for other sales and
marketing expenditures.
The Distributor provides distribution services on behalf of other funds
having distribution plans and receives similar payments from, and incurs similar
expenses on behalf of such other funds. When expenses of the Distributor cannot
be identified as relating to a specific fund, the Distributor allocates expenses
among the funds in a manner deemed fair and equitable to each fund.
The payment of service and distribution fees may continue even if the
Fund ceases, temporarily or permanently to sell one or more classes of shares to
new accounts. During the period the Fund is closed to new accounts, the
distribution fee will not be used for promotion expenses. The service and
distribution fees are used during a closed period to cover services provided to
current shareholders and to cover the compensation of financial professionals in
connection with the prior sale of Fund shares, among other non-promotional
distribution expenditures.
The Distributor may pay certain dealers and other intermediaries
additional compensation for sales and administrative services. The Distributor
may provide cash and noncash incentives to intermediaries who, for example, sell
significant amounts of shares or develop particular distribution channels. The
Distributor may compensate dealers with clients who maintain their investments
in the Fund over a period of years. The incentives can include merchandise and
trips to, and attendance at, sales seminars at resorts. The Distributor may pay
for administrative services, such as technological and computer systems support
for the maintenance of pension plan participant records, for subaccounting, and
for distribution through mutual fund supermarkets or similar arrangements.
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