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As filed with the Securities and Exchange Commission
on April 28, 2000
1940 Act File No. 811-4256
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 17 [x]
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STATE STREET RESEARCH EXCHANGE TRUST
(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, One Financial Center, Boston, MA 02111
(Name and Address of Agent for Service)
Copy to:
Geoffrey R.T. Kenyon, Esq.
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
<PAGE>
STATE STREET RESEARCH EXCHANGE TRUST
PART A - INFORMATION REQUIRED IN A PROSPECTUS
May 1, 2000
All information required by this Part of Form N-1A
(except Items 1, 2, 3, 5 and 9, which are omitted pursuant
to paragraph 2(b) of General Instruction B to Form
N-1A is included in Part B.)
<PAGE>
STATE STREET RESEARCH EXCHANGE TRUST
PART B - STATEMENT OF ADDITIONAL INFORMATION
May 1, 2000
The following Statement of Additional Information is not a Prospectus.
Registrant is not offering securities to the general public and maintains no
current prospectus. However, general information about Registrant which would
normally be included in a current prospectus, except such information as would
be applicable to an offering of Registrant's shares, has been included in this
Statement of Additional Information.
TABLE OF CONTENTS
Page
General Information and History ...............................2
Investment Policies............................................2
Trustees and Officers.........................................14
Controlling Persons and Principal Holders of Securities.......17
Investment Advisory and Other Services........................18
Portfolio Transactions........................................19
Shares of Beneficial Interest and Other Securities............21
Redemption and Pricing of Securities..........................23
Tax Status....................................................25
Financial Statements..........................................26
<PAGE>
General Information and History
Registrant's predecessor, State Street Exchange Fund, Inc., was
originally incorporated in Massachusetts on December 12, 1984 to
become the successor to State Street Exchange Fund (A Limited
Partnership) (the "Partnership") which was formed as a limited
partnership, and registered with the Securities and Exchange
Commission as an open-end, diversified management company, in 1975.
Effective May 1, 1985, in accordance with a Plan of Reorganization
and Liquidation which was approved by the partners of the
Partnership on December 11, 1984, State Street Exchange Fund, Inc.
succeeded to the business and operations of the Partnership.
Effective May 1, 1989 State Street Exchange Fund, Inc. was
reorganized as a Massachusetts business trust and carries on its
operations as State Street Research Exchange Fund (the "Fund")
(formerly known as State Street Exchange Fund), a series of State
Street Research Exchange Trust (the "Trust") (formerly known as
State Street Exchange Trust). References to Registrant here also
refer, where appropriate, to Registrant's predecessors.
Investment Policies
Investment Objective and Restrictions
The Fund's investment objective is to seek long-term growth of
capital and consequent long-term growth of income. This objective
cannot be changed without a vote of the shareholders. In order to
achieve this objective the Fund's assets normally will be invested
largely in a diversified and supervised portfolio of common stocks,
or securities convertible into common stocks, believed by management
to have growth potential over the years. However, there may be times
when, in management's judgment, the Fund's interests are best served
and the long range investment objective most likely to be achieved
by having a portion of the Fund's assets in cash or fixed income or
other defensive securities, and freedom to so administer the
portfolio is retained. Because the Fund invests primarily in stocks,
its major risks are those of stock investing, including sudden,
unpredictable drops in value and the potential for periods of
lackluster performance. The Fund may invest in companies with some
international business, and also may invest in foreign companies,
therefore, the Fund is subject to the risks associated with
international investing.
The Fund has no fundamental policy with respect to the issuance of
senior securities.
It is the Fund's policy not to purchase securities on margin or make
a short sale of any securities, or purchase or write puts, calls,
straddles or spreads except in connection with options on securities
and securities indices and options on futures with respect to
securities and securities indices.
It is the Fund's policy not to borrow money except for temporary,
emergency or extraordinary purposes and then only up to an amount
equal to 10% of its net assets.
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It is the Fund's policy not to underwrite securities of other
issuers except to the extent it may be deemed an "underwriter" when
it disposes of restricted securities. In addition, it is
Registrant's policy not to purchase or otherwise acquire securities
for its portfolio which are deemed by the Board of Trustees to be
restricted as to resale if such acquisition would cause more than
10% of the Fund's total assets (taken at market value) to be held in
such securities.
It is the Fund's policy not to make any investment which would cause
more than 25% of its total assets, taken at market value, to be
invested in any one industry.
It is the Fund's policy not to make any investment in real property.
The Fund has no fundamental policy with respect to investment in
real estate mortgage loans.
It is the Fund's policy not to invest in commodities or commodity
contracts except for futures and options on futures with respect to
securities and securities indices. (This policy is interpreted to
permit transactions in foreign currencies, including forward
contracts on foreign currencies, when used as a hedge with respect
to a specific foreign security held by the Fund.)
It is the Fund's policy not to make loans to other persons except
that Registrant may make loans of its portfolio securities
comprising not more than 10% of its total assets if such loans are
fully secured by cash when made. Registrant will lend portfolio
securities only when a determination has been made by the Board of
Trustees that the net return to the Fund in consideration of lending
the securities is reasonable and desirable, that any fee paid to the
broker placing such loan is reasonable and based solely upon
services rendered, that the lending of such securities is consistent
with the Fund's investment objective, and that no affiliate of the
Fund or of State Street Research & Management Company (the
"Management Company") is involved in such lending transaction or is
receiving any fees in connection therewith.
It is the Fund's policy not:
(a) To purchase oil, gas, or other mineral leases or
partnership interests in oil, gas, or other exploration
programs;
(b) To purchase for its portfolio, securities of any issuer
(other than the United States or its instrumentalities)
if such purchase at the time would cause more than 5% of
the total assets of Registrant (taken at market value)
to be invested in the securities of such issuer;
(c) To purchase for its portfolio, securities of any issuer
if such purchase at the time thereof would cause more
than 10% of any class of securities of such issuer to be
held by the Fund;
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(d) To make investments for the purpose of exercising
control or management of other companies;
(e) To purchase securities for its portfolio issued by any
other investment company;
(f) To purchase securities of any issuer which has a record
of less than three years' continuous operation if such
purchase would cause more than 5% of the Fund's total
assets (taken at market value) to be invested in the
securities of such issuers; provided that any such three
year period may include the operation of any predecessor
company, partnership, or individual enterprise if the
issuer whose securities are to be purchased came into
existence as a result of a merger, consolidation,
reorganization, or the purchase of substantially all the
assets of such predecessor company, partnership, or
individual enterprise; or
(g) To purchase or retain any securities of an issuer if, to
the knowledge of the Fund, those officers and Trustees
of the Management Company who individually own
beneficially more than 1/2 of 1% of the shares or
securities of such issuer together own beneficially more
than 5% of such shares or securities.
Restricted Securities
It is the Fund's 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 35% of the Fund's total assets are
invested in restricted securities, provided not more than 10% of the
Fund's total assets are invested in restricted securities other than
Rule 144A Securities.
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, such 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, marketmaking activity, and the nature of the security and
marketplace trades. Investments in Rule 144A Securities could have
the effect of increasing the level of the Fund's illiquidity to the
extent that qualified institutional buyers become, for a time,
uninterested in purchasing such securities. Also, the Fund may be
adversely impacted by the possible illiquidity and subjective
valuation of such securities in the absence of an active 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.
Foreign Investments
The Fund reserves the right to invest without limitation in
securities of non-U.S. issuers directly, or indirectly in the form
of American Depositary Receipts ("ADRs")
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European Depositary Receipts ("EDRs") and Global Depositary Receipts
("GDRs"). Under current policy, however, the Fund limits such
investments, including ADRs, EDRs and GDRs, to a maximum of 35% of
its total assets.
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 trading. The Fund will take these and
other risk considerations into account before making an investment
in an unsponsored ADR.
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 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.
It is anticipated that most of the foreign investments of the Fund
will consist of securities of issuers in countries with developed
economies. However, the Fund may also invest
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in the securities of issuers in countries with less developed
economies as deemed appropriate by the Management Company. Such
countries include countries that have an emerging stock market that
trades a small number of securities and/or countries with economies
that are based on only a few industries. To the extent the Fund
invests in such securities, it will be subject to a variety of
additional risks, including risks associated with political
instability, economies based on relatively few industries, lesser
market liquidity, high rates of inflation, significant price
volatility of portfolio holdings and high levels of external debt in
the relevant country.
Although the Fund may invest in securities denominated in foreign
currencies, the Fund values its securities and other assets in U.S.
dollars. As a result, the net asset value of the Fund's shares may
fluctuate with U.S. dollar exchange rates as well as with price
changes of the Fund's securities in the various local markets and
currencies. Thus, an increase in the value of the U.S. dollar
compared to the currencies in which the Fund makes its investments
could reduce the effect of increases and magnify the effect of
decreases in the prices of the Fund's securities in their local
markets. Conversely, a decrease in the value of the U.S. dollar will
have the opposite effect of magnifying the effect of increases and
reducing the effect of decreases in the prices of the Fund's
securities in the local markets.
Currency Transactions
In order to protect against the effect of uncertain future exchange
rates on securities denominated in foreign currencies, the Fund may
engage in 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. Although such contracts tend to minimize the risk of
loss resulting from a correctly predicted decline in value of hedged
currency, they tend to limit any potential gain that might result
should the value of such currency increase. In entering a forward
currency transaction, the 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, large institutions with which the
Management Company has done substantial business in the past.
The Fund's dealings in forward currency exchange contracts will be
limited to hedging involving either specific transactions or
aggregate portfolio positions. A forward currency contract involves
an obligation to purchase or sell a specific currency at a future
date, which may be any fixed
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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. Although spot and forward
contracts will be used primarily to protect the 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
the 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.
Derivatives
The Fund 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 the
Management Company to aid in achieving the Fund's investment
objective. The Fund may also purchase instruments with
characteristics of both futures and securities (e.g., debt
instruments with
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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.
Derivatives, such as options, futures contracts, options on futures
contracts, and swaps enable the 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). The 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.
The Management Company may enter into derivative positions for the
Fund for either hedging or non-hedging purposes. The term hedging is
applied to defensive strategies designed to protect the 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 the
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). Non-hedging strategies include
strategies designed to produce incremental income (such as the
option writing strategy described below) or "speculative" strategies
which are undertaken to profit (i) from an expected decline in the
market value of an asset or group of assets which the 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. The 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 the 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 increase in value of the underlying asset. Conversely, when the
Fund has taken a long position
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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, the 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 the Fund to the Trust's custodian for maintenance in a
separate account to insure that the use of such futures contracts is
unleveraged. Similarly, assets having a value equal to the aggregate
face value of the futures contract will be identified with respect
to each short position. The Fund will utilize such assets and
methods of cover as appropriate under applicable exchange and
regulatory policies.
Options. The 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.
Purchased options have defined risk, that is, the premium paid for
the option, no matter how adversely the price of the underlying
asset moves, while affording an opportunity for gain corresponding
to the increase or decrease in the value of the optioned 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 difference between the agreed upon price that the 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.
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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 the Fund may enter are options on securities
indices. 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, the 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.
A securities index assigns relative values to the securities
included in the index and the index options are based on a broad
market index. In connection with the use of such options, the 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. The 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 nonhedging purposes would exceed 5% of the market value of
the Fund's net assets. The Fund applies a similar policy to options
that are not commodities.
As noted above, the 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.
The 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.
Nonhedging strategies typically involve special risks. The
profitability of the Fund's non-hedging strategies will depend on
the ability of the Management Company to analyze both the applicable
derivatives market and the market for the underlying asset or group
of assets.
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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 the 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. The Fund will
enter into an option or futures position only if it appears to be a
liquid investment.
Swaps. The Fund may enter into various forms of swap arrangements
with counterparties with respect to interest rates, currency rates
or indices, including purchase of caps, floors and collars as
described below. In an interest rate swap the 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 the Fund a
fixed rate of interest on the notional principal amount. In a
currency swap the 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 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.
The 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 the 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, the
Fund will set up a segregated custodial account to hold appropriate
liquid assets, including cash; 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.
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These arrangements will be made primarily for hedging purposes, to
preserve the return on an investment or on a portion of the 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 for entities which are not
commodity pool operators, such as the Fund. In entering a swap
arrangement, the 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
Management Company is incorrect in its forecasts of market values,
interest rates and other applicable factors, the investment
performance of the Fund would diminish compared with what it would
have been if these investment techniques were not used. Moreover,
even if the Management Company 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. The Fund 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 interest which is unrelated to
the coupon rate or maturity of the acquired security. The 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 the Fund's ability to dispose
of the underlying securities. Repurchase agreements will be limited
to 30% of the Fund's net assets, except that repurchase agreements
extending for more than seven days when combined with any other
illiquid securities held by the Fund will be limited to 15% of the
Fund's net assets. To the extent excludable under relevant
regulatory interpretations, repurchase agreements involving U.S.
Government Securities are not subject to the limitations on the
Fund's total assets which may be invested in one issuer or industry.
Reverse Repurchase Agreements. The Fund may enter into reverse
repurchase agreements. In a reverse repurchase agreement the Fund
transfers possession of 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.
Temporary and Defensive Investments. The Fund may hold up to 100% of
its assets in cash or high-quality debt securities for temporary
defensive purposes. The Fund will 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 the 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 Corporation ("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.
Securities Lending. The Fund may lend portfolio securities with a
value of up to 10% of its total assets. The 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 the loaned securities plus accrued interest. Collateral
received by the Fund will generally be held in the form tendered,
although cash may be invested in securities issued or guaranteed by
the U.S. Government or its agencies or instrumentalities,
irrevocable stand-by letters of credit issued by a bank, or any
combination thereof. 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 the Fund's outstanding
securities. Such loans may be
12
<PAGE>
terminated at any time.
The 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 the 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 Management Company to be
of good financial standing.
Industry Classifications. In determining how much of the portfolio
is invested in a given industry, the following industry
classifications are currently used. Industry classifications are
subject to change from time to time. 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 will be classified according to the industries
of the parent 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.
<TABLE>
<S> <C>
Autos & Transportation Financial Data Processing
- ---------------------- Services & Systems
Air Transport Insurance
Auto Parts Miscellaneous Financial
Automobiles Real Estate Investment
Miscellaneous Trusts
Transportation Rental & Leasing Services:
Railroad Equipment Commercial
Railroads Securities Brokerage &
Recreational Vehicles & Services
Boats
Tires & Rubber
Truckers Health Care
-----------
Drugs & Biotechnology
Consumer Discretionary Health Care Facilities
- ---------------------- Health Care Services
Advertising Agencies Hospital Supply
Casino/Gambling, Service Miscellaneous
Hotel/Motel
Commercial Services
Communications, Media & Integrated Oils
Entertainment ---------------
Consumer Electronics Oil: Integrated Domestic
Consumer Products Oil: Integrated International
Consumer Services
Household Furnishings
Leisure Time Materials & Processing
Photography ----------------------
Printing & Publishing Agriculture
Restaurants Building & Construction
Retail Chemicals
Shoes Containers & Packaging
Textile Apparel Diversified Manufacturing
Manufacturers Engineering & Contracting
Toys Services
Fertilizers
Forest Products
Consumer Staples Gold & Precious Metals
- ---------------- Miscellaneous Materials &
Beverages Processing
Drug & Grocery Store Non-Ferrous Metals
Chains Office Supplies
Foods Paper and Forest Products
Household Products Real Estate & Construction
Tobacco Steel
Textile Products
Financial Services
- ------------------
Banks & Savings and Loans
</TABLE>
<TABLE>
<CAPTION>
Other Producer Durables Technology
- ---------------- ----------------- ----------
<S> <C> <C>
Trust Certificates-- Aerospace Communications Technology
Government Related Electrical Equipment & Computer Software
Lending Components Computer Technology
Asset-backed--Mortgages Electronics: Industrial Electronics
Asset-backed--Credit Card Homebuilding Electronics: Semi-
Receivables Industrial Products Conductors/Components
Miscellaneous Machine Tools Miscellaneous Technology
Multi-Sector Companies Machinery
Miscellaneous Equipment
Miscellaneous Producer Utilities
Other Energy Durables ---------
- ------------ Office Furniture & Business Miscellaneous Utilities
Gas Pipelines Equipment Utilities: Cable TV & Radio
Miscellaneous Energy Pollution Control and Utilities: Electrical
Offshore Drilling Environmental Services Utilities: Gas Distribution
Oil and Gas Producers Production Technology Utilities: Telecommunications
Oil Well Equipment & Equipment Utilities: Water
Services Telecommunications
Equipment
</TABLE>
13
<PAGE>
Trustees and Officers
Under Registrant's Master Trust Agreement, subject to the terms
thereof, Registrant's Board of Trustees has general management and control of
all the property and affairs of the Fund.
The Trustees and principal officers of the Trust and their principal
occupations and positions with certain affiliates of the Management Company are
set forth below. The address for each person is One Financial Center, Boston,
Massachusetts 02111.
*+Peter C. Bennett serves as Vice President of the Trust. He is 61.
His principal occupation is currently, and during the past five years has been,
Executive Vice President of State Street Research & Management Company. Mr.
Bennett is also a Director of State Street Research & Management Company. Mr.
Bennett's other principal business affiliation is Director, State Street
Research Investment Services, Inc.
+Bruce R. Bond serves as Trustee of the Trust. He is 53. During the
past five years, Mr. Bond has also served as Chairman of the Board, Chief
Executive Officer and President of PictureTel Corporation, Chief Executive
Officer of ANS Communications (a communications networking company) and as
managing director of British Telecommunications PLC.
+Steve A. Garban serves as Trustee of the Trust. He is 62. He is
retired and was formerly Senior Vice President Finance and Operations and
Treasurer Emeritus of The Pennsylvania State University.
*+Gerard P. Maus serves as Treasurer of the Trust. He is 49. 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.
*+Francis J. McNamara, III serves as Secretary and General Counsel
of the Trust. He is 44. 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 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, General
Counsel and Clerk of State Street Research Investment Services, Inc.
- ------------------------------------------------
* or + See footnotes on page 16
14
<PAGE>
+Dean O. Morton serves as Trustee of the Trust. He is 68. He is
retired and was formerly Executive Vice President, Chief Operating Officer and
Director of Hewlett-Packard Company.
+Susan M. Phillips serves as Trustee of the Trust. She is 57. Her
principal occupation is currently Dean of the School of Business and Public
Management at George Washington University and Professor of Finance. 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.
+Toby Rosenblatt serves as Trustee of the Trust. He is 61. His
principal occupations during the past five years have been President of The Glen
Ellen Company, a private investment company and President of Founders
Investments Ltd.
+Michael S. Scott Morton serves as Trustee of the Trust. He is 62.
His principal occupation during the past five years has been Jay W. Forrester
Professor of Management at Sloan School of Management, Massachusetts Institute
of Technology.
*+Ralph F. Verni serves as Chairman of the Board, President, Chief
Executive Officer and Trustee of the Trust. He is 57. 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. (until February 1996, prior positions as President and Chief Executive
Officer).
- ------------------------------------------------
* or + See footnotes on page 16
15
<PAGE>
*+James M. Weiss serves as Vice President of the Trust. He is 53.
His principal occupation is Executive Vice President and Director of State
Street Research & Management Company. During the past five years he has also
served as President and Chief Investment Officer of IDS Equity Advisors.
*+Kennard Woodworth, Jr. serves as Vice President of the Trust. He
is 61. 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 Investment Company Act
of 1940 (the "1940 Act") because of their affiliations with the
Trust's Management Company.
+ Serves as a Trustee and/or officer of one or more of the following
investment companies, each of which has an advisory relationship
with the Management Company or its parent, Metropolitan Life
Insurance Company ("Metropolitan"): 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 and Metropolitan Series Fund, Inc.
16
<PAGE>
Controlling Persons and Principal Holders of Securities
There are no persons who control Registrant.
There are no persons who own or are known by Registrant to own of
record or beneficially 5% or more of Registrant's outstanding
shares.
Registrant's Trustees and principal Officers as a group beneficially
owned, as of March 31, 2000, none of the outstanding shares
of the Registrant.
The Trustees were compensated as follows:
<TABLE>
<CAPTION>
Name of Aggregate Total Compensation Total Compensation From
Trustee Compensation From All State Street All State Street Research Funds
From Fund(a) Research Funds and Metropolitan Series Fund, Inc.
Paid to Trustees(b) Paid to Trustees(c)
<S> <C> <C> <C>
Bruce R. Bond $2,507 $55,495 $ 55,495
Steve A. Garban $4,115 $80,150 $110,900
Dean Morton $4,171 $81,150 $108,900
Susan M. Phillips $3,807 $57,150 $ 57,150
Toby Rosenblatt $3,507 $67,900 $ 67,900
Michael S. Scott Morton $4,321 $85,250 $113,000
Ralph F. Verni $ 0 $ 0 $ 0
</TABLE>
(a) For the Fund's fiscal year ended December 31, 1999.
(b) Includes compensation on behalf of all series of 11 investment
companies for which the Management Company served as sole investment
adviser. "Total Compensation From All State Street Research Funds
Paid to Trustees" is for the 12 months ended December 31, 1999. The
Fund does not provide any pension or retirement benefits for the
Trustees.
(c) Includes compensation on behalf of all series of 11 investment
companies for which the Management Company served as sole investment
adviser and all series of Metropolitan Series Fund, Inc. The
primary adviser to Metropolitan Series Fund, Inc. is Metropolitan
Life Insurance Company, which as retained the Management Company a
sub-adviser to certain series of Metropolitan Series Fund, Inc. The
figure indicated in this column includes compensation relating to
series of Metropolitan Series, Inc. which are not advised by the
Management Comapny. "Total Compensation From All State Street
Research Funds and Metropolitan Series Fund, Inc." is for the 12
months ended December 31, 1999.
17
<PAGE>
Investment Advisory and Other Services
Registrant's Management Company is State Street Research &
Management Company, a Delaware corporation, with offices at One
Financial Center, Boston, Massachusetts 02111-2690. The Management
Company is an indirect wholly-owned subsidiary of Metropolitan.
It, and its predecessor, a Massachusetts partnership having the same
name, have been providing investment advice and management to
clients since 1927. As of March 31, 2000, the Management Company had
assets of approximately $55.5 billion under direct or indirect
management.
Kennard Woodworth, Jr. has been responsible for the Fund's
day-to-day portfolio management since February 1993. He is a Senior
Vice President of the Management Company. He joined the Management
Company in 1986 and has worked as an investment professional since
1961.
The advisory fee payable quarterly by Registrant to the Management
Company is computed as a percentage of the average of the values of
the net assets of Registrant as determined at the close of each
business day during the quarter at the annual rate of 1/2 of 1% of
the value of such net assets.
The total investment management fees paid by Registrant to the
Management Company for the fiscal years ended December 31, 1999,
1998 and 1997 were $2,317,805, $1,951,523 and $1,630,111,
respectively.
Registrant's investment advisory contract with the Management
Company provides that the Management Company shall furnish
Registrant with suitable office space and facilities and such
management, investment advisory, statistical and research facilities
and services as may be required from time to time by Registrant.
Although under such contract Registrant is responsible for all of
its other expenses and services, the Management Company currently
follows, and expects to continue to follow, the practice of keeping
Registrant's general books and accounts relative to the net asset
value of Registrant's shares and of calculating such net asset
value, both at no additional charge.
The Fund, the Investment Manager, and the Distributor have adopted a
Code of Ethics pursuant to the requirement of the 1940 Act. Under
the Code of Ethics, 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.
Transactions in securities that may be held by the Fund are
permitted, subject to compliance with applicable provisions of the
Code. Personal securities transactions must be reported quarterly
and broker confirmations of such transactions must be provided for
review.
18
<PAGE>
State Street Bank and Trust Company (the "Bank") is the registrant's
custodian with main offices at 225 Franklin Street, Boston, MA
02110. As custodian the Bank maintains custody over all portfolio
securities and cash of Registrant. The Bank also acts as
Registrant's Dividend Disbursing Agent and as Transfer Agent (the
"Transfer Agent") with respect to shares of Registrant and in each
capacity maintains appropriate records relating to, and forwards
appropriate statements to, Registrant's shareholders.
Under a Shareholders' Administrative Services Agreement with the
Trust, State Street Research Investment Services, Inc. provides
shareholders' administrative services, such as responding to
inquiries and instructions from investors respecting shareholder
records and the redemption of shares of the Fund, and is entitled to
a fee for providing such services.
Registrant's independent accountants are PricewaterhouseCoopers LLP,
160 Federal Street, Boston, MA 02110. This firm is responsible for
all required audit functions with respect to Registrant's financial
statements and reviews Registrant's semi-annual and annual reports
to Registrant's shareholders as well as Registrant's filings with
the Securities and Exchange Commission on Form N-1A.
PORTFOLIO TRANSACTIONS
Portfolio Turnover
The Fund's portfolio turnover rate is determined by dividing the
lesser of securities purchases or sales for a year by the monthly
average value of securities held by the Fund (excluding, for
purposes of this determination, securities the maturities of which
as of the time of their acquisition were one year or less). The
portfolio turnover rates for the fiscal years ended December 31,
1998 and 1999 were 4.52% and 1.04%, respectively.
Brokerage Allocation
The Management Company's policy is to seek for its clients,
including the Fund, what in the Management Company'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 Management Company may do business,
and the Management Company 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 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 Management Company
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 the Fund occur. Against this
background, the Management Company 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 Management Company 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 Management Company 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 Management Company'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
19
<PAGE>
software and databases (including those contained in certain trading
systems and used for portfolio analysis and modeling in conjunction
with certain trading systems and 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. 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.
In the case of the Fund and other registered investment companies
advised by the Management Company 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 Management Company's advisory services and to review the fees
and other provisions contained in the advisory contracts between the
investment companies and the Management Company. The Management
Company 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.
The Management Company regularly reviews and evaluates the services
furnished by broker-dealers. The Management Company's investment
management personnel seek 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 Management
Company 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
Management Company 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 Management
Company'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 Management Company has no fixed agreements or understandings
with any broker-dealer as to the amount of brokerage business which
that firm may expect to receive for services supplied to the
Management Company 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 Management Company'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
Management Company is aware that this is an area where differences
of opinion as to fact and circumstances may exist, and in such
circumstances, if any, relies on the provisions of Section 28(e) of
the Securities Exchange Act of 1934. Brokerage commissions paid by
Registrant during the fiscal years ended December 31, 1999, 1998 and
1997 were $14,609, $37,410 and $22,650, respectively. During and at
the end of its most recent fiscal year, the Fund held in its
portfolio no securities of any
20
<PAGE>
entity that might be deemed to be a regular broker-dealer of the
Fund as defined under the 1940 Act.
In the case of the purchase of fixed income securities in
underwriting transactions, the Management Company follows any
instructions received from its clients as to the allocation of new
issue discounts, selling concessions 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 Management Company may make such
allocations to broker-dealers which have provided the Management
Company with research and brokerage services.
In some instances, certain clients of the Management Company request
it to 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 Management Company generally agrees to honor these
requests to the exact practicable. Clients may request that the
Management Company only effect transactions with the specified
broker-dealers if the broker-dealers are competitive as to price and
execution. When the request is not so conditioned, the Management
Company may be unable to negotiate commissions or obtain volume
discounts or best execution. In other cases, the Management Company
may be unable to negotiate commissions or obtain volume discounts or
best execution. In cases where the Investment Manager is requested
to use a particular broker-dealer, different commission may be
charged to clients making the 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 Management Company 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 Management Company 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 Management Company 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
Management Company 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.
Shares of Beneficial Interest and Other Securities
The Fund's only authorized and outstanding securities are shares of
beneficial interest ("Shares"). The following provisions are
applicable to the Shares.
(i) Distribution Rights
The Board of Trustees determines the amounts
of ordinary income and/or capital gains to
be distributed to the holders of Shares and
the time or times when such distributions
will be made. Distributions of net income,
exclusive of capital gains, to the extent
practicable will be made quarterly. Such
dividends are declared in additional Shares
with the option to each shareholder to elect
to receive the distribution in cash. The
Fund's current practice is to retain
long-term capital gains and to pay the
Federal
21
<PAGE>
taxes thereon at corporate capital gains tax
rates on behalf of the shareholders.
(ii) Voting Rights
Shareholders are entitled to one vote or
fraction thereof for each Share, or fraction
thereof, held. The Shares do not possess
cumulative voting rights.
(iii) Liquidation Rights
All Shares will participate on a pro rata
basis in net assets in the event of
liquidation.
(iv) Preemptive Rights
Shares and fractions thereof have no
Preemptive rights.
(v) Conversion Rights
Shares and fractions thereof have no
conversion rights.
(vi) Redemption Provisions
A Shareholder has the right to redeem his
Shares by delivering to the Fund either his
certificates, or an instrument of transfer
if no certificates have been issued, in good
order for transfer, with a separate written
request for redemption. Redemption is made
at the net asset value next computed after
such delivery. Good order means that
certificates or instruments of transfer must
be endorsed by the record owner(s) exactly
as the Shares are registered and the
signature(s) must be guaranteed by a bank, a
member firm of a national stock exchange, or
other eligible guarantor institution. The
Transfer Agent will not accept guarantees
(or notarizations) from notaries public. The
above requirements may be waived by the Fund
in certain instances.
Payment for Shares surrendered for
redemption is made within seven days. The
Fund may suspend the right of redemption or
postpone the date of payment of a redemption
or redemptions during any period when
trading on the New York Stock Exchange (the
"NYSE") is restricted or such Exchange is
closed (other than weekends or holidays), or
the Securities and Exchange Commission has
by order permitted such suspension, or the
Board of Trustees has determined an
emergency exists making disposal of
securities, or determination of the net
asset value of the Fund, not reasonably
practicable. The Fund, in the sole
discretion of
22
<PAGE>
the Board of Trustees, may pay, and
ordinarily will pay, the redemption price in
whole or in part by a distribution in kind
of securities from the portfolio of the Fund
in lieu of cash.
(vii) Sinking Fund Provisions
There are no sinking fund provisions.
(viii) Liability to Further Calls or to Assessment
There is no liability to further calls or to
assessment by the Registrant.
The rights of Registrant's shareholders set
forth in Registrant's Master Trust Agreement
may be modified by lawful amendment thereof
at any time, so long as such amendment does
not have a material adverse effect on the
rights of any shareholder with respect to
which such amendment is or purports to be
applicable by an instrument in writing
signed by a majority of Trustees (or by an
officer pursuant to a vote of a majority of
Trustees). Any such amendment that does have
a material adverse effect on the rights of
shareholders may be adopted as above
provided when authorized by vote of a
majority of shares then outstanding and
entitled to vote.
Under Massachusetts law, the shareholders of
the Trust could, under certain
circumstances, be held personally liable for
the obligations of the Trust. However, the
Master Trust Agreement of the Trust
disclaims shareholder liability for acts or
obligations of the Trust and provides for
indemnification for all losses and expenses
of any shareholder of the 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
Management Company believes that, in view of
the above, the risk of personal liability to
shareholders is remote.
Shareholder inquiries should be made to
State Street Research Shareholder Services,
P.O. Box 8408, Boston, MA 02266-8408 or, if
by telephone, to 1-800-562-0032.
Redemption and Pricing of Securities
The Fund is not offering its Shares to the general public and
consequently has no offering price. Registrant has no principal
underwriter.
23
<PAGE>
As set forth above, redemptions of the Fund's Shares are made at
their net asset value next computed after delivery of such shares to
the Fund in good order for transfer under the conditions and in
accordance with the policies and procedures there stated.
The Fund reserves the right to pay redemptions in kind with
portfolio securities in lieu of cash. In accordance with its
election pursuant to Rule 18f-1 under the 1940 Act, the Fund may
limit the amount of redemption proceeds paid in cash. The Fund may
limit redemptions in cash with respect to each shareholder during
any ninety-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. In
connection with any redemptions paid in kind with portfolio
securities, brokerage and other costs may be incurred by the
redeeming shareholder in the sale of the securities received.
The net asset value of the shares of the Fund is determined once
daily as of the close of 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 NYSE is currently closed for
Martin Luther King, Jr. Day, New Year's Day, Presidents Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.
The net asset value per share of the Fund is computed by dividing
the sum of the market 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 Management
Company, are accrued daily.
In determining the values of the portfolio assets, the Trustees
utilize one or more pricing services to value, certain securities
for which market quotations are not readily available on a daily
basis. The pricing services 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 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 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' NASDAQ
System, or other system, are valued at the closing price supplied
through such system for that day at
24
<PAGE>
the close of the NYSE. Other securities are, in general, valued at
the mean of the bid and asked quotations last quoted prior to the
close of 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
in pricing in unusual circumstances where use of other methods as
discussed in part above, could otherwise have a material adverse
effect on the Fund as a whole.
Short-term debt instruments issued with a maturity of one year or
less which have a remaining maturity of 60 days or less are valued
using the amortized cost method, provided that during any period in
which more than 25% of 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. The amortized cost method is used
when the value obtained is fair value. 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.
Tax Status
Registrant intends to qualify under those sections of the Internal
Revenue Code which provide that Registrant, so long as it so
qualifies, will pay no federal income taxes on investment income or
on capital gains to the extent they are distributed to Registrant's
shareholders.
Dividends paid out of investment income are taxable to Registrant's
shareholders at ordinary income tax rates whether they are taken by
Registrant's shareholders in additional shares of Registrant or in
cash. In general, such dividends are eligible for the dividends
received deduction for corporations. The percentage of Registrant's
dividends eligible for such tax treatment may be less than 100% to
the extent that less than 100% of the Registrant's gross income may
be from qualifying dividends of domestic corporations. Distributions
of capital gains, if made, will ordinarily be taxable to
Registrant's shareholders at federal capital gain rates regardless
of how long the underlying shares of Registrant have been held and
regardless of whether they are taken by the shareholder in
additional shares of Registrant or in cash.
Registrant currently follows a policy of distributing substantially
all of its net investment income (ordinarily
25
<PAGE>
no less than 98% to avoid imposition of an excise tax under the
Internal Revenue Code) to its shareholders and of retaining net
realized capital gains and paying the Federal tax thereon on behalf
of its shareholders. Retention by Registrant of its net realized
long-term capital gains and payment of the tax thereon on behalf of
shareholders results in each shareholder including in his income tax
return his proportionate share of such gains and taking a credit for
the payment of the corporate tax thereon and of increasing the tax
basis of his shares in Registrant by an amount equal to the
difference between his proportionate share of such gains and the
amount of the tax paid on his behalf by Registrant.
Financial Statements
Each of the Investment Portfolio, the Statement of Assets and
Liabilities, the Statement of Operations, the Notes to Financial
Statements (including Financial Highlights), and the Report of
Independent Accountants, which are included in the Annual Report to
Shareholders of State Street Research Exchange Fund, for the fiscal
year ended December 31, 1999, and the Statement of Changes in Net
Assets for the year ended December 31, 1999 and for the year ended
December 31, 1998, also included in said Annual Report, are hereby
incorporated by reference from the Fund's Annual Report, filed with
the Securities and Exchange Commission (EDGAR accession number
000095016-00-000138). Management's Discussion of Fund Performance
for the Fund's latest fiscal year ended December 31, 1999, is also
included in the Annual Report. Shareholder reports are available
without charge upon request. For more information call the State
Street Research Service Center at (800) 562-0032.
26
<PAGE>
STATE STREET RESEARCH EXCHANGE TRUST
PART C
OTHER INFORMATION
Item 23. Exhibits
Exhibits
(1) Master Trust Agreement and
Amendment No. 1 to the
Master Trust Agreement (v)
(2)(a) By-Laws (i)*
(2)(b) No. 1 to By-Laws effective
September 30, 1992 (iv)*
(5) Investment Advisory Contract (iii)**
(8)(a) Custodian Contract (ii)**
(8)(b) Data Access Services Addendum to Custodian
Contract (viii)
(11) Consent of PricewaterhouseCoopers LLP
(12) Not applicable
(17)(a) First Amended and Restated Multiple Class
Expense Allocation Plan (vi)
(17)(b) Code of Ethics (revised March 1, 2000)
- ----------------------
Filed as part of the Registration Statement as noted below and incorporated
herein by reference:
Footnote Investment Company Act of 1940
Reference Registration/Amendment Date Filed
i Amendment No. 5 to April 26, 1989
Registration Statement
ii Amendment No. 6 to April 27, 1990
Registration Statement
iii Amendment No. 8 to April 30, 1991
Registration Statement
iv Amendment No. 10 to April 30, 1993
Registration Statement
v Amendment No. 13 to
Registration Statement April 29, 1996
vi Amendment No. 14 to
Registration Statement April 30, 1997
vii Amendment No. 15 to
Registration Statement April 30, 1998
viii Amendment No. 16 to
Registration Statement April 30, 1999
* Filed electronically April 24, 1996
**Filed electronically April 30, 1998
C-1
<PAGE>
Item 24. Persons Controlled by or under Common Control with
Registrant
Inapplicable.
Item 25. Indemnification
Article VI of Registrant's Master Trust Agreement provides: The
Trust shall indemnify (from the assets of the Sub-Trust or
Sub-Trusts in question) each of its Trustees and officers (including
persons who serve at the Trust's request as directors, officers or
trustees of another organization in which the Trust has any interest
as a shareholder, creditor or otherwise (hereinafter referred to as
a "Covered Person")) against all liabilities, including but not
limited to amounts paid in satisfaction of judgments, in compromise
or as fines and penalties, and expenses, including reasonable
accountants' and counsel fees, incurred by any Covered Person in
connection with the defense or disposition of any action, suit or
other proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which such Covered Person may
be or may have been involved as a party or otherwise 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, director or trustee, except with respect to any matter as
to which it has been determined that such Covered Person had acted
with willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such Covered
Person's office (such conduct referred to hereafter as "Disabling
Conduct"). A determination that the Covered Person is entitled to
indemnification may be made by (i) a final decision on the merits by
a court or other body before whom the proceeding was brought that
the person to be indemnified was not liable by reason of Disabling
Conduct, (ii) dismissal of a court action or an administrative
proceeding against a Covered Person for insufficiency of evidence of
Disabling Conduct, or (iii) a reasonable determination, based upon a
review of the facts, that the indemnitee was not liable by reason of
Disabling Conduct by (a) a vote of a majority of a quorum of
Trustees who are neither "interested persons" of the Trust as
defined in section 2(a)(19) of the 1940 Act nor parties to the
proceeding, or (b) an independent legal counsel in a written
opinion.
C-2
<PAGE>
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
Abbott, Christopher C. Senior Managing Pioneer Investment Mgmt. Boston, MA
Executive Vice Director
President (until 10/99)
Arpiarian, Tanya None
Vice President
Bangs, Linda L. None
Vice President
Barghaan, Dennis C. Senior Vice President State Street Research Investment Services, Inc. Boston, MA
Senior Vice President Senior Vice President Metropolitan Life Insurance Company New York, NY
(until 12/1998)
Barnwell, Amy F. Vice President State Street Research Investment Services, Inc. Boston, MA
Vice President
Beatty, T. Kevin Vice President Fleet Investment Advisors Boston, MA
Vice President (until 9/99)
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 Institutional Funds 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
Director and Chairman Boston Private Bank & Trust Co. Boston, MA
of Exec. Comm.
Vice President State Street Research Income Trust Boston, MA
Vice President State Street Research Securities Trust Boston, MA
President and Director Christian Camps & Conferences, Inc. Boston, MA
Chairman and Trustee Gordon College Wenham, MA
Bochman, Kathleen M. None
Vice President
Borzilleri, John Vice President State Street Research Financial Trust Boston, MA
Senior Vice President
(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
</TABLE>
C-6
<TABLE>
<CAPTION>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
<S> <C> <C> <C>
Calame, Mara D. Assistant Secretary State Street Research Institutional Funds Boston, MA
Vice President and
Assistant Secretary
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 Institutional Funds 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
Carstens, Linda C. Vice President State Street Research Investment Services, Inc. Boston, MA
Vice President
Clifford, Jr., Paul J. Vice President State Street Research Tax-Exempt Trust Boston, MA
Senior Vice President
Coleman, Thomas J. None
Vice President
Cullen, Terrence J. Vice President and State Street Research Investment Services, Inc. Boston, MA
Vice President Assistant Counsel
and Assistant Secretary
D'Vari, Ronald None
Senior Vice President
Depp, Maureen G. None
Vice President
DeVeuve, Donald None
Vice President
Dillman, Thomas J. Vice President State Street Research Securities Trust Boston, MA
Senior Vice President
Dudley, Catherine Vice President State Street Research Capital Trust Boston, MA
Senior Vice President Vice President State Street Research Institutional Funds Boston, MA
Duggan, Peter J. None
Senior Vice President
Ebel, Bruce A.
Senior Vice President Vice President Loomis, Sayles & Company, L.P. Chicago, IL
(since 3/99)
Vice President State Street Research Institutional Funds Boston, MA
Egel, David J. Vice President Sun Life of Canada Boston, MA
Vice President (since 4/98)
Vice President State Street Research Investment Services, Inc. Boston, MA
Even, Karen L. None
Vice President
Fazo, Steven A. None
Vice President
Federoff, Alex G. None
Vice President
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
<S> <C> <C> <C>
Fee, Richard E. Vice President State Street Research Investment Services, Inc. Boston, MA
Vice President
Feliciano, Rosalina None
Vice President
Ficco, Bonnie A. None
Vice President
Fochtman, Jr., Leo None
Vice President
Frey, Kenneth Analyst The Boston Company Boston, MA
Vice President (until 10/99)
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
Giroux, June M. None
Vice President
Goganian, David Vice President Scudder-Kemper Investments Boston, MA
Vice President (until 6/99)
Vice President State Street Research Investment Services, Inc. Boston, MA
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
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
Holland, Thomas Senior Vice President Putnam Investments Boston, MA
Vice President (until 6/99)
Senior Vice President State Street Research Investment Services, Inc. Boston, MA
</TABLE>
C-8
<PAGE>
<TABLE>
<CAPTION>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
<S> <C> <C> <C>
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
Joseph, Robert I. None
Vice President
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 Institutional Funds Boston, MA
Vice President State Street Research Money Market Trust Boston, MA
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.
Kasper, M. Katherine Vice President State Street Research Investment Services, Inc. Boston, MA
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
Lomasney, Mary T. None
Vice President
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
Marsh, Eleanor H. Portfolio Manager Evergreen Investment Management Company Boston, MA
Vice President (Until 3/00)
Maurer, Jacqueline J. None
Vice President
McKown, Elizabeth Vice President State Street Research Investment Services, Inc. Boston, MA
Vice President
</TABLE>
C-9
<PAGE>
<TABLE>
<CAPTION>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
<S> <C> <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 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 Institutional Funds 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,
Chief Adminstrative
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
Director State Street Research Luxembourg
Moore, Jr., Thomas P. Vice President State Street Research Financial Trust Boston, MA
Senior Vice Vice President State Street Research Equity Trust Boston, MA
President Director Hibernia Savings Bank Quincy, MA
Governor on the Board Association for Investment Management Charlottesville, VA
of Governors and Research
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
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. None
Vice President
Pyle, David J. None
Vice President
</TABLE>
C-10
<PAGE>
<TABLE>
<CAPTION>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
<S> <C> <C> <C>
Ragsdale, E.K. Easton Vice President State Street Research Financial Trust Boston, MA
Senior Vice President
Ransom, Clifford F. 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
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 Institutional Funds Boston, MA
Assistant Treasurer State Street Research Master Investment Trust Boston, MA
Assistant Treasurer State Street Research Securities Trust Boston, MA
Ryan, Michael J. None
Senior Vice President
Sanderson, Derek None
Senior Vice President
Schrage, Michael M. None
Vice President
Shean, William G. None
Vice President
Shively, Thomas A. Vice President State Street Research Financial Trust Boston, MA
Director and Vice President State Street Research Income 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 Institutional Funds Boston, MA
Shoemaker, Richard D. None
Senior Vice President
Simi, Susan None
Vice President
Stambaugh, Kenneth None
Vice President
Stolberg, Thomas B. None
Vice President
Strelow, Daniel R. None
Senior Vice President
Swanson, Amy McDermott Vice President State Street Research Institutional Funds Boston, MA
Senior Vice President
Tice, Robyn S. None
Vice President
Trebino, Anne M. Vice President SSRM Holdings, Inc. Boston, MA
Senior Vice President
</TABLE>
C-11
<PAGE>
<TABLE>
<CAPTION>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
<S> <C> <C> <C>
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 Director
Chairman, President, and State Street Research Institutional Funds Boston, MA
Chief Executive Officer
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
Chairman and Director Metric Holdings, Inc. San Francisco, CA
Director and Officer Certain wholly-owned subsidiaries
of Metric Holdings, Inc.
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
Wallace, Julie K. None
Vice President
Walsh, Denis J. None
Vice President
Walsh, Tucker Vice President State Street Research Capital Trust Boston, MA
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 Institutional Funds Boston, MA
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
Welch, Timothy M. None
Vice President
Westvold, Vice President State Street Research Institutional Funds Boston, MA
Elizabeth McCombs Vice President State Street Research Securities Trust Boston, MA
Senior Vice President
Wilkins, Kevin Senior Vice President State Street Research Investment Services, Inc. Boston, MA
Senior Vice President
(Vice President
until 9/98)
Wilson, John T. Vice President State Street Research Master Investment Trust Boston, MA
Senior Vice President Vice President State Street Research Institutional Funds Boston, MA
(Vice President
until 4/98)
</TABLE>
C-12
<PAGE>
<TABLE>
<CAPTION>
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 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 Financial Trust Boston, MA
President Vice President State Street Research Growth Trust Boston, MA
Vice President State Street Research Institutional Funds Boston, MA
Vice President State Street Research Securities Trust Boston, MA
Wu, Norman N. Partner Atlantic-Acton Realty Framingham, MA
Senior Vice President Director Bond Analysts Society of Boston Boston, MA
Yannone, John T. Vice President State Street Research Investment Services, Inc. Boston, MA
Vice President Vice President John Hancock Company Boston, MA
(until 1/00)
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-13
<PAGE>
Item 27. Principal Underwriters
Inapplicable.
Item 28. Location of Accounts and Records
Gerard P. Maus
State Street Research & Management Company
One Financial Center
Boston, MA 02111
Item 29. Management Services
Under a Shareholders' Administrative Services Agreement between the
Registrant and State Street Research Investment Services, Inc.
("SSRISI"), SSRISI provides shareholders' administrative services,
such as responding to inquiries and instructions from investors
respecting the redemption of shares of the Registrant and received
the amounts set forth below:
Year-end Year-end Year-end
12/31/97 12/31/98 12/31/99
-------- -------- --------
$3,863 $5,246 $6,772
Item 31. Undertakings
(a) Inapplicable
(b) Inapplicable
(c) Deleted
C-14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940,
the Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Boston, and
Commonwealth of Massachusetts, on the 28th day of April, 2000.
STATE STREET RESEARCH EXCHANGE TRUST
Registrant
By /s/Francis J. McNamara, III
------------------------------
Francis J. McNamara, III
Secretary
Exhibit (11)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement (File No. 811-4256) on Form N-1A of our report dated February 11, 2000
relating to the financial statements and financial highlights which appear in
the December 31, 1999 Annual Report to Shareholders of State Street Research
Exchange Fund (a series of State Street Research Exchange Trust) which is also
incorporated by reference into the Registration Statement. We also consent to
the references to us under the caption "Investment Advisory and Other Services"
in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
April 26, 2000
EXHIBIT (17)(b)
STATE STREET RESEARCH & MANAGEMENT COMPANY
CODE OF ETHICS
Revised March 1, 2000
This Code of Ethics establishes rules of conduct that govern the personal
investment activities of employees, officers and directors or trustees of (i)
State Street Research & Management Company and its subsidiaries (collectively,
"State Street Research" or the "Company"), and (ii) registered investment
companies (other than money market funds) for which the Company is the primary
investment adviser ("Funds").
1. General Provisions.
1.1. Purpose Statement. In pursuing its mission of being a premier
investment management organization, State Street Research has earned a
reputation for the highest integrity. An important contributor to this
reputation is our philosophy of always placing the interests of our clients
first. This Code contains uniform standards which are intended to provide us
with a high level of confidence that our personal investment activities are
consistent with our clients' interests and do not interfere with our mission.
1.2. Overriding Principles. Every Access Person who engages in Personal
Transactions must: (i) consider the interests of the Company's clients before
initiating a Personal Transaction, and place the clients' interests first,
particularly in the case of any security that might provide a suitable and
beneficial opportunity for any client; (ii) not use his or her position with the
Company to influence a broker, dealer or underwriter to effect a Personal
Transaction for the benefit of the Access Person; and (iii) conduct all Personal
Transactions in accordance with the provisions of this Code and in avoidance of
any actual or potential conflicts of interest or abuse of fiduciary
responsibilities.
2. Applicability and Definitions. The following definitions describe the
persons, securities, accounts and transactions to which this Code applies:
2.1. "Associate" means any person in the employment of the Company.
2.2. "Access Person " means any director or officer of State Street
Research or any associate of State Street Research who, in connection with his
or her regular functions or duties, participates in the selection of a client's
portfolio securities or has access to information regarding a fund's future
purchases or sales of portfolio securities on behalf of any clients.
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2.3. "Investment Person" means any Access Person directly involved in the
investment process of the Company, including portfolio managers, security
analysts, research associates and trading personnel.
2.4. "Portfolio Manager" means any Access Person responsible for the
overall investment management of a client's portfolio and any Access Person
assisting directly in such management, and also includes any member of the
Company's Management Committee.
2.5. "Security" means any stock, bond, debenture, note, convertible
security, or any put, call, straddle, warrant, right or option with respect to a
security, or any future or other investment contract or derivative, or, in
general, any interest or investment commonly known as a security, but does not
include securities which are direct obligations of the Government of the United
States, bankers' acceptances, bank certificates of deposit, commercial paper and
high quality short-term debt instruments (including repurchase agreements), or
shares of registered open-end investment companies.
2.6. "Personal Account" means (a) any securities account in which an Access
Person has "beneficial ownership" (as described in Exhibit A), including certain
accounts of family members and other related accounts, or (b) any account over
which the Access Person (or any member of the Access Person's immediate family
sharing the same household, except as exempted under Section 6.2) has direct or
indirect influence or control with respect to the purchase or sale of individual
securities. See Exhibit A for a fuller explanation and examples of situations
involving beneficial ownership. Unless otherwise specified, the provisions of
this Code applicable to transactions by Access Persons are applicable to
transactions in their Personal Accounts.
2.7. "Personal Transaction" means any transaction with respect to a
security for any Personal Account, including without limitation purchases and
sales, entering into or closing out futures or other derivatives, and exercising
warrants, rights or options but not including the acceptance of tender offers.
3. Prohibitions.
3.1. Restrictions Applicable to all Access Persons An Access Person should
not place an order to enter into a Personal Security Transaction during any of
the following times:
(a) When the Access Person knows, or has reason to believe, that the
security may in the near future be recommended for action or
acted upon by the Company for any client account; or
(b) For a period of ten (10) business days after a security has been
recommended for action by the Company for any client account,
including any rating change, even though no action has been taken
for the Company's clients with respect to the security during
that period; or
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(c) When the security is on order for purchase or sale for a client's
account, or has been on order at any time during the five (5)
preceding trading days (either as a completed order, an
uncompleted order or an order on hold), as reflected on the
Company's Restricted List.
3.2. Restrictions Applicable Only to Investment Persons. In addition to the
restrictions applicable to all Access Persons, an Investment Person may not:
(a) Purchase a security in an initial public offering; or
(b) Acquire a security in a private placement unless advance written
approval is obtained from the Chief Executive Officer or the
Chief Investment Officer of the Equity or Fixed Income
Department, as appropriate. In the event that the Investment
Person plays a part in any subsequent consideration of the
security for investment for a client account, he or she must
disclose the holding to the Chief Executive Officer or the
appropriate Chief Investment Officer, and any decision to make
the investment for a client account will be subject to an
independent review and approval by senior investment personnel
with no personal interest in the issuer or its securities; or
(c) Realize a profit from any transaction involving the purchase and
sale, or sale and purchase, of the same (or equivalent)
securities within a period of sixty (60) calendar days. For
purposes of this rule, transactions will be reviewed on a
first-in-first-out basis.
(d) Participate in an investment club.
3.3. Restrictions Applicable Only to Portfolio Managers. In addition to the
restrictions applicable to all Access Persons and Investment Persons, a
Portfolio Manager may not purchase or sell a security within a period of seven
(7) calendar days before or after a client account managed by the Portfolio
Manager trades in that security.
3.4. Special Provisions for Options and Futures.
(a) The general principle governing transactions in options, futures
and other derivatives is that they are treated as transactions in
the underlying security for all purposes of this Code.
(b) Purchased options must comply with the Code both at the time of
initial purchase and at the time of exercise. However, if an
Access Person buys a call or put option at a time when the
purchase is not restricted by Section 3.1, the option may be
exercised automatically at expiration by the relevant exchange or
clearing corporation without violating that provision.
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(c) Written options must comply with this Code at the time of the
transaction. Exercise by a counterparty, however, is not a
voluntary transaction by an Access Person and is not governed by
Section 3.1.
(d) In the case of a purchased call or a written put, the security
received upon exercise (whether voluntary or automatic) is
subject to the 60-day period in Section 3.2 (c) measured from the
time of purchasing the call or writing the put. As a result, if
such an option is exercised within the 60-day period, the
Investment Person cannot sell the security at a gain until
expiration of the 60-day period from the time of the original
option transaction. In these circumstances, the Investment Person
must be prepared to pay for the security, accept delivery and
bear the risk of holding the security until expiration of the
period.
(e) An Access Person may not write an uncovered call or sell an
uncovered future. An Investment Person may not write a covered
call option unless the underlying security has been held for 60
days. Where an Investment Person purchases a put option and owns
the underlying security, the put option may not expire or be
exercised within 60 days after purchase of the underlying
security. Where an Investment Person purchases a put option
without owning the underlying security, the option cannot be
exercised and can only be closed through a sale more than 60 days
after the purchase.
Futures and other derivatives will be treated consistently with
the provisions applicable to options.
3.5. Receipt of Gifts. Except for an occasional meal or ticket to a
sporting event or the theater, or comparable entertainment which is not so
frequent or extensive as to raise questions of propriety, or except with the
approval of the Company's Chief Executive Officer, an Associate must not accept
cash or non-cash gifts from any person or entity which directly or indirectly
does business with or performs services for the Company or any client, which
exceed the dollar limit imposed by the NASD from time to time under Conduct Rule
2830(1)(5)(A) or any successor rule ($100 as of February 1999), or such other
level as established from time to time by the Compliance Committee.
3.6. Service as a Director. An Investment Person may not serve on the board
of directors, or similar governing body, of an organization the shares of which
are publicly traded without obtaining prior approval of the Company's Chief
Executive Officer (or, in case such Investment Person is the Chief Executive
Officer, the Company's Board of Directors with the Chief Executive Officer
abstaining). Any such approval will be reported to the Board of Directors of
each Fund at least annually.
3.7. Promotion of Personal Investments. Associates are free to refer
investment opportunities to other Associates for their personal consideration.
However, Associates should not engage in the active promotion of securities to
other Associates and should not receive any payment or other benefit for the
sale of a security to another associate.
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3.8. Conflicts of Interest. Associates should not engage in activities that
could create a conflict of interest or the appearance of a conflict of interest
between the interests of the Company's clients and the interests of the Company
or its Associates. For example, no Associate should condition the company's
purchase or continued holding of any security for its clients on whether the
issuer of that security becomes or remains a client of the Company.
4. Pre-Clearance.
Any Access Person who plans to place an order to enter into a Personal
Transaction must first pre-clear the transaction by obtaining approval from the
Equity Trading Desk, the Fixed Income Trading Desk, the Head Municipal Bond
Trader, the Head High Yield Trader or the Head International Fixed Income
Trader, as appropriate, either directly or through other communications links
established for this purpose. The appropriate trading personnel will only
pre-clear the transaction after determining that the security is not on the
Company's Restricted List and that no order has been placed or, to their
knowledge, is about to be placed with respect to the security. All clearances
(including time of clearance) will be recorded by the appropriate trading
personnel in the Investment Clearance Database or other system used to maintain
this information.
Generally, a pre-clearance is effective only for the business day on which
it is obtained. A clearance for an open order (such as a limit order or "good
until cancelled" order) is effective until the transaction is completed, except
that any change in the terms of the order will require a new pre-clearance.
5. Disclosure and Reporting.
5.1. List of Holdings. Each Access Person shall provide a list of all of
his or her personal securities holdings to the Compliance Department within 10
days of commencement of his or her employment or within 10 days of becoming an
Access Person, and will also provide an updated list on an annual basis at the
time designated by the Compliance Department
5.2. Confirmations and Statements. Each Access Person who engages in
Personal Transactions shall instruct his or her broker(s) or dealer(s) to
deliver duplicate copies of any confirmation of a transaction, and duplicate
copies of all periodic statements with respect to his or her Personal
Account(s), to the Company, P.O. Box 2794, Boston, MA 02208-2794. (See Exhibit B
for a sample letter to a broker or dealer.
5.3. Transaction Reports. Each Access Person shall report on a quarterly
basis any Personal Transactions in his or her Personal Account(s), except for
transactions in securities which are excluded from the term "security" for
purposes of this Code under Section 2.5. The report shall be made on the
official form designed for this purpose within ten (10) calendar days following
the quarter in which the transactions occur, shall be dated and signed by the
Access Person, and shall contain the following information:
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(a) With respect to any security transaction during the quarter:
(1) The title and number of shares (or principal amount) of the
security;
(2) The date and nature of the transaction (purchase or sale or
other);
(3) The transaction price;
(4) The name of the broker (or bank or dealer); and
(5) Such additional information as may be requested on the reporting
form.
(b) With respect to any account established by the Access Person in which
any securities were held during the quarter:
(1) The name of the broker (or bank or dealer) with whom the account
was established; and
(2) The date the account was established.
The quarterly report of any Investment Person must contain a
representation that the Investment Person: as a portfolio manager, has reviewed
the suitability of the security for each of the clients whose accounts he or she
manages; or as an investment analyst, has presented any opportunity for
securities within his or her area of coverage to the firm for consideration for
client accounts.
5.4 Certification of Compliance. Each Access Person shall be required to
certify annually that he or she:
(a) Has read and understands this Code and is subject thereto;
(b) Has complied with the requirements of the Code; and
(c) Has disclosed or reported all Personal Securities Transactions
required to be disclosed or reported under the Code.
6. Exemptions.
6.1. Transactional Exemptions. The prohibitions and restrictions in Section
3 and the pre-clearance requirements in Section 4 shall not apply (but the
reporting requirements in Section 5 shall continue to apply) to:
(a) Transactions by investment clubs in which non-Investment Persons are
participants;
(b) Purchases or sales of securities which are not voluntary;
(c) Purchases which are part of an automatic dividend reinvestment plan;
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(d) Purchases effected upon the exercise of rights issued by an issuer pro
rata to all holders of a class of its securities;
(e) Transactions in derivatives tied to the performance of a broad-based
index, and transactions in SPDR's and shares of other UIT's or
vehicles the performance of which is designed to track closely the
performance of a broad- based index;
(f) Transactions in currencies and related options, futures contracts and
forward contracts; and
(g) Transactions in other securities determined by the Compliance
Committee to present a similarly low potential for impropriety or the
appearance of impropriety.
6.2. Complete Exemption. The prohibitions and restrictions in Section 3,
the pre-clearance requirements in Section 4 and the reporting requirements in
Section 5 shall not apply to:
(a) Any transaction in an instrument which is not included in the
definition of "security" contained in Section 2.5.
(b) Transactions effected for any account which is a Personal Account
solely because it is directly or indirectly influenced or controlled
by an Access Person's immediate family member sharing the same
household, so long as neither the Access Person nor the family member
has any beneficial ownership of securities in the Account and so long
as the Access Person agrees in writing not to discuss with the family
member any specific investment ideas or transactions arising in the
course of the Access Person's employment with the Company.
(c) Transactions effected for any account over which neither the Access
Person nor any immediate family member sharing the same household has
any direct or indirect influence or control; provided that in the case
of an account exempted because it is under the discretionary
management of another person (including an interest in a hedge fund or
investment partnership or enterprise but not including an interest in
a trust that is not revocable by the Access Person or an immediate
family member sharing the same household), the Access Person must
enter into a letter agreement with that person in substantially the
form of Exhibit C at the later of the time the account is opened or
the Access Person joins the Company, and on an annual basis
thereafter, and the Access Person must provide an annual inventory of
the securities in such account.
6.3. Large Cap Stock Exemption. The prohibitions of Section 3.1 and Section
3.3 shall not apply (but the prohibitions in Section 3.2 (Restrictions
Applicable Only to Investment Persons), the preclearance requirements in Section
4 and the reporting requirements in Section 5 shall continue to apply) to equity
securities with a market capitalization of $5 billion or greater as of the end
of the previous month.
7. Compliance Committee.
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The Chief Executive Officer of the Company will from time to time appoint
the members of the Company's Compliance Committee, which is charged with the
duties and responsibilities of administering the Code, ensuring compliance with
the Code, and recommending sanctions for violations of the Code. The Compliance
Committee may amend the Code, interpret its provisions, make decisions with
respect to the classes of Access Persons covered by provisions of the Code, and
grant waivers and establish exceptions, including waivers and exceptions for
particular securities or transactions and other situations it deems to require
special treatment. The Committee may appoint one or more of its members to
fulfill its duties between meetings, subject to ratification by the Committee at
its next regular meeting. The Committee has appointed the Director of Compliance
as the person responsible for monitoring compliance with the Code of Ethics,
including the review of the quarterly transaction reports and the annual
holdings reports.
8. Sanctions.
Upon the occurrence of any violation of this Code, the Company acting
through its Compliance Committee may impose such sanctions as it deems
appropriate, including disgorgement of any profit, a warning, probation,
suspension or termination of employment.
9. Reports To Trustees/Directors of Investment Companies Under Management.
A report shall be prepared annually for submission to the Board of Trustees
or Directors of each investment company under the management of the Company. The
report will:
(a) Summarize current procedures under the Code and any changes in
those procedures since the prior report;
(b) Identify all material violations of the Code or any related
procedures, and any sanctions imposed with respect thereto;
(c) List any recommended changes to the Code or procedures under the
Code as the result of experience, evolving industry practices or
changes in the applicable laws or regulations; and
(d) Certify that procedures, reasonably necessary to prevent
violations of the Code, have been adopted.
10. Provisions Applicable To Mutual Fund Trustees
10.1. General Provision. An independent trustee of an investment company
for which the Company is the primary adviser should not purchase or sell a
security in an account in which he or she may be deemed to have a direct or
indirect beneficial interest, as defined in Exhibit A hereto, when he or she
knows, or in the ordinary course of his or her duties should know, that such
security is under consideration for purchase or sale, or being purchased or
sold, by the investment company. In addition, an independent trustee must report
to the investment company
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any transactions in a security where the trustee knew, or in the ordinary course
of fulfilling his or her official duties should have known, that during the 15
day period immediately preceding or after the date of the transaction, the
investment company was buying or selling, or considering buying or selling, that
security.
10.2. Portfolio Reports. In connection with their duties, independent
trustees of an investment company are provided, prior to a trustees' meeting,
with schedules of securities transactions effected by such investment company
during a specific period (generally a calendar quarter) ended more than 15 days
prior to delivery of the schedules. Consequently, an independent trustee in the
ordinary course of fulfilling his or her duties shall be deemed to have no duty,
and would have no reason, to know of, or inquire about, a transaction in a
security by the investment company during a 15 day period immediately preceding
or after the trustee's transaction in that security. In the event an independent
trustee does become aware of such a transaction, the independent trustee shall
file a report under this Code containing the information described in Section
5.3.
10.3. Exempted Transactions. Transactions by independent trustees which do
not fall within the above restrictions and reporting requirements are
transactions in securities which are direct obligations of the Government of the
United States, bankers' acceptances, bank certificates of deposit, commercial
paper, shares of registered open-end investment companies, and transactions as
to which the trustee had no investment discretion.
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EXHIBIT A
BENEFICIAL OWNERSHIP
"Beneficial ownership" is an important concept in determining which
personal securities accounts are covered by the Code. Beneficial ownership
exists when you have a "pecuniary interest" in securities.
More specifically, beneficial ownership of securities in an account means
directly or indirectly having or sharing a direct or indirect pecuniary interest
in the securities, whether through any contract, arrangement, understanding,
relationship or otherwise. A "pecuniary interest", in turn, means the
opportunity, directly or indirectly, to profit, or share in any profit derived,
from the transactions in question.
The pecuniary interest standard looks beyond the record owner of
securities. As a result, the definition of beneficial ownership is extremely
broad and encompasses many situations which might not ordinarily be thought to
confer ownership of securities.
Set forth below are some examples of how beneficial ownership may arise in
different contexts:
Family Holdings. Securities held by members of your immediate family
sharing the same household are presumed to be beneficially owned by you. Your
"immediate family" includes any child, step-child, grandchild, parent,
step-parent, grandparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law (but does not
include aunts and uncles, or nieces and nephews). The definition also includes
adoptive relationships. You may also be deemed to be the beneficial owner of
securities held by an immediate family member not living in your household if
the family member is economically dependent upon you.
Partnership and Corporate Holdings. A general partner of a general or
limited partnership will generally be deemed to beneficially own securities held
by the partnership. A limited partner or a stockholder will generally not be
deemed to beneficially own securities held by a limited partnership or
corporation, respectively, provided he or she does not own a controlling voting
interest in the entity, he or she does not have or share investment control over
the entity's portfolio, and the entity is not an "alter ego" or "personal
holding company". However, see Section 6.2(c) of the Code.
Derivatives. A person having the right to acquire securities through the
exercise or conversion of any derivative security, whether or not presently
exercisable, has beneficial ownership of the underlying securities. For this
purpose the term "derivative security" means any option, future, warrant,
convertible security, stock appreciation right, or similar right with an
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exercise or conversion privilege at a price related to a security, or similar
security with a value derived from the value of a security.
Trust Holdings. In general, a person's interest in a trust will amount to
an indirect pecuniary interest in the securities held by that trust. Therefore,
among other examples, a beneficiary of a trust will generally be deemed the
beneficial owner of securities held by the trust. However, the following persons
will generally not be deemed beneficial owners of the securities held by a
trust:
(a) Trustees, unless the trustee has a pecuniary interest in any holding
or transaction of the trust, or unless the trustee has any direct or
indirect influence or control with respect to the purchase or sale of
individual securities. A trustee will be deemed to have a pecuniary
interest in the trust's holdings if at least one beneficiary of the
trust is a member of the trustee's immediate family;
(b) Settlors, unless a settlor reserves the right to revoke the trust
without the consent of another person.
Securities Not Beneficially Owned. You are not deemed to have beneficial
ownership of:
(a) Portfolio securities held by an investment company registered under
the Investment Company Act of 1940;
(b) Securities of which you are a pledgee with the right to sell the
pledged security, provided that you will have beneficial ownership
upon any foreclosure or exercise of the right of sale;
(c) Rights you may have which are the same as all holders of a class of
securities of any issuer to receive securities pro rata, or
obligations to dispose of securities as a result of a merger, exchange
offer, or consolidation involving the issuer of the securities;
(d) An interest in broad-based index options, broad-based index futures,
and broad-based publicly traded market baskets of stocks approved for
trading by the appropriate federal government authority, nor in an
interest in any underlying securities of these instruments. A
broad-based index is one that provides investors with a performance
indicator of the overall applicable stock or bond market (or market
segment) as appropriate. An index would not be considered to be
broad-based if it is composed of securities of firms in a particular
industry or group of related industries;
(e) A security that may be redeemed or exercised only for cash and does
not permit the receipt of equity securities in lieu of cash, if the
security either:
(i) is awarded pursuant to an employee benefit plan satisfying the
provisions of 240.16b-3(c); or
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(ii) may be redeemed or exercised only upon a fixed date or dates at
least six months after award, or upon death, retirement, disability or
termination of employment; or
(f) An interest or right to participate in employee benefit plans of the
issuer.
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EXHIBIT B
(SAMPLE LETTER TO BROKER)
(Date)
(Name and Address of Broker)
Dear :
In connection with my brokerage account (Account No. ________) at your
firm, please be advised that State Street Research & Management Company should
be designated an "interested party" with respect to my account and should,
therefore, be sent copies of all trade confirmations and account statements
relating to my account. Please send the information to:
State Street Research & Management Company
John W. McCormick Post Office
P. O. Box 2794
Boston, MA 02208-2794
Any questions should be submitted to our Director of Compliance, (617)
357-1398.
Thank you for your attention to this matter.
Sincerely,
(SSRM Access Person)
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EXHIBIT C
_________ __, 2000
[Name of Investment Adviser]
[Address of Investment Adviser]
Dear Mr. _______________:
As you know, I am an employee of State Street Research & Management Company
("SSRM"), and I therefore need to comply with SSRM's Code of Ethics with respect
to all accounts in which I have a beneficial interest, including the [identify
specific account]. Accordingly, I would like to confirm with you, as investment
adviser for such account, the manner in which the assets of the account are to
be invested and the degree of communication which you and I will have with
respect to the account.
Please note that I must not be consulted about, or have any input into or
knowledge of, the transactions placed by you, as an investment adviser for the
account, in any individual securities prior to the execution of such
transactions. I am permitted, consistent with SSRM's Codes of Ethics, to discuss
with you broad policy matters, such as: overall defensive or aggressive
postures, asset allocation by broad categories, tax matters such as tolerance
for gains and losses, and cash disbursement requirements for taxes or otherwise.
Please sign in the space indicated below acknowledging your agreement with
this arrangement and return it to me.
Thank you very much for your assistance.
Sincerely,
[SSRM employee]
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The foregoing is accepted and agreed to:
[Name of Investment Adviser]
By:________________________
Name:
Title:
Dated: _____________ __, 2000
cc: Director of Compliance
State Street Research
& Management Company
