STATE STREET RESEARCH MONEY MARKET FUND
Prospectus
March 16, 1998
The investment objective of State Street Research Money Market Fund (the
"Fund") is to seek a high level of current income consistent with preservation
of capital and maintenance of liquidity by investing in securities issued or
guaranteed as to principal and interest by the U.S. Government or its agencies
or instrumentalities as well as high quality, short-term money market
instruments such as bank certificates of deposit, bankers' acceptances and such
short-term corporate debt securities as commercial paper and master demand
notes.
As of September 30, 1997, the Fund's investments consisted predominantly
of corporate debt securities. The Investment Manager presently anticipates that
it will continue to emphasize such securities in managing the Fund's portfolio.
State Street Research & Management Company serves as investment adviser
for the Fund (the "Investment Manager"). As of January 31, 1998, the Investment
Manager had assets of approximately $48.1 billion under management. State
Street Research Investment Services, Inc. serves as distributor (the
"Distributor") for the Fund.
Shareholders may have their shares redeemed directly by the Fund at the
net asset value next determined on the basis of amortized cost after the
Application and payment are received and accepted on behalf of the Fund, plus
the applicable contingent deferred sales charge, if any; redemptions processed
through securities dealers may be subject to processing charges. The Fund will
invest in U.S. dollar-denominated high quality securities having remaining
maturities of 397 calendar days or less and will maintain a dollar-weighted
average portfolio maturity of 90 days or less. The Fund follows these policies
in seeking to maintain a constant net asset value of $1.00 per share. The
Fund's net asset value is determined on each business day as of 12 noon and as
of the close of trading on the New York Stock Exchange (the "NYSE").
This Prospectus sets forth concisely the information a prospective
investor ought to know about the Fund before investing. It should be retained
for future reference. A Statement of Additional Information about the Fund
dated March 16, 1998 has been filed with the Securities and Exchange
Commission and is incorporated by reference in this Prospectus. It is
available, at no charge, upon request to the Fund at the address indicated on
the back cover or by calling 1-800-562-0032.
The Fund is a diversified series of State Street Research Money Market
Trust (the "Trust"), an open-end management investment company.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN
A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FINANCIAL INSTITUTION, ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND
INVOLVE INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
<PAGE>
The Fund offers multiple classes of shares which may be purchased at the
next determined net asset value per share plus, in the case of Class B and Class
C shares only, a sales charge which is imposed on a deferred basis. Class B and
Class C shares are offered solely in connection with exchanges from Eligible
Funds. Only Class E and Class S shares are offered for direct purchase. See
"Purchase of Shares--Alternative Purchase Program" and "Shareholder
Services--Exchange Privilege."
Class B shares are subject to (i) a contingent deferred sales charge
(declining from 5% to 2%), which will be imposed on most redemptions made
within five years of purchase and (ii) annual distribution and service fees of
1% of the average daily net asset value of such shares. Class B shares
automatically convert into Class E shares (which pay lower ongoing expenses) at
the end of eight years after purchase. No contingent deferred sales charge
applies after the fifth year following the purchase of Class B shares.
Class C shares are subject to (i) a contingent deferred sales charge of 1%
if redeemed within one year following purchase and (ii) annual distribution and
service fees of 1% of the average daily net asset value of such shares. Prior
to November 1, 1997, this class of shares was designated as Class D shares.
Class E shares are not subject to any initial or contingent deferred sales
charges. Class E shares do not pay any distribution or service fees.
Class S shares are available through certain employee benefit plans, and
special programs with financial intermediaries, among other arrangements. No
sales charge is imposed at the time of purchase or redemption of Class S
shares. Class S shares do not pay any distribution or service fees. Prior to
November 1, 1997, this class of shares was designated as Class C shares.
<TABLE>
<CAPTION>
Table of Expenses
- -------------------------------------------------------------------------------------------------------------
Class B Class C Class E Class S
---------- ---------- --------- --------
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses(1)
Maximum Sales Charge Imposed on Purchases (as a percentage
of offering price) ...................................... None None None None
Maximum Deferred Sales Charge (as a percentage of net
asset value at time of purchase or redemption, whichever
is lower) ............................................... 5% 1% None None
Maximum Sales Charge Imposed on Reinvested Dividends (as a
percentage of offering price) ........................ None None None None
Redemption Fees (as a percentage of amount redeemed,
if applicable) .......................................... None None None None
Exchange Fee ............................................. None None None None
- ------------
(1) The maximum 5% contingent deferred sales charge on Class B shares applies
to redemptions during the first year after purchase; the charge declines
thereafter and no contingent deferred sales charge is imposed after the
fifth year. Class C shares are subject to a 1% contingent deferred sales
charge on any portion of the purchase redeemed within one year of the
sale. Long-term investors in Class B or Class C shares may, over a period
of years, pay more than the economic equivalent of a maximum sales charge
permissible under applicable rules. See "Purchase of Shares."
</TABLE>
Table of Contents Page
- ----------------------------------------------
<TABLE>
<S> <C>
Table of Expenses ...................... 2
Financial Highlights ................... 4
Yield Information ...................... 6
The Fund's Investments ................. 6
Limiting Investment Risk ............... 7
Purchase of Shares ..................... 8
Redemption of Shares ................... 14
- ----------------------------------------------
</TABLE>
Table of Contents Page
- ----------------------------------------------
<TABLE>
<S> <C>
Service Center ......................... 16
The Fund and its Shares ................ 20
Management of the Fund ................. 21
Dividends and Distributions; Taxes ..... 22
Other Investment Practices ............. 22
Calculation of Performance Data ........ 23
- ----------------------------------------------
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Class B Class C Class E Class S
------------ ------------ ---------- ------------
<S> <C> <C> <C> <C>
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fee ................................................ 0.50% 0.50% 0.50% 0.50%
12b-1 Fees .................................................... 1.00% 1.00% None None
Other Expenses ................................................ 0.41% 0.41% 0.41% 0.41%
Less Voluntary Reduction ..................................... (0.26%) (0.26%) (0.26%) (0.26%)
----- ----- ----- -----
Total Fund Operating Expenses (after voluntary reduction) ... 1.65% 1.65% 0.65% 0.65%
===== ===== ===== =====
</TABLE>
Example:
You would pay the following expenses on a $1,000 investment assuming (1) 5%
annual return and (2) redemption of the entire investment at the end of each
time period:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class B shares(1) ........ $67 $82 $110 $169
Class C shares ........... $27 $52 $ 90 $195
Class E shares ........... $ 7 $21 $ 36 $ 81
Class S shares ........... $ 7 $21 $ 36 $ 81
</TABLE>
- ----------
You would pay the following expenses on the same investment, assuming no
redemption:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class B shares(1) ........ $17 $52 $90 $169
Class C shares ........... $17 $52 $90 $195
</TABLE>
- ------------
(1) Ten-year figures assume conversion of Class B shares to Class E shares at
the end of eight years.
The example should not be considered as a representation of past or future
return or expenses. Actual return or expenses may be greater or less than
shown.
The purpose of the table above is to assist the investor in understanding
the various costs and expenses that an investor will bear directly or
indirectly. The percentage expense levels shown in the table above are based on
experience with expenses during the fiscal year ended March 31, 1997, as
adjusted to reflect an increase in the voluntary assumption of fees and
expenses commencing April 1, 1997; actual expense levels for the current fiscal
year and future years may vary from the amounts shown. The table does not
reflect charges for optional services elected by certain shareholders, such as
the $7.50 fee for remittance of redemption proceeds by wire. For further
information on sales charges, see "Purchase of Shares--Alternative Purchase
Program"; for further information on management fees, see "Management of the
Fund"; and for further information on 12b-1 fees, see "Purchase of
Shares--Distribution Plan."
The Fund has been advised that the Distributor and its affiliates may from
time to time and in varying amounts voluntarily assume some portion of fees or
expenses relating to the Fund. For the fiscal year ended March 31, 1997, Total
Fund Operating Expenses as a percentage of average net assets of Class B, Class
C, Class E and Class S shares of the Fund would have been 1.91%, 1.91%, 0.91%
and 0.91%, respectively, in the absence of the voluntary assumption of fees or
expenses by the Distributor and its affiliates, which amounted to 0.16% of
average net assets of each of the Class B, Class C, Class E and Class S shares
of the Fund. The Fund expects the subsidization of fees or expenses to continue
in the current year, although it cannot give complete assurance that such
assistance will be received.
3
<PAGE>
Financial Highlights
The data set forth below for the periods through March 31, 1997 has been
audited by Price Waterhouse LLP, independent accountants, and their report
thereon for the five years ended March 31, 1997 is included in the Statement of
Additional Information. For further information about the performance of the
Fund, see "Financial Statements" in the Statement of Additional Information.
<TABLE>
<CAPTION>
Class B
---------------------------------
Six months
ended Year
September 30, ended
1997 March 31
(Unaudited) 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period .................... $1.000 $1.000
------ ------
Net investment income* .................................. .020 .037
Dividends from net investment income .................... (.020) (.037)
------ ------
Net asset value, end of period .......................... $1.000 $1.000
====== ======
Total return ............................................ 2.02%++ 3.72%+
Net assets at end of period (000s) ...................... $14,309 $15,982
Ratio of operating expenses to average net assets* ...... 1.65%[dbldag] 1.75%
Ratio of net investment income to average net assets* 3.99%[dbldag] 3.69%
*Reflects voluntary assumption of fees or expenses per
share in each period ................................... $.001 $.002
</TABLE>
<TABLE>
<CAPTION>
Class B
-------------------------------------
Year ended March 31
-------------------------------------
1996 1995 1994**
------ ------ ------
<S> <C> <C> <C>
Net asset value, beginning of period .................... $1.000 $1.000 $1.000
------ ------ ------
Net investment income* .................................. .041 .032 .012
Dividends from net investment income .................... (.041) (.032) (.012)
------ ------ ------
Net asset value, end of period .......................... $1.000 $1.000 $1.000
====== ====== ======
Total return ............................................ 4.16%+ 3.27%+ 1.27%++
Net assets at end of period (000s) ...................... $11,884 $9,322 $3,028
Ratio of operating expenses to average net assets* ...... 1.75% 1.75% 1.75%[dbldag]
Ratio of net investment income to average net assets* 4.06% 3.53% 1.54%[dbldag]
*Reflects voluntary assumption of fees or expenses per
share in each period ................................... $.003 $.004 $.007
</TABLE>
<TABLE>
<CAPTION>
Class C****
---------------------------------
Six months
ended Year
September 30, ended
1997 March 31
(Unaudited) 1997
------------- -------
<S> <C> <C>
Net asset value, beginning of period .................... $1.000 $1.000
------ ------
Net investment income* .................................. .020 .037
Dividends from net investment income .................... (.020) (.037)
------ -----
Net asset value, end of period .......................... $1.000 $1.000
====== ======
Total return ............................................ 2.02%++ 3.72%+
Net assets at end of period (000s) ...................... $831 $959
Ratio of operating expenses to average net assets* ...... 1.65%[dbldag] 1.75%
Ratio of net investment income to average net assets* 3.98%[dbldag] 3.68%
*Reflects voluntary assumption of fees or expenses per
share in each period ................................... $.001 $.002
</TABLE>
<TABLE>
<CAPTION>
Class C
-------------------------------------
Year ended March 31
-------------------------------------
1996 1995 1994**
------ ------ ------
<S> <C> <C> <C>
Net asset value, beginning of period .................... $1.000 $1.000 $1.000
------ ------ ------
Net investment income* .................................. .041 .032 .013
Dividends from net investment income .................... (.041) (.032) (.013)
------ ------ ------
Net asset value, end of period .......................... $1.000 $1.000 $1.000
====== ====== ======
Total return ............................................ 4.16%+ 3.28%+ 1.30%++
Net assets at end of period (000s) ...................... $1,964 $842 $174
Ratio of operating expenses to average net assets* ...... 1.75% 1.75% 1.75%[dbldag]
Ratio of net investment income to average net assets* 4.08% 3.30% 1.54%[dbldag]
*Reflects voluntary assumption of fees or expenses per
share in each period ................................... $.003 $.005 $.002
</TABLE>
- ------------
** June 1, 1993 (commencement of share class designations) to March 31, 1994.
**** Prior to November 1, 1997, Class C shares were designated as Class D
shares.
[dbldag] Annualized.
+ Total return figures do not reflect any front-end or contingent deferred
sales charges. Total return would be lower if the Distributor and its
affiliates had not voluntarily assumed a portion of the Fund's expenses.
++ Represents aggregate return for the period without annualization and does
not reflect any front-end or contingent deferred sales charges. Total
return would be lower if the Distributor and its affiliates had not
voluntarily assumed a portion of the Fund's expenses
- --------------------------------------------------------------------------------
4
<PAGE>
<TABLE>
<CAPTION>
Class E
-------------------------------------------------------------------------------------
Six months
ended
September 30, Year ended March 31
1997 ---------------------------------------------------------------
(Unaudited) 1997 1996 1995 1994***
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period ........... $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------
Net investment
income* .......... .025 .047 .051 .042 .025
Dividends from
net investment
income ........... (.025) (.047) (.051) (.042) (.025)
----- ----- ----- ----- -----
Net asset value,
end of period .... $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ======
Total return ...... 2.53%++ 4.78%+ 5.20%+ 4.31%+ 2.48%+
Net assets at end
of period (000s) . $202,911 $192,360 $197,109 $150,491 $138,129
Ratio of operating
expenses to
average net
assets* .......... 0.65%[dbldag] 0.75% 0.75% 0.75% 0.75%
Ratio of net
investment
income to average
net assets* ...... 5.00%[dbldag] 4.69% 5.06% 4.26% 2.46%
*Reflects voluntary
assumption of fees
or expenses per
share in each
period ........... $.001 $.002 $.003 $.006 $.003
</TABLE>
<TABLE>
<CAPTION>
Class E
-----------------------------------------------------------------------------------------------
Year ended March 31
-----------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988
------- ------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period ........... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------ ------
Net investment
income* .......... .028 .048 .072 .083 .074 .062
Dividends from
net investment
income ........... (.028) (.048) (.072) (.083) (.074) (.062)
----- ----- ----- ----- ----- -----
Net asset value,
end of period .... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ====== ======
Total return ...... 2.88%+ 4.85%+ 7.47%+ 8.61%+ 7.68%+ 6.32%+
Net assets at end
of period (000s) . $149,831 $168,088 $185,839 $122,002 $63,711 $59,952
Ratio of operating
expenses to
average net
assets* .......... 0.75% 0.75% 0.75% 0.75% 0.77% 0.80%
Ratio of net
investment
income to average
net assets* ...... 2.84% 4.77% 7.21% 8.23% 7.44% 6.16%
*Reflects voluntary
assumption of fees
or expenses per
share in each
period ........... $.001 $.001 $.002 $.003 $.003 $.002
</TABLE>
<TABLE>
<CAPTION>
Class S****
-------------------------------------
Six months
ended Year
September 30, ended
1997 March 31
(Unaudited) 1997
------------------------- -----------
<S> <C> <C>
Net asset value, beginning of period ................. $1.000 $1.000
------ ------
Net investment income* ............................... .025 .047
Dividends from net investment income ................. (.025) (.047)
----- -----
Net asset value, end of period ....................... $1.000 $1.000
====== ======
Total return ......................................... 2.53%++ 4.78%+
Net assets at end of period (000s) ................... $13,796 $14,710
Ratio of operating expenses to average net assets* ... 0.65%[dbldag] 0.75%
Ratio of net investment income to average net assets* 4.99%[dbldag] 4.69%
*Reflects voluntary assumption of fees or expenses per
share in each period ................................ $.001 $.002
<CAPTION>
Class S****
---------------------------------------
Year ended March 31
---------------------------------------
1996 1995 1994
------ ------ -------
<S> <C> <C> <C>
Net asset value, beginning of period ................. $1.000 $1.000 $1.000
------ ------ ------
Net investment income* ............................... .051 .042 .021
Dividends from net investment income ................. (.051) (.042) (.021)
----- ----- -----
Net asset value, end of period ....................... $1.000 $1.000 $1.000
====== ====== ======
Total return ......................................... 5.20%+ 4.31%+ 2.08%++
Net assets at end of period (000s) ................... $16,191 $7,886 $1,786
Ratio of operating expenses to average net assets* ... 0.75% 0.75% 0.75%[dbldag]
Ratio of net investment income to average net assets* 5.03% 4.66% 2.54%[dbldag]
*Reflects voluntary assumption of fees or expenses per
share in each period ................................ $.003 $.003 $.006
</TABLE>
- ------------
** June 1, 1993 (commencement of share class designations) to March 31, 1994.
*** Effective November 30, 1993, the Fund discontinued offering Class A shares
and any existing Class A shares were redesignated Class E shares. Net
investment income and dividends amounted to $.011 per share for Class A
shares during the period June 1, 1993 (commencement of share class
designations) to November 30, 1993.
**** Prior to November 1, 1997, Class S shares were designated as Class C
shares.
[dbldag] Annualized.
+ Total return figures do not reflect any front-end or contingent deferred
sales charges. Total return would be lower if the Distributor and its
affiliates had not voluntarily assumed a portion of the Fund's expenses.
++ Represents aggregate return for the period without annualization and does
not reflect any front-end or contingent deferred sales charges. Total
return would be lower if the Distributor and its affiliates had not
voluntarily assumed a portion of the Fund's expenses
- --------------------------------------------------------------------------------
5
<PAGE>
Yield Information
For the seven-day period ended December 31, 1997, the simple annualized yield
of the Fund's Class B, Class C, Class E and Class S shares was 4.11%, 4.11%,
5.11% and 5.11%, respectively; the compounded effective yield of the Fund's
Class B, Class C, Class E and Class S shares was 4.19%, 4.19%, 5.24% and 5.24%,
respectively; and the Fund had a weighted average maturity of investments of 40
days.
The Fund's Investments
The Fund's investment objective is to seek a high level of current income
consistent with preservation of capital and maintenance of liquidity by
investing in securities issued or guaranteed as to principal and interest by
the U.S. Government or its agencies or instrumentalities as well as
high-quality, short-term money market instruments such as bank certificates of
deposit, bankers' acceptances and such short-term corporate debt securities as
commercial paper and master demand notes. The Fund's investment objective is a
fundamental policy and may not be changed without the affirmative vote of the
holders of a majority of the Fund's outstanding voting securities.
The Fund invests only in U.S. dollar-denominated high quality securities
as described in this paragraph. At least 95% of the Fund's assets will consist
of government securities and "first tier" eligible securities as defined in
Rule 2a-7 under the Investment Company Act of 1940, as amended (the "1940
Act"), which have been (i) rated by at least two nationally recognized
statistical rating organizations (such as Standard & Poor's Corporation or
Moody's Investors Service, Inc.) in the highest rating category for short-term
obligations (or so rated by one such organization if it alone has rated the
security), (ii) issued by an issuer with comparable short-term obligations that
are rated in the highest rating category, or (iii) if unrated, determined to be
comparable to such securities. The balance of the Fund's assets will be
invested in "second tier" eligible securities as defined in Rule 2a-7. See the
Statement of Additional Information.
All securities in which the Fund invests have remaining maturities of 397
calendar days or less at the date of acquisition. The Fund also maintains a
dollar-weighted average portfolio maturity of 90 days or less. The Fund follows
these policies in seeking to maintain a constant net asset value of $1.00 per
share, although there is no assurance it can do so on a continuing basis.
Investors should recognize that in periods of declining interest rates the
inflow of net new money to the Fund from the continuous sale of its shares will
likely be invested in portfolio instruments producing lower yields than the
balance of the Fund's portfolio, thereby reducing the current yield of the
Fund. In periods of rising interest rates, the opposite can be true. Securities
in which the Fund invests may not produce as high a level of income as can be
obtained from securities with longer maturities or those having a lesser degree
of quality.
Corporate Obligations
The Fund may invest in U.S. dollar-denominated high quality corporate debt
securities such as commercial paper and bonds and long-term unsecured
debentures with remaining maturities of 397 calendar days or less. Such
commercial paper may be issued by domestic subsidiaries of foreign banks or
bank holding companies. The Investment Manager will monitor the value of the
Fund's investments in commercial paper, taking into account such factors as the
issuer's earning power, cash flow and other liquidity ratios. For further
information concerning debt securities ratings and permissible money market
investments of the Fund, see the Statement of Additional Information.
In making investments in qualifying foreign securities, up to 15% of the
Fund's total assets may be invested, subject to compliance with applicable
issuer diversification and quality limitations, in U.S. dollar-denominated
short-term Canadian Government and corporate money market instruments of the
type described above. See "Other Investment Practices--Foreign Banks and
Securities" herein.
Bank Obligations
Money market instruments of nongovernmental issuers may include but are not
limited to obligations of U.S. banks that are members of the Federal Deposit
6
<PAGE>
Insurance Corporation ("FDIC"), including their foreign branches (Eurodollars),
obligations of U.S. branches or agencies of foreign banks (Yankee dollars),
obligations of foreign branches of foreign banks and obligations of savings
banks or savings and loan associations that are members of the FDIC (including
certificates of deposit, U.S. dollar-denominated time deposits maturing in
seven days or less (provided that not more than 10% of the Fund's total assets
will be invested in time deposits with maturities of two to seven days) and
bankers' acceptances), provided that any such institution has, at the date of
investment, capital, surplus and undivided profits (as of the date of its most
recently published financial statements) in excess of $50,000,000.
U.S. Government and Related Obligations
Securities issued or guaranteed as to principal and interest by the U.S.
Government or its agencies or instrumentalities in which the Fund may invest
include (a) direct obligations of the U.S. Treasury, including bills, bonds and
notes; and (b) obligations issued or guaranteed as to principal and interest by
U.S. Government agencies or instrumentalities and supported by any of (i) the
full faith and credit of the U.S. Treasury (e.g., Government National Mortgage
Association participation certificates); (ii) the right of the issuer to borrow
a limited amount from the U.S. Treasury; (iii) the discretionary authority of
the U.S. Government to purchase certain obligations of the agency or
instrumentality (e.g., securities of the Federal National Mortgage Association);
or (iv) the credit of the agency or instrumentality (e.g., securities of a
Federal Home Loan Bank). In addition, the Fund may invest in obligations of
mixed-ownership Government Corporations such as Resolution Funding Corporation.
The Fund may also invest in repurchase agreements with respect to such
instruments, subject to certain limitations, and purchase securities on a "when
issued" basis. See "Other Investment Practices."
Securities issued or guaranteed as to principal and interest by the U.S.
Government may be acquired by the Fund in the form of separately traded
principal and interest components of securities issued or guaranteed by the
U.S. Treasury. The principal and interest components of selected securities are
currently traded independently under the Separate Trading of Registered
Interest and Principal of Securities ("STRIPS") program. Under the STRIPS
program, the principal and interest components are individually numbered and
separately issued by the U.S. Treasury at the request of depository financial
institutions, which then trade the component parts independently. The interest
and principal payments on the U.S. Treasury securities underlying STRIPS are
direct obligations of the U.S. Government.
Limiting Investment Risk
In seeking to lessen investment risk, the Fund operates under certain
investment restrictions. Under these restrictions, the Fund may not (a)
purchase a security of any one issuer; if such purchase would, with respect to
75% of the Fund's total assets, cause more than 5% of the Fund's total assets
to be invested in the securities of such issuer or cause more than 10% of the
voting securities of such issuer to be held by the Fund or (b) make any
investment which would cause more than 25% of the value of the Fund's total
assets to be invested in the securities of issuers principally engaged in any
one industry; except that the Fund will invest more than 25% of its total
assets in the financial services industry. None of the above restrictions
applies to investments in securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities, and the restriction in clause
(b) does not apply to investments in obligations of banks.
The Fund will not lend money directly to natural persons, however it may
lend portfolio securities and purchase bonds and other debt instruments and may
engage in repurchase transactions collateralized by obligations of the U.S.
Government and its agencies and instrumentalities or other high quality
securities.
The restrictions set forth above may be changed only by a vote of the
holders of a majority of the Fund's outstanding voting securities.
The Fund may not purchase any security or enter into a repurchase
agreement if as a result more than 10% of its net assets would be invested in
securities that are illiquid (including repurchase agreements not entitling the
holder to payment of principal and interest within seven days.
For further discussion of these and other investment restrictions including
nonfundamental restrictions which may be
7
<PAGE>
changed without a shareholder vote, see the Statement of Additional Information.
Information on the Purchase of Shares, Redemptions of Shares and Shareholder
Services is set forth on pages 8 to 20 below.
The Fund is available for investment by many kinds of investors including
participants investing through 401(k) or other retirement plan sponsors,
employees investing through savings plans sponsored by employers, Individual
Retirement Account ("IRAs"), trusts, corporations, individuals, etc. The
applicability of the general information and administrative procedures set forth
below accordingly will vary depending on the investor and the recordkeeping
system established for a shareholder's investment in the Fund. Participants in
401(k) and other plans should first consult with the appropriate person at
their employer or refer to the plan materials below following any of the
procedures below. For more information or assistance, anyone may call
1-800-562-0032.
Purchase of Shares
Methods of Purchase
Through Dealers and Others
Shares of the Fund are continuously offered through securities dealers,
financial institutions and others (collectively referred to herein as securities
dealers or dealers) who have entered into sales agreements with the Distributor
at a price which is expected to be maintained at $1.00 per share plus the
applicable sales charge. Purchases through dealers are confirmed at the offering
price plus the applicable sales charge next determined after the order is duly
received by State Street Research Service Center ("Service Center"), a division
of State Street Research Investment Services, Inc., from the dealer. ("Duly
received" for purposes herein means in accordance with the conditions of the
applicable method of purchase as described below.) The dealer is responsible for
transmitting the order promptly to the Service Center in order to permit the
investor to obtain the current price. See "Purchase of Shares--Net Asset Value"
herein.
Purchases made by check are normally effective as of the business day after the
check is received by the Service Center and delivered by the Service Center to
the transfer agent and dividend paying agent, State Street Bank and Trust
Company (the "Transfer Agent"), and accrue dividends commencing the business day
after the effective date, subject to collection conditions. As more fully
described below, certain large purchases made with Federal Funds received by 12
noon Boston time on any business day will normally be effective and accrue
dividends commencing that day. Other purchases made with Federal Funds received
after 12 noon and before 4 P.M. Boston time on any business day will normally be
effective that day and accrue dividends commencing the next business day.
By Mail
Initial investments in the Fund may be made by mailing or delivering to the
investor's dealer a completed Application (accompanying this Prospectus),
together with a check for the total purchase price payable to the Fund. The
dealer must forward the Application and check in accordance with the
instructions on the Application.
Additional shares may be purchased by mailing to the Service Center a check
payable to the Fund in the amount of the total purchase price together with any
one of the following: (i) an Application; (ii) the stub from a shareholder's
account statement; or (iii) a letter setting forth the name of the Fund, the
class of shares and the shareholder's account name and number. The Service
Center will deliver the purchase order to the Transfer Agent.
If a check is not honored for its full amount, the purchaser could be
subject to additional charges to cover collection costs and any investment
loss, and the purchase may be cancelled.
8
<PAGE>
By Wire
An investor may purchase shares by wiring Federal Funds of not less than $5,000
to State Street Bank and Trust Company, which also serves as the Trust's
custodian (the "Custodian"), as set forth below. Prior to making an investment
by wire, an investor must notify the Service Center at 1-800-562-0032 and obtain
a control number and instructions. Following such notification, Federal Funds
should be wired through the Federal Reserve System to:
ABA #011000028
State Street Bank and Trust Company
Boston, MA
BNF=State Street Research Money Market Fund
and class of shares
(B, C, E or S)
AC=99029761
OBI=Shareholder Name
Shareholder Account Number
Control #K (assigned by State Street
Research Service Center)
In order for an investment to be effective on the same day Federal Funds
are received and also accrue dividends for that day, (i) the investor must
notify the Service Center by telephone by 9:30 A.M. Boston time on that day of
the investor's intention to make such investment for a minimum amount of
$25,000; and (ii) the Federal Funds must be received by 12 noon Boston time that
same day. To facilitate the timely processing of such investments, an investor
may establish special bank accounts and make other direct arrangements with the
Custodian, subject to related charges by the Custodian payable directly by the
investor. Transactions processed through such accounts are only subject to the
minimum amounts noted under the subcaption "Minimum Investment" below and will
be treated as the equivalent of a Federal Funds wire for purposes of making
investments and remitting redemption proceeds hereunder. The use of such special
accounts may be terminated by the Fund, and special policies, procedures and
limitations applicable to such special accounts may be adopted without notice at
any time. Contact the Distributor for further information.
Wire investments not made as provided above will nonetheless be effective
on the same day if (i) the investor notifies the Service Center of his or her
intention to make such investment by 12 noon Boston time on the day of his or
her investment; and (ii) the wire is received by 4 P.M. Boston time that same
day. Dividends on such wire investments will commence on the business day after
the effective date of the purchase.
An investor making an initial investment by wire must promptly complete
the Application accompanying this Prospectus and deliver it to his or her
dealer, who should forward it as required. No redemptions will be effected
until the Application has been duly processed.
The Fund may in its discretion discontinue, suspend or change the practice
of accepting orders by any of the methods described above. Orders for the
purchase of shares are subject to acceptance by the Fund. The Fund reserves the
right to suspend the sale of shares or to reject any purchase order, including
orders in connection with exchanges, for any reason.
Minimum Investment
<TABLE>
<CAPTION>
Class of Shares
---------------------------------------
B C E S
------ ------ ------ ---
<S> <C> <C> <C> <C>
Minimum Initial Investment
By Wire ................. $5,000 $5,000 $5,000 (a)
IRAs .................... $2,000 $2,000 $2,000 (a)
By Investamatic ......... $1,000 $1,000 $1,000 (a)
All other ............... $2,500 $2,500 $2,500 (a)
Minimum Subsequent Investment
By Wire ................. $5,000 $5,000 $5,000 (a)
IRAs .................... $ 50 $ 50 $ 50 (a)
By Investamatic ......... $ 50 $ 50 $ 50 (a)
All other ............... $ 50 $ 50 $ 50 (a)
</TABLE>
(a) Special conditions apply; contact the Distributor.
The Fund reserves the right to vary the minimums for initial or subsequent
investments as in the case of, for example, exchanges and investments under
various retirement and employee benefit plans, sponsored arrangements involving
group solicitations of the members of an organization, or other investment
plans for reinvestment of dividends and distributions or for periodic
investments (e.g., Investamatic Program).
9
<PAGE>
Alternative Purchase Program
General
Alternative classes of shares permit investors to exchange their shares of an
Eligible Fund for shares of the corresponding class of the Fund. Only Class E
and Class S shares will be issued to investors purchasing shares of the Fund
other than by an exchange from an Eligible Fund. Class E and Class S shares do
not pay any distribution or service fees.
As described in greater detail below, dealers are paid differing amounts
of commission and other compensation depending on which class of shares they
sell.
The major differences among the various classes of shares are as follows:
<TABLE>
<CAPTION>
CLASS B CLASS C CLASS E CLASS S
---------------------------- --------------------------- --------- --------
<S> <C> <C> <C> <C>
Sales Charges Contingent deferred sales Contingent deferred sales None None
charge of 5% to 2% charge of 1% applies to
applies to any shares any shares redeemed
redeemed within first five within one year following
years following their their purchase
purchase; no contingent
deferred sales charge after
five years
Distribution Fee 0.75% for first eight 0.75% each year None None
years; Class B shares
convert automatically to
Class E shares after eight
years
Service Fee 0.25% each year 0.25% each year None None
Initial 4% 1% None None
Commission
Received by
Selling
Dealer
</TABLE>
In deciding which class of shares to purchase, the investor should
consider the amount of the investment, the length of time the investment is
expected to be held, and the ongoing service fee and distribution fee, among
other factors.
Class B shareholders pay no initial sales charge, but a contingent
deferred sales charge of up to 5% generally applies to shares redeemed within
five years of purchase. Class C shareholders also pay no initial sales charge,
but a contingent deferred sales charge of 1% generally applies to redemptions
made within one year of purchase. For Class B and Class C shareholders,
therefore, the entire purchase amount is immediately invested in the Fund.
Class B and Class C shares are assessed an annual service fee of 0.25% of
average daily net assets. Class B shares are assessed an annual distribution
fee of 0.75% of daily net assets for an eight-year period following the date of
purchase and are then automatically converted to Class E shares. Class C shares
are assessed an annual distribution fee of 0.75% of daily net assets for as
long as the shares are held. The prospective investor should consider these
fees plus the contingent deferred sales charges in estimating the costs of
investing in the various classes of the Fund's shares.
10
<PAGE>
Class S shares are available through certain employee benefit plans, and
special programs with financial intermediaries, among other arrangements.
Some of the service and distribution fees are allocated to dealers (see
"Distribution Plan" below). In addition, the Distributor will, at its expense,
provide additional cash and noncash incentives to dealers that sell shares.
Such incentives may be extended only to those dealers that have sold or may
sell significant amounts of shares and/or meet other conditions established by
the Distributor; for example, the Distributor may sponsor special promotions to
develop particular distribution channels or to reach certain investor groups.
The Distributor may also compensate those dealers with clients who maintain
their investments in the Fund over a period of years. The incentives may
include merchandise and trips to and attendance at sales seminars at resorts.
The Distributor may also pay its affiliate, MetLife Securities, Inc.,
additional compensation of up to 0.25% of certain sales or assets.
Class B Shares--Contingent Deferred Sales Charges
Class B shares are offered solely in connection with exchanges from Eligible
Funds.
Contingent Deferred Sales Charges
The public offering price of Class B shares is the net asset value per share
next determined after the purchase order is duly received, as defined herein.
No sales charge is imposed at the time of purchase; thus the full amount of the
investor's purchase payment will be invested in the Fund. However, a contingent
deferred sales charge may be imposed upon redemptions of Class B shares as
described below.
The Distributor will pay dealers at the time of sale a 4% commission for
selling Class B shares. In certain cases, a dealer may elect to waive the 4%
commission on Class B shares and receive in lieu thereof a 1% annual fee with
respect to such shares until the shares convert to Class E shares. The proceeds
of the contingent deferred sales charge and the distribution fee are used to
offset distribution expenses and thereby permit the sale of Class B shares
without an initial sales charge.
Class B shares that are redeemed within a five-year period after their
purchase will not be subject to a contingent deferred sales charge to the
extent that the value of such shares represents (1) capital appreciation of
Fund assets or (2) reinvestment of dividends or capital gains distributions.
The amount of any applicable contingent deferred sales charge will be
calculated by multiplying the net asset value of such shares at the time of
redemption or at the time of purchase, whichever is lower, by the applicable
percentage shown in the table below:
<TABLE>
<CAPTION>
Contingent Deferred
Sales Charge
As A Percentage Of
Redemption During Net Asset Value
- -------------------------------------------- --------------------
<S> <C>
1st Year Since Purchase .................. 5%
2nd Year Since Purchase .................. 4%
3rd Year Since Purchase .................. 3%
4th Year Since Purchase .................. 3%
5th Year Since Purchase .................. 2%
6th Year Since Purchase and Thereafter ... None
</TABLE>
In determining the applicability and rate of any contingent deferred sales
charge, it will be assumed that a redemption of Class B shares is made first of
those shares having the greatest capital appreciation, next of shares
representing reinvestment of dividends and capital gains distributions and
finally of remaining shares held by the shareholder for the longest period of
time. The holding period for purposes of applying a contingent deferred sales
charge on Class B shares of the Fund acquired through an exchange from another
Eligible Fund, as described below, will be measured from the date that such
shares were initially acquired in the other Eligible Fund, and Class B shares
being redeemed will be considered to represent, as applicable, capital
appreciation or dividend and capital gains distribution reinvestments in such
other Eligible Fund. ("Eligible Funds" include the Fund and other funds so
designated by the Distributor from time to time.) These determinations will
result in any contingent deferred sales charge being imposed at the lowest
possible rate. For federal income tax purposes, the amount of the contingent
deferred sales charge will reduce the gain or increase the loss, as the case
may be, on the amount realized on redemption. The amount of any contingent
deferred sales charge will be paid to the Distributor.
Contingent Deferred Sales Charge Waivers
The contingent deferred sales charge does not apply to exchanges, or to
redemptions under a systematic
11
<PAGE>
withdrawal plan which meets certain conditions. In addition, the contingent
deferred sales charge will be waived for: (i) redemptions made within one year
of the death or total disability, as defined by the Social Security
Administration, of all shareholders of an account; (ii) redemptions made after
attainment of a specific age in an amount which represents the minimum
distribution required at such age under Section 401(a)(9) of the Internal
Revenue Code for retirement accounts or plans (e.g., age 70-1/2 for IRAs and
Section 403(b) plans), calculated solely on the basis of assets invested in the
Fund or other Eligible Funds; and (iii) a redemption resulting from a tax-free
return of an excess contribution to an IRA. (The foregoing waivers do not apply
to a tax-free rollover or transfer of assets out of the Fund.) The Fund may
modify or terminate the waivers described above at any time; for example, the
Fund may limit the application of multiple waivers and establish other
conditions for employee benefit plans.
Conversion of Class B Shares to Class E Shares
A shareholder's Class B shares, including all shares received as dividends or
distributions with respect to such shares, will automatically convert to Class
E shares of the Fund at the end of eight years following the issuance of such
Class B shares; consequently, they will no longer be subject to the higher
expenses borne by Class B shares. The conversion rate will be determined on the
basis of the relative per-share net asset values of the two classes and may
result in a shareholder receiving either a greater or fewer number of Class E
shares than the Class B shares so converted. As noted above, holding periods
for Class B shares received in exchange for Class B shares of other Eligible
Funds will be counted toward the eight-year period.
Class C Shares--Spread Sales Charges
Class C shares are offered solely in connection with exchanges from Eligible
Funds.
The purchase price of a Class C share of the Fund is the Fund's per share
net asset value next determined after the purchase order is duly received, as
defined herein. No sales charge is imposed at the time of purchase; thus the
full amount of the investor's purchase payment will be invested in the Fund.
Class C shares are subject to a 1% contingent deferred sales charge on any
portion of the purchase redeemed within one year of the sale. The contingent
deferred sales charge will be 1% of the lesser of the net asset value of the
shares at the time of purchase or at the time of redemption. The Distributor
pays dealers a 1% commission for selling Class C shares at the time of
purchase. The proceeds of the contingent deferred sales charge and the
distribution fee are used to offset distribution expenses and thereby permit
the sale of Class C shares without an initial sales charge.
Class C shares that are redeemed within one year after purchase will not
be subject to the contingent deferred sales charge to the extent that the value
of such shares represents (1) capital appreciation of Fund assets or (2)
reinvestment of dividends or capital gains distributions. In addition, the
contingent deferred sales charge will be waived for certain other redemptions
as described under "Contingent Deferred Sales Charge Waivers" above (as
otherwise applicable to Class B shares). For federal income tax purposes, the
amount of the contingent deferred sales charge will reduce the gain or increase
the loss, as the case may be, on the amount realized on redemption. The amount
of any contingent deferred sales charge will be paid to the Distributor.
Class E Shares--General; No Sales Charge
The purchase price of a Class E share of the Fund is the Fund's per share net
asset value next determined after the purchase order is duly received, as
defined herein. No sales charge is imposed at the time of purchase or
redemption. The Fund will receive the full amount of the investor's purchase
payment.
Class E shares may have also been issued directly or through exchanges to
certain shareholders of the Fund or other Eligible Funds who previously held
shares which are not subject to any future sales charge or service fees or
distribution fees.
Class S Shares--Special Programs; No Sales Charge
The purchase price of a Class S share of the Fund is the Fund's per share net
asset value next determined
12
<PAGE>
after the purchase order is duly received, as defined herein. No sales charge
is imposed at the time of purchase or redemption. The Fund will receive the
full amount of the investor's purchase payment.
In general, Class S shares are available for new investments by certain
large institutions, advisory accounts of the Investment Manager, and employee
benefit plans and other investors which acquire shares through programs or
products sponsored by Metropolitan Life Insurance Company ("Metropolitan")
and/or its affiliates for which Class S shares have been designated. In
addition, Class S shares are available through special programs under which, for
example, investors pay an asset-based fee and/or a transaction fee to
intermediaries. Class S share availability is determined by the Distributor and
intermediaries based on overall direct and indirect costs of a particular
program, expected assets, account sizes and similar considerations. Information
on the availability of Class S shares and further conditions and limitations is
available from the Distributor.
Class S shares may have also been issued directly or through exchanges to
those shareholders of the Fund or other Eligible Funds who previously held
shares not subject to any future sales charge or service fees or distribution
fees.
Net Asset Value
The Fund's per share net asset values are determined Monday through Friday as
of 12 noon and as of the close of the NYSE exclusive of days on which the NYSE
is closed. The NYSE ordinarily closes at 4 P.M. New York City time. Net asset
value per share is calculated by adding the value of all instruments and other
assets of the Fund, deducting its actual and accrued liabilities, and dividing
the difference by the number of shares outstanding.
The Fund's portfolio instruments are valued on the basis of the amortized
cost valuation method. This involves valuing an instrument initially at its
cost and thereafter assuming a constant amortization of premium or accretion of
discount to maturity, regardless of the impact of fluctuating interest rates on
the market value of the instrument. For this purpose securities whose interest
rates are adjusted periodically to market rates will in general be deemed to
have maturities equal to the period remaining until the next interest rate
adjustment, subject to applicable limitations under Rule 2a-7 under the 1940
Act. It is the intention of the Fund to maintain a per share net asset value of
$1.00, although this cannot be assured. See "Net Asset Value" in the Statement
of Additional Information.
Distribution Plan
The Fund has adopted a Plan of Distribution Pursuant to Rule 12b-1 (the
"Distribution Plan") in accordance with the regulations under the 1940 Act.
Under the provisions of the Distribution Plan, the Fund makes payments to the
Distributor based on an annual percentage of the average daily value of the net
assets of each class of shares as follows:
<TABLE>
<CAPTION>
Class Service Fee Distribution Fee
- ------- ------------- -----------------
<S> <C> <C>
B 0.25% 0.75%
C 0.25% 0.75%
E None None
S None None
</TABLE>
Some or all of the service fees are used to pay or reimburse dealers
(including dealers that are affiliates of the Distributor) or others for
personal services and/or the maintenance or servicing of shareholder accounts.
A portion of any initial commission paid to dealers for the sale of shares of
the Fund represents payment for personal services and/or the maintenance or
servicing of shareholder accounts by such dealers. Dealers who have sold Class
B and Class C shares are eligible for further reimbursement after the first
year during which such shares have been held of record by such dealer as
nominee for its clients (or by such clients directly). Any service fees
received by the Distributor and not allocated to dealers may be applied by the
Distributor in reduction of expenses incurred by it directly for personal
services and the maintenance or servicing of shareholder accounts.
The distribution fees are used primarily to offset initial and ongoing
commissions paid to dealers for selling such shares. Any distribution fees
received by the Distributor and not allocated to dealers may be applied by the
Distributor in connection with sales or
13
<PAGE>
marketing efforts, including special promotional fees and cash and noncash
incentives based upon sales by dealers.
The Distributor provides distribution services on behalf of other funds
having distribution plans and receives similar payments from, and incurs
similar expenses on behalf of, such other funds. When expenses of the
Distributor cannot be identified as relating to a specific fund, the
Distributor allocates expenses among the funds in a manner deemed fair and
equitable to each fund.
Commissions and other cash and noncash incentives and payments to dealers,
to the extent payable out of the general profits, revenues or other sources of
the Distributor (including the advisory fees paid by the Fund), have also been
authorized pursuant to the Distribution Plan.
A rule of the National Association of Securities Dealers, Inc. ("NASD")
limits the annual expenditures which the Fund may incur under the Distribution
Plan to 1%, of which 0.75% may be used to pay distribution expenses and 0.25%
may be used to pay shareholder service fees. The NASD rule also limits the
aggregate amount which the Fund may pay for such distribution costs to 6.25% of
gross share sales of a class since the inception of any asset-based sales
charge plus interest at the prime rate plus 1% on unpaid amounts thereof (less
any contingent deferred sales charges). Such limitation does not apply to
shareholder service fees. Payments to the Distributor or to dealers funded
under the Distribution Plan may be discontinued at any time by the Trustees of
the Trust.
Redemption of Shares
Shareholders may redeem all or any portion of their accounts on any day the
NYSE is open for business. Redemptions will be effective at the net asset value
per share next determined (see "Purchase of Shares--Net Asset Value" herein)
after receipt of the redemption request, in accordance with the requirements
described below, by the Service Center and delivery of the request by the
Service Center to the Transfer Agent. To allow time for the clearance of checks
used for the purchase of any shares which are tendered for redemption shortly
after purchase, the remittance of the redemption proceeds for such shares could
be delayed for 15 days or more after the purchase. Shareholders who anticipate
the need for immediate access to their investments should, therefore, purchase
shares by wire. Except as noted, redemption proceeds from the Fund are normally
remitted within seven days after receipt of the redemption request by the Fund
and any necessary documents in good order.
Methods of Redemption
Request By Mail
A shareholder may write to request redemption of shares, with proceeds to be
mailed to the shareholder or wired to a predesignated bank account (see
"Proceeds By Wire" below), by sending to State Street Research Service Center,
P.O. Box 8408, Boston, Massachusetts 02266-8408: (1) a written request for
redemption signed by the registered owner(s) of the shares, exactly as the
account is registered; (2) an endorsed stock power in good order with respect
to the shares or, if issued, the share certificates for the shares endorsed for
transfer or accompanied by an endorsed stock power; (3) any required signature
guarantees (see "Redemption of Shares--Signature Guarantees" below); and (4)
any additional documents which may be required for redemption in the case of
corporations, trustees, etc., such as certified copies of corporate
resolutions, governing instruments, powers of attorney, and the like. The
Transfer Agent will not process requests for redemption until it has received
all necessary documents in good order. A shareholder will be notified promptly
if a redemption request cannot be accepted. Shareholders having any questions
about the requirements for redemption should call the Service Center toll-free
at 1-800-562-0032.
Request By Telephone
Shareholders may request redemption by telephone with proceeds to be
transmitted by check or by wire (see "Proceeds By Wire" below). A shareholder
can request a redemption for $50,000 or less to be transmitted by check. Such
check for the proceeds will be made payable to the shareholder of record and
will be mailed to the address of record. There is no fee for this service. It
is not available if the address of
14
<PAGE>
record has been changed within 30 days of the redemption request. The Fund may
revoke or suspend the telephone redemption privilege at any time and without
notice. See "Shareholder Services--Telephone Services" for a discussion of the
conditions and risks associated with Telephone Privileges.
Request By Check (Class E Shares Only)
Shareholders of Class E shares of the Fund may redeem shares by checks drawn on
State Street Bank and Trust Company. Checks may be made payable to the order of
any person or organization designated by the shareholder and must be for
amounts of at least $500. Shareholders will continue to earn dividends on the
shares to be redeemed until the check clears. There is currently no charge
associated with redemption of shares by check. Checkbooks are supplied for a $2
fee. Checks will be sent only to the registered owner at the address of record.
A $10 fee will be charged against an account in the event a redemption check is
presented for payment and not honored pursuant to the terms and conditions
established by State Street Bank and Trust Company.
Shareholders can request the checkwriting privilege by completing the
signature card which is part of the Application. In order to arrange for
redemption-by-check after an account has been opened, a revised Application
with signature card and signatures guaranteed must be sent to the Service
Center. Cancelled checks will be returned to shareholders at the end of each
month.
The redemption-by-check service is subject to State Street Bank and Trust
Company's rules and regulations applicable to checking accounts (as amended
from time to time), and is governed by the Massachusetts Uniform Commercial
Code. All notices with respect to checks drawn on State Street Bank and Trust
Company must be given to State Street Bank and Trust Company. Stop payment
instructions with respect to checks must be given to State Street Bank and
Trust Company by calling 1-617-985-8543. Shareholders may not close out an
account by check.
Proceeds By Wire
Upon a shareholder's written request or by telephone if the shareholder has
Telephone Privileges (see "Shareholder Services--Telephone Services" herein),
the Trust's custodian will wire redemption proceeds to the shareholder's
predesignated bank account. If a telephone redemption request for a minimum of
$25,000 is received by 9:30 A.M., redemption proceeds will normally be wired
that day. All other redemptions will normally be wired on the business day after
receipt of the redemption request. In any event, redemption proceeds will be
wired not later than seven days, in most cases, after receipt of the redemption
request and all necessary documents. To make the request, the shareholder should
call 1-800-562-0032. A $7.50 charge against the shareholder's account will be
imposed for each wire redemption. This charge is subject to change without
notice. The shareholder's bank may also impose a charge for receiving wires of
redemption proceeds. The minimum redemption by wire is $1,000.
The Fund has reserved the right to change, modify or terminate the
services described above at any time.
Additional Information
Because of the relatively high cost of maintaining small shareholder accounts,
the Fund reserves the right to involuntarily redeem at its option any
shareholder account which remains below $1,500 for a period of 60 days after
notice is mailed to the applicable shareholder, or to impose a maintenance fee
on such account after 60 days' notice. Such involuntary redemptions will be
subject to applicable sales charges, if any. The Fund may increase such minimum
account value above such amount in the future after notice to affected
shareholders. Involuntarily redeemed shares will be priced at the net asset
value on the date fixed for redemption by the Fund, and the proceeds of the
redemption will be mailed to the affected shareholder at the address of record.
Currently, the maintenance fee is $18 annually, which is paid to the Transfer
Agent. The fee does not apply to certain retirement accounts or if the
shareholder has more than an aggregate $50,000 invested in the Fund and other
Eligible Funds combined. Imposition of a maintenance fee on a small account
could, over time, exhaust the assets of such account.
To cover the cost of additional compliance administration, a $20 fee will
be charged against any share-
15
<PAGE>
holder account that has been determined to be subject to escheat under
applicable state laws.
The Fund may not suspend the right of redemption or postpone the date of
payment of redemption proceeds for more than seven days, except that (a) it may
elect to suspend the redemption of shares or postpone the date of payment of
redemption proceeds: (1) during any period that the NYSE is closed (other than
customary weekend and holiday closings) or trading on the NYSE is restricted;
(2) during any period in which an emergency exists as a result of which
disposal of portfolio securities is not reasonably practicable or it is not
reasonably practicable to fairly determine the Fund's net asset values; or (3)
during such other periods as the Securities and Exchange Commission may by
order permit for the protection of investors; and (b) the payment of redemption
proceeds may be postponed as otherwise provided under "Redemption of Shares"
herein.
Signature Guarantees
To protect shareholder accounts, the Transfer Agent, the Fund, the Investment
Manager and the Distributor from possible fraud, signature guarantees are
required for certain redemptions. Signature guarantees help the Transfer Agent
to determine that the person who has authorized a redemption from the account
is, in fact, the shareholder. Signature guarantees are required for, among
other things: (1) written requests for redemptions for more than $50,000; (2)
written requests for redemptions for any amount if the proceeds are transmitted
to other than the current address of record (unchanged in the past 30 days);
(3) written requests for redemptions for any amount submitted by corporations
and certain fiduciaries and other intermediaries; (4) requests to transfer the
registration of shares to another owner; and (5) authorizations to establish
the checkwriting privilege. Signatures 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 in certain instances. Please
contact the Service Center at 1-800-562-0032 for specific requirements
relating to your account.
Service Center
The Open Account System
Under the Open Account System full and fractional shares of the Fund owned by
shareholders are credited to their accounts by the Transfer Agent, State Street
Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110. Share
certificates will not be issued. Shareholders will receive periodic statements
of transactions in their accounts.
The Fund's Open Account System provides the following options:
1. Additional purchases of shares of the Fund may be made by wire or by
mailing a check payable to the Fund to the Service Center under the
terms set forth above under "Purchase of Shares."
2. The following methods of receiving dividends from investment income
and distributions from capital gains (if any) are available:
(a) All income dividends and capital gains distributions reinvested
in additional shares of the Fund.
(b) All income dividends and capital gains distributions in cash.
(c) All income dividends and capital gains distributions invested in
any one available Eligible Fund designated by the shareholder.
See "Dividend Allocation Plan" herein.
Dividend and distribution selections should be made on the Application
accompanying the initial investment. If no selection is indicated on the
Application, that account will be automatically coded for reinvestment of all
dividends and distributions in additional shares of the same class of the Fund.
Selections may be changed at any time by telephone or written notice to the
Service Center. Dividends and distributions are reinvested at net asset value
without a sales charge.
Exchange Privilege
Shareholders of the Fund may exchange their shares for available shares with
corresponding characteristics of any of the other Eligible Funds at any time on
the
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basis of the relative net asset values of the respective shares to be
exchanged, subject to compliance with applicable securities laws. Shareholders
of any other Eligible Fund may similarly exchange their shares for Fund shares
with corresponding characteristics. Prior to making an exchange, shareholders
should obtain the Prospectus of the Eligible Fund into which they are
exchanging. Under the Direct Program, subject to certain conditions,
shareholders may make arrangements for regular exchanges from the Fund into
other Eligible Funds. To effect an exchange, Class B and Class C shares may be
redeemed without the payment of any contingent deferred sales charge that might
otherwise be due upon an ordinary redemption of such shares. Exchanges of Class
E shares of the Fund into Class A shares of any other Eligible Fund are subject
to the initial sales charge or contingent deferred sales charge applicable to
an initial investment in such Class A shares, unless a prior Class A sales
charge has been paid directly or indirectly with respect to the shares
redeemed. For purposes of computing the contingent deferred sales charge that
may be payable upon disposition of any acquired Class A, Class B and Class C
shares, the holding period of the redeemed shares is "tacked" to the holding
period of the acquired shares. The period any Class E shares are held is not
tacked to the holding period of any acquired shares. No exchange transaction
fee is currently imposed on any exchange.
Shares of the Fund may also be acquired or redeemed in exchange for shares
of the Summit Cash Reserves Fund ("Summit Cash Reserves") by customers of
Merrill Lynch, Pierce, Fenner & Smith Incorporated (subject to completion of
steps necessary to implement the program). The Fund and Summit Cash Reserves
are related mutual funds for purposes of investment and investor services. Upon
the acquisition of shares of Summit Cash Reserves by exchange for redeemed
shares of the Fund, (a) no sales charge is imposed by Summit Cash Reserves, (b)
no contingent deferred sales charge is imposed by the Fund on the Fund shares
redeemed, and (c) any applicable holding period of the Fund shares redeemed is
"tolled," that is, the holding period clock stops running pending further
transactions. Upon the acquisition of shares of the Fund by exchange for
redeemed shares of Summit Cash Reserves, the acquisition of Class B or Class C
shares of the Fund shall restart any holding period previously tolled, or shall
be subject to the contingent deferred sales charge applicable to an initial
investment in such shares.
For the convenience of the shareholders who have Telephone Privileges, the
Fund permits exchanges by telephone request from either the shareholder or his
or her dealer. Shares may be exchanged by telephone provided that the
registration of the two accounts is the same. The toll-free number for
exchanges is 1-800-562-0032. See "Telephone Services" herein for a discussion
of conditions and risks associated with Telephone Privileges.
The exchange privilege may be exercised only in those states where shares
of the relevant other Eligible Fund may legally be sold. For tax purposes, each
exchange actually represents the sale of shares of one fund and the purchase of
shares of another. Accordingly, exchanges may produce a capital gain or loss for
tax purposes. The exchange privilege may be terminated or suspended or its terms
changed at any time, subject, if required under applicable regulations, to 60
days' prior notice. New accounts established for investments upon exchange from
an existing account in another fund will have the same Telephone Privileges as
the existing account, unless the Service Center is instructed otherwise. Related
administrative policies and procedures may also be adopted with regard to a
series of exchanges, street name accounts, sponsored arrangements and other
matters.
If an exchange request in good order is received by the Service Center and
delivered by the Service Center to the Transfer Agent by 12 noon Boston time on
any business day, the exchange usually will occur that day. For further
information regarding the exchange privilege, shareholders should contact the
Service Center.
Reinvestment Privilege
A shareholder of the Fund who has redeemed shares or had shares repurchased at
his or her request may reinvest any portion or all of the proceeds (plus that
amount necessary to acquire a fractional share to
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round off his or her reinvestment to full shares) in shares, of the same class
as the shares redeemed, of the Fund or any other Eligible Fund at net asset
value and without subjecting the reinvestment to an initial sales charge,
provided such reinvestment is made within 120 calendar days after a redemption
or repurchase. Upon such reinvestment, the shareholder will be credited with
any contingent deferred sales charge previously charged with respect to the
amount reinvested. The redemption of shares is, for federal income tax
purposes, a sale on which the shareholder may realize a gain or loss. If a
redemption at a loss is followed by a reinvestment within 30 days, the
transaction may be a "wash sale" resulting in a denial of the loss for federal
income tax purposes.
Any reinvestment pursuant to the reinvestment privilege will be subject to
any applicable minimum account standards imposed by the fund into which the
reinvestment is made. Shares are sold to a reinvesting shareholder at the net
asset value thereof next determined following timely receipt by the Service
Center of such shareholder's written purchase request and delivery of the
request by the Service Center to the Transfer Agent. A shareholder may exercise
this reinvestment privilege only once per 12-month period with respect to his or
her shares of the Fund. No charge is imposed by the Fund for such reinvestments;
however, dealers may charge fees in connection with the reinvestment privilege.
The reinvestment privilege may be exercised with respect to an Eligible Fund
only in those states where shares of the relevant other Eligible Fund may
legally be sold.
Investment Plans
The Investamatic Program is available to Class E shareholders. Under this
Program, shareholders may make regular investments by authorizing withdrawals
from their bank accounts each month or quarter on the Application available
from the Service Center.
The Distributor also offers IRAs and retirement plans, including prototype
and other employee benefit plans for employees, sole proprietors, partnerships
and corporations. Details of these investment plans and their availability may
be obtained from securities dealers or from the Service Center.
Systematic Withdrawal Plan
A shareholder who owns Class E or Class S shares with a value of $5,000 or
more, or Class B or Class C shares with a value of $10,000 or more, may elect,
by participating in the Fund's Systematic Withdrawal Plan, to have periodic
checks issued for specified amounts. These amounts may not be less than certain
minimums, depending on the class of shares held. The Plan provides that all
income dividends and capital gains distributions (if any) of the Fund shall be
credited to participating shareholders in additional shares of the Fund. Thus,
the withdrawal amounts paid can only be realized by redeeming shares of the
Fund under the Plan. To the extent such amounts paid exceed dividends and
distributions from the Fund, a shareholder's investment will decrease and may
eventually be exhausted.
In the case of shares otherwise subject to contingent deferred sales
charges, no such charges will be imposed on withdrawals of up to 8% annually of
either (a) the value, at the time the Plan is initiated, of the shares then in
the account or (b) the value, at the time of a withdrawal, of the same number
of shares as in the account when the Plan was initiated, whichever is higher.
Expenses of the Plan are borne by the Fund. A participating shareholder
may withdraw from the Plan, and the Fund may terminate the Plan at any time on
written notice. Purchase of additional shares while a shareholder is receiving
payments under a Plan is ordinarily disadvantageous because of duplicative
sales charges. For this reason, a shareholder may not simultaneously
participate in the Investamatic Program and the Systematic Withdrawal Plan in
connection with shares which are subject to an initial or contingent deferred
sales charge.
Dividend Allocation Plan
The Dividend Allocation Plan allows shareholders to elect to have all their
dividends and any other distributions from the Fund or any Eligible Fund
automatically invested at net asset value in one other such Eligible Fund
designated by the shareholder, provided the account into which the dividends
and distributions are directed is initially funded with the requisite minimum
amount. The number of shares
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purchased will be determined as of the dividend payment date. The Dividend
Allocation Plan is subject to suspension at any time, and to such policies,
limitations and restrictions, such as may be applicable to street name or
master accounts, that may be adopted from time to time.
Automatic Bank Connection
A shareholder may elect, by participating in the Fund's Automatic Bank
Connection ("ABC"), to have dividends and other distributions, including
Systematic Withdrawal Plan payments, automatically deposited in the
shareholder's bank account by electronic funds transfer. Some contingent
deferred sales charges may apply. See "Systematic Withdrawal Plan" herein.
Reports
Reports for the Fund will be sent to shareholders of record at least
semiannually. These reports will include a list of the securities owned by the
Fund as well as the Fund's financial statements.
Telephone Services
The following telephone privileges ("Telephone Privileges") can be used:
(1) the privilege allowing the shareholder to make telephone redemptions
for amounts up to $50,000 to be mailed to the shareholder's address of
record is available automatically;
(2) the privilege allowing the shareholder or his or her dealer to make
telephone exchanges is available automatically;
(3) the privilege allowing the shareholder to make telephone redemptions
for amounts over $1,000, to be remitted by wire to the shareholder's
predesignated bank account, is available by election on the
Application accompanying this Prospectus. A current shareholder who
did not previously request such telephone wire privilege on his or her
original Application may request the privilege by completing a
Telephone Redemption-by-Wire Form which may be obtained by calling
1-800-562-0032. The Telephone Redemption-by-Wire Form requires a
signature guarantee; and
(4) the privilege allowing the shareholder to make telephone purchases or
redemptions, transmitted via the Automated Clearing House system, into
or from the shareholder's predesignated bank account, is available
upon completion of the requisite initial documentation. For details
and forms, call 1-800-562-0032. The documentation requires a signature
guarantee.
A shareholder may decline the automatic Telephone Privileges set forth in
(1) and (2) above by so indicating on the Application accompanying this
Prospectus.
A shareholder may discontinue any Telephone Privilege at any time by
advising the Service Center that the shareholder wishes to discontinue the use
of such privileges in the future.
Unless such Telephone Privileges are declined, a shareholder is deemed to
authorize the Service Center and the Transfer Agent to: (1) act upon the
telephone instructions of any person purporting to be the shareholder to redeem,
or purporting to be the shareholder or the shareholder's dealer to exchange,
shares from any account for which such services have been authorized; and (2)
honor any written instructions for a change of address regardless of whether
such request is accompanied by a signature guarantee. All telephone calls will
be recorded. None of the Fund, the other Eligible Funds, the Transfer Agent, the
Investment Manager or the Distributor will be liable for any loss, expense or
cost arising out of any request, including any fraudulent or unauthorized
requests. Shareholders assume the risk to the full extent of their accounts that
telephone requests may be unauthorized. Reasonable procedures will be followed
to confirm that instructions communicated by telephone are genuine. The
shareholder will not be liable for any losses arising from unauthorized or
fraudulent instructions if such procedures are not followed.
Shareholders may redeem or exchange shares by calling toll-free
1-800-562-0032. Although it is unlikely, during periods of extraordinary market
conditions, a shareholder may have difficulty in reaching
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<PAGE>
the Service Center at such telephone number. In that event, the shareholder
should contact the Service Center at 1-800-357-7800, or otherwise at its main
office at One Financial Center, Boston, Massachusetts 02111-2690.
Shareholder Account Inquiries:
Please call 1-800-562-0032
Call this number for assistance in answering general questions on your account,
including account balance, available shareholder services, statement
information and performance of the Fund. Account inquiries may also be made in
writing to State Street Research Service Center, P.O. Box 8408, Boston,
Massachusetts 02266-8408. A fee of up to $10 will be charged against an account
for providing additional account transcripts or photocopies of paid redemption
checks or for researching records in response to special requests.
Shareholder Telephone Transactions:
Please call 1-800-562-0032
Call this number for assistance in purchasing shares by wire and for telephone
redemptions or telephone exchange transactions. The Service Center will require
some form of personal identification prior to acting upon instructions received
by telephone. Written confirmation of each transaction will be provided.
The Fund and its Shares
The Fund was organized in 1985 as a series of State Street Research Money
Market Trust, a Massachusetts business trust. The Trustees have authorized
shares of the Fund to be issued in four classes: Class B, Class C, Class E and
Class S shares. The Trust is registered with the Securities and Exchange
Commission (the "Commission") as an open-end management investment company. The
fiscal year end of the Fund is March 31.
Except for those differences between the classes of shares described below
and elsewhere in the Prospectus, each share of the Fund has equal dividend,
redemption and liquidation rights with other shares of the Fund and when issued
is fully paid and nonassessable.
Each share of each class of shares represents an identical legal interest
in the same portfolio of investments of the Fund, has the same rights and is
identical in all respects, except that Class B and Class C shares bear the
expenses of the deferred sales arrangement and any expenses (including the
higher service and distribution fees) resulting from such sales arrangement,
and certain other incremental expenses related to a class. Each class will have
exclusive voting rights with respect to provisions of the Rule 12b-1
distribution plan pursuant to which the service and distribution fees, if any,
are paid. Although the legal rights of holders of each class of shares are
identical, it is likely that the different expenses borne by each class will
result in different net asset values and dividends. The different classes of
shares of the Fund also have different exchange privileges.
The rights of holders of shares may be modified by the Trustees at any
time, so long as such modifications do not have a material, adverse effect on
the rights of any shareholder. On any matter submitted to the shareholders, the
holder of shares of the Fund is entitled to one vote per share (with
proportionate voting for fractional shares) regardless of the relative net asset
value thereof.
Under the Master Trust Agreement, no annual or regular meeting of
shareholders is required. Thus, there will ordinarily be no shareholder
meetings unless required by the 1940 Act. Except as otherwise provided under
said Act, the Board of Trustees will be a self-perpetuating body until fewer
than two thirds of the Trustees serving as such are Trustees who were elected
by shareholders of the Trust. In the event less than a majority of the Trustees
serving as such were elected by shareholders of the Trust, a meeting of
shareholders will be called to elect Trustees. Under the Master Trust
Agreement, any Trustee may be removed by vote of two thirds of the outstanding
Trust shares; holders of 10% or more of the outstanding shares of the Trust can
require that the Trustees call a meeting of shareholders for purposes of voting
on the removal of one or more Trustees. In
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connection with such meetings called by shareholders, shareholders will be
assisted in shareholder communications to the extent required by applicable
law.
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
Investment Manager believes that, in view of the above, the risk of personal
liability to shareholders is remote.
As of December 31, 1997, Metropolitan was the record and/or beneficial
owner, directly or indirectly through its subsidiaries or affiliates, of
approximately 26.2% of the outstanding Class E shares of the Fund, and may be
deemed to be in control of such Class E shares of the Fund. Ownership of 25% or
more of a voting security is deemed "control" as defined in the 1940 Act. So
long as 25% of a class of shares is so owned, such owners will be presumed to be
in control of such class of shares for purposes of voting on certain matters,
such as any Distribution Plan for a given class.
Management of the Fund
Under the provisions of the Master Trust Agreement and the laws of
Massachusetts, responsibility for the management and supervision of the Fund
rests with the Trustees.
The Fund's investment manager is State Street Research & Management
Company. The Investment Manager is charged with the overall responsibility for
managing the investments and business affairs of the Fund, subject to the
authority of the Board of Trustees.
The Investment Manager was founded by Paul Cabot, Richard Saltonstall and
Richard Paine to serve as investment adviser to one of the nation's first
mutual funds, presently known as State Street Research Investment Trust, which
they had formed in 1924. Their investment management philosophy emphasized
comprehensive fundamental research and analysis, including meetings with the
management of companies under consideration for investment. The Investment
Manager's portfolio management group has extensive investment industry
experience managing equity and debt securities. In managing debt securities, if
any, for a portfolio, the Investment Manager may consider yield curve
positioning, sector rotation and duration, among other factors.
The Investment Manager and the Distributor are indirect wholly owned
subsidiaries of Metropolitan and are located at One Financial Center, Boston,
Massachusetts 02111-2690.
The Investment Manager has entered into an Advisory Agreement with the
Trust pursuant to which investment research and management, administrative
services, office facilities and personnel are provided for the Fund in
consideration of a fee from the Fund.
Under its Advisory Agreement with the Trust, the Investment Manager
receives a monthly investment advisory fee equal to 0.50% (on an annual basis)
of the average daily value of the net assets of the Fund. The Fund bears all
costs of its operation other than those incurred by the Investment Manager
under the Advisory Agreement. In particular, the Fund pays, among other
expenses, investment advisory fees, certain distribution expenses under the
Fund's Distribution Plan and the compensation and expenses of the Trustees who
are not otherwise currently affiliated with the Investment Manager or any of
its affiliates. The Investment Manager compensates Trustees of the Trust if
such persons are employees or affiliates of the Investment Manager or its
affiliates.
Subject to the policy of seeking best overall price and execution, sales
of shares of the Fund may be considered by the Investment Manager in the
selection of broker or dealer firms for the Fund's portfolio transactions.
The Investment Manager has a Code of Ethics governing personal securities
transactions of certain of its employees; see the Statement of Additional
Information.
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Dividends and Distributions; Taxes
The Fund has qualified and elected to be treated as a regulated investment
company under Subchapter M of the Internal Revenue Code for its most recent
fiscal year and intends to qualify as such in future fiscal years, although it
cannot give complete assurance that it will do so. As long as it so qualifies
and satisfies certain distribution requirements, it will not be subject to
federal income tax on its taxable income (including capital gains, if any)
distributed to its shareholders. Consequently, the Fund intends to distribute
annually to its shareholders substantially all of its net investment income and
any capital gain net income (capital gains net of capital losses).
The Fund declares dividends from its net investment income on each day on
which it is open for business and pays dividends monthly. Unless a shareholder
chooses a different available distribution method, dividends will be
automatically reinvested in additional shares of the Fund at net asset value. A
shareholder may change the method of receiving dividends at any time by
notifying the Service Center. The Fund will provide its shareholders of record
with annual information on a timely basis concerning the federal tax status of
dividends and distributions during the preceding calendar year.
Dividends paid by the Fund from taxable net investment income and
distributions of any net short-term capital gains, whether paid in cash or
reinvested in additional shares, will be taxable for federal income tax
purposes to shareholders as ordinary income. Distributions of net capital gains
(the excess of net long-term capital gains over net short-term capital losses),
if any, which are designated as capital gains distributions, whether paid in
cash or reinvested in additional shares, will be taxable for federal income tax
purposes to shareholders as long-term capital gains, regardless of how long
shareholders have held their shares.
Dividends and other distributions and proceeds of redemption of Fund
shares paid to individuals and other nonexempt payees will be subject to a 31%
federal backup withholding tax if the Transfer Agent is not provided with the
shareholder's correct taxpayer identification number and certification that the
shareholder is not subject to such backup withholding.
The foregoing discussion relates only to generally applicable federal
income tax provisions in effect as of the date of this Prospectus. Dividends
from the Fund that represent interest income from U.S. Government securities
may not be tax-exempt at some state and local levels. Therefore, prospective
shareholders are urged to consult their own tax advisers regarding tax matters,
including state and local tax consequences.
Other Investment Practices
Foreign Banks and Securities
The Fund may elect to concentrate its investments in obligations of domestic
banks, including certain U.S. branches and agencies of foreign banks and
certain foreign branches of U.S. banks as described under the caption "Money
Market Instruments" in the Statement of Additional Information. The Fund
expects that investments, if any, in such obligations will consist principally
of obligations which are issued by U.S. branches and agencies of foreign banks
for sale in the U.S., and the Investment Manager believes that the risks
described below are reduced in the case of such bank obligations. The Fund also
may invest up to 25% of its total assets in obligations of foreign banks
located abroad and obligations of foreign branches of domestic banks not having
a guarantee of the domestic bank.
The Fund may invest up to 15% of its total assets in money market
instruments of issuers organized and located in Canada payable in U.S. dollars
as described under "The Fund's Investments," subject to the issuer
diversification and other restrictions described under "Limiting Investment
Risk." Securities of such issuers guaranteed as to principal and interest by a
U.S. parent and otherwise meeting applicable quality standards will not be
included for purposes of calculating the 15% limitation.
Investing in foreign branches of U.S. banks, U.S. branches of foreign
banks, foreign branches of foreign banks and U.S. agencies of foreign banks may
involve risks. These risks may include future unfavorable political and
economic developments, possible withholding or confiscatory taxes, seizure of
22
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foreign deposits, currency controls, interest limitations and other
governmental restrictions which might affect payment of principal or interest,
and possible difficulties pursuing or enforcing claims against banks located
outside the U.S. Additionally, foreign issuers are not generally subject to
uniform accounting, auditing and financial reporting standards or other
regulatory requirements and practices comparable to domestic issuers, and there
may be less public information available about foreign banks and their branches
and agencies.
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
(see "The Fund's Investments--U.S. Government and Related Obligations" above).
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 extending for more than seven days when combined with any other
illiquid securities held by the Fund will be limited to 10% of the Fund's total
assets.
When-Issued Securities
The Fund may purchase "when-issued" debt securities, which are traded on a
price or yield basis prior to actual issuance. Such purchases will be made only
to achieve the Fund's investment objective and not for leverage. The
when-issued trading period generally lasts from a few days to up to a month or
more; during this period interest will not accrue. A frequent form of
when-issued trading occurs in the U.S. Treasury market when dealers begin to
trade a new issue of bonds or notes shortly after a Treasury financing is
announced, but prior to the actual sale of the securities. Such transactions
may involve a risk of loss if the value of the securities falls below the price
committed to prior to actual issuance. The Trust's custodian will establish a
segregated account for the Fund when it purchases securities on a when-issued
basis consisting of cash or liquid securities equal to the amount of the
when-issued commitments. Securities transactions involving delayed deliveries
or forward commitments are frequently characterized as when-issued transactions
and are similarly treated by the Fund.
Securities Lending
The Fund may lend portfolio securities with a value of up to 331/3% 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 invested in quality
short-term unaffiliated mutual funds, 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 repurchase agreements, among similar
investments. The investing of cash collateral received from loaning portfolio
securities involves leverage which magnifies the potential for gain or loss on
monies invested and, therefore, results in an increase in the volatility of the
Fund's outstanding securities. Such loans may be terminated at any time.
The Fund will retain rights to dividends, interest or other distributions
on the loaned securities. Should the borrower of the securities fail
financially, there is a risk of delay in recovery of the securities or loss of
rights in the collateral. Loans are made only to borrowers which are deemed by
the Investment Manager to be of good financial standing.
Restricted Securities
The Fund may invest in securities restricted as to resale. Restricted securities
may be subject to the risks of illiquidity and subjective valuations because
generally, there is a limited resale market for them. Some restricted securities
in which the Fund may invest may be resold pursuant to Rule 144A under the
Securities Act of 1933, as amended, which allows the Fund more flexibility to
resell such securities, specifically to certain qualified institutional buyers.
The market for Rule 144A securities, however, still is developing, and thus,
even securities sold pursuant to the rule may be illiquid or their current
market value difficult to determine.
Calculation of Performance Data
From time to time, in advertisements or in communications to shareholders or
prospective investors, the
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Fund may compare the performance of its Class B, Class C, Class E or Class S
shares to that of other mutual funds with similar investment objectives, to
certificates of deposit and/or to other financial alternatives. The Fund may
also compare its performance to appropriate indices such as the Consumer Price
Index and/or to appropriate rankings or averages such as those compiled by
Lipper Analytical Services, Inc. for the Money Market Instrument Fund category
or to those compiled by Morningstar, Inc., Money Magazine, Business Week,
Forbes Magazine, The Wall Street Journal, Fortune Magazine, Investor's Daily or
Donoghue's Money Fund Report.
The current yield of the Fund quoted at any time represents the amount
being earned on a current basis, based on dividends declared daily from net
investment income, and is a function of the types of instruments in the Fund's
portfolio, their quality and length of maturity, and the Fund's operating
expenses. The length of maturity for the portfolio is the average
dollar-weighted maturity of the portfolio. This means that the portfolio has an
average maturity of a stated number of days for all of its issues. The
calculation is weighted by the relative value of each investment. Net
investment income consists of interest income accrued on the portfolio assets
of the Fund, less all expenses and liabilities of the Fund chargeable against
such income including all recurring charges. Recurring and nonrecurring charges
for optional services which only certain shareholders elect and which involve
nominal fees, such as the $7.50 fee for remittance of redemption proceeds by
wire, are not taken into account. The Fund's simple annualized yield is its net
investment income expressed as a percentage of assets on an annualized basis
for a seven-day period. The Fund's compounded effective yield is calculated
similarly except, when annualized, the income earned is assumed to be
reinvested.
The yield of the Fund is computed separately for each class of shares and
fluctuates daily as the income earned on the investments of the Fund
fluctuates. Accordingly, there is no assurance that the yield quoted on any
given occasion will remain in effect for any period of time. There is also no
guarantee that the net asset value or stated rate of return will remain
constant. A shareholder's investment in the Fund is not insured. Investors
comparing results of the Fund with investment results and yields from other
sources, such as banks or savings and loan associations, should understand this
distinction. In addition, shareholders and prospective investors should note
that yields of funds valuing their securities portfolio at market prices will
not be comparable to the yield of the Fund, which values its securities
portfolio at amortized cost. Any voluntary waiver of fees or assumption of
expenses by the Fund's affiliates will increase performance results.
In its supplemental sales literature, the Fund may provide total return
calculations. Total return is computed separately for each class of shares of
the Fund. The average annual total return ("standard total return") for shares
of the Fund is computed by determining the average annual compounded rate of
return for a designated historical period as applied to a hypothetical $1,000
initial investment, which is redeemed in total at the end of such period. In
making the calculation, all dividends and distributions are assumed to be
reinvested, and all accrued expenses and recurring charges, including
management and distribution fees, are recognized. The calculation also reflects
the highest applicable contingent deferred sales charge, determined as of the
assumed date of redemption. Standard total return may be accompanied with
nonstandard total return information computed in the same manner, but for
differing periods and with or without annualizing the total return or taking
sales charges, if any, into account.
Shares of the Fund had no class designations until June 1, 1993, when
designations were assigned based on the pricing and Rule 12b-1 fees applicable
to shares sold thereafter. Performance data for a specified class includes
periods prior to the adoption of class designations.
Performance data for periods prior to June 1, 1993 do not reflect
additional Rule 12b-1 Distribution Plan fees, if any, of up to 1% per year,
depending on the class of shares, which will adversely affect performance
results for periods after such date. Performance data or rankings for a given
class of shares should be interpreted carefully by investors who hold or may
invest in a different class of shares.
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STATE STREET RESEARCH
State Street Research
Money Market Fund
MARCH 16, 1998
P R O S P E C T U S
STATE STREET RESEARCH
MONEY MARKET FUNDS
One Financial Center
Boston, MA 02111
INVESTMENT ADVISER
State Street Research &
Management Company
One Financial Center
Boston, MA 02111
DISTRIBUTOR
State Street Research
Investment Services, Inc.
One Financial Center
Boston, MA 02111
SERVICE CENTER
State Street Research
Service Center
P.O. Box 8408
Boston, MA 02266
800-562-0032
CUSTODIAN
State Street Bank and
Trust Company
225 Franklin Street
Boston, MA 02110
LEGAL COUNSEL
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
<PAGE>
State Street Research Money Market Fund
a Series of
State Street Research Money Market Trust
STATEMENT OF ADDITIONAL INFORMATION
March 16, 1998
TABLE OF CONTENTS
Page
ADDITIONAL INVESTMENT POLICIES AND RESTRICTIONS.......................... 2
MONEY MARKET INSTRUMENTS................................................. 5
DEBT SECURITIES RATINGS.................................................. 9
ADDITIONAL INFORMATION CONCERNING CERTAIN INVESTMENTS.................... 10
TRUSTEES AND OFFICERS.................................................... 13
INVESTMENT ADVISORY SERVICES............................................. 18
PURCHASE AND REDEMPTION OF SHARES........................................ 19
NET ASSET VALUE.......................................................... 20
PORTFOLIO TRANSACTIONS................................................... 21
CERTAIN TAX MATTERS...................................................... 24
DISTRIBUTION OF SHARES OF THE FUND....................................... 26
CALCULATION OF PERFORMANCE DATA.......................................... 28
CUSTODIAN................................................................ 32
INDEPENDENT ACCOUNTANTS.................................................. 32
FINANCIAL STATEMENTS..................................................... 32
The following Statement of Additional Information is not a Prospectus. It
should be read in conjunction with the Prospectus of State Street Research Money
Market Fund (the "Fund") dated March 16, 1998, which may be obtained without
charge from the offices of State Street Research Money Market Trust (the
"Trust") or State Street Research Investment Services, Inc. (the "Distributor"),
One Financial Center, Boston, Massachusetts 02111-2690.
CONTROL NUMBER: 1285L-970801(0998)SSR-LD MM-879D-897
<PAGE>
ADDITIONAL INVESTMENT POLICIES AND RESTRICTIONS
As set forth under "The Fund's Investments" and "Limiting Investment Risk"
in the Fund's Prospectus, the Fund has adopted certain investment restrictions.
All of the Fund's fundamental investment restrictions are set forth below.
These fundamental investment restrictions may not be changed except by the
affirmative vote of a majority of the Fund's outstanding voting securities as
defined in the Investment Company Act of 1940, as amended (the "1940 Act").
(Under the 1940 Act, a Avote of the majority of the outstanding voting
securities" means the vote, at the annual or a special meeting of security
holders duly called, (i) of 67% or more of the voting securities present at the
meeting if the holders of more than 50% of the outstanding voting securities are
present or represented by proxy or (ii) of more than 50% of the outstanding
voting securities, whichever is less.) Under these restrictions, it is the
Fund's policy:
(1) not to purchase a security of any one issuer (other than securities
issued or guaranteed as to principal or interest by the U.S.
Government or its agencies or instrumentalities) if such purchase
would, with respect to 75% of the Fund's total assets, cause more
than 5% of the Fund's total assets to be invested in the securities
of such issuer or cause more than 10% of the voting securities of
such issuer to be held by the Fund;
(2) not to issue senior securities;
(3) not to underwrite or participate in the marketing of securities of
other issuers;
(4) not to purchase or sell real estate in fee simple;
(5) not to invest in commodities or commodity contracts;
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(6) not to lend money directly to natural persons; however, the Fund may
lend portfolio securities and purchase bonds, debentures, notes, bills
and any other debt-related instruments or interests directly from the
issuer thereof or in the open market and may enter into repurchase
transactions collateralized by obligations of the U.S. Government and
its agencies and instrumentalities or other high quality securities;
(7) not to conduct arbitrage transactions;
(8) not to invest in interests in oil, gas or other mineral exploration or
development programs (provided that the Fund may invest in securities
which are based, directly or indirectly, on the credit of companies
which invest in or sponsor such programs);
(9) not to make any investment which would cause more than 25% of the
value of the Fund's total assets to be invested in the securities of
issuers principally engaged in any one industry, as based on industry
classifications as may be described in the Fund's Prospectus or
Statement of Additional Information, as amended from time to time,
except that the Fund will invest more than 25% of its total assets in
the financial services industry and except that this limitation does
not apply to securities issued or guaranteed by the U.S. Government or
its agencies or instrumentalities or obligations of
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banks as described in the Fund's Prospectus or Statement of Additional
Information, as amended from time to time; and
(10) not to borrow money (through reverse repurchase agreements or
otherwise) except for extraordinary and emergency purposes, such as
permitting redemption requests to be honored, and then not in an
amount in excess of 10% of the value of its total assets, provided
that additional investments will be suspended during any period when
borrowings exceed 5% of the Fund's total assets and provided further
that reverse repurchase agreements shall not exceed 5% of the Fund's
total assets. Reverse repurchase agreements occur when the Fund sells
money market securities and agrees to repurchase such securities at an
agreed-upon price, date and interest payment. The Fund would use the
proceeds from the transaction to buy other money market securities,
which are either maturing or under the terms of a resale agreement, on
the same day as (or day prior to) the expiration of the reverse
repurchase agreement, and would employ a reverse repurchase agreement
when interest income from investing the proceeds of the transaction is
greater than the interest expense of the reverse repurchase
transaction.
The following investment restrictions may be changed by vote of a majority
of the Trustees. Under these restrictions, it is the Fund's policy:
(1) not to purchase any security or enter into a repurchase agreement if
as a result more than 10% of its net assets would be invested in
securities that are illiquid (including repurchase agreements not
entitling the holder to payment of principal and interest within seven
days).
(2) not to purchase securities on margin, make a short sale of any
securities or purchase or deal in puts, calls, straddles or spreads
with respect to any security;
(3) not to hypothecate, mortgage or pledge any of its assets except as may
be necessary in connection with permitted borrowings and then not in
excess of 15% of the Fund's total assets, taken at cost;
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(4) not to purchase a security issued by another investment company,
except to the extent permitted under the 1940 Act or except by
purchase in the open market involving only customary brokers'
commissions, or securities acquired as dividends or distributions or
in connection with a merger, consolidation or similar transaction or
other exchange; and
(5) not to invest in companies for the purpose of exercising control over
their management.
MONEY MARKET INSTRUMENTS
The following describes further the money market instruments in which the
Fund will invest and is provided as a supplement to the discussion appearing in
the Fund's Prospectus.
Short-Term Corporate Debt Instruments. Short-term corporate debt
instruments include commercial paper (i.e., short-term, unsecured promissory
notes) issued by corporations (including bank holding companies) to finance
short-term credit needs. Commercial paper is usually sold on a discounted basis
and has a maturity at the time of issuance not exceeding nine months.
Short-term corporate debt instruments also include master demand notes.
Master demand notes are obligations of companies that permit an investor to
invest fluctuating amounts at varying rates of interest pursuant to arrangements
between the investor, as lender, and the companies, as borrowers. The Fund will
have the right, at any time, to increase the amount lent up to the full amount
provided by a note. Because the Fund may also decrease the amount lent at any
time, such instruments are highly liquid and in effect have a maturity of one
business day. The borrower will have the right, at any time, to prepay up to the
full amount of the amount borrowed without penalty. Because the notes are direct
lending obligations
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between the Fund and the borrowers, they are generally not traded and there is
no secondary market. Consequently, the Fund's ability to receive repayment will
depend upon the borrower's ability to pay principal and interest on the Fund's
demand. The Fund will invest only in notes that either have the ratings
described below for commercial paper or (because notes are not typically rated
by credit rating agencies) unrated notes that are issued by companies having the
ratings described below for issuers of commercial paper. The Fund does not
expect that the notes will be backed by bank letters of credit. The Investment
Manager will monitor the value of the Fund's investments in commercial paper and
master demand notes, taking into account such factors as the issuer's earning
power, cash flow and other liquidity ratios.
Commercial paper investments at the time of purchase will be rated in one
of the two highest rating categories by a nationally recognized statistical
rating organization, such as within the A-1 or A-2 categories by Standard &
Poor's Corporation ("S&P") or within the Prime-1 or Prime-2 categories by
Moody's Investors Service, Inc. ("Moody's"), or, if not rated, issued by
companies having an outstanding debt issue rated at least within the AA category
by S&P or within the Aa category by Moody's or equivalent. See "Debt Securities
Ratings" below for further information.
Under certain limited circumstances, the Fund may invest in nonconvertible
corporate debt securities (e.g., bonds and debentures which may be issued by
U.S. or Canadian corporations) with no more than thirteen months remaining
either to the date of maturity or the date on which, under the indenture
governing the security, it may be sold back to the issuer thereof for payment of
principal and accrued interest. Corporate debt securities with a remaining
maturity of thirteen months or less are liquid (and tend to become more liquid
as their maturities lessen) and are traded as money market securities. Such
securities also tend to have considerably less market value fluctuation than
longer term issues.
Corporate debt and other securities in which the Fund invests must be U.S.
dollar-denominated Eligible Securities (as defined in Rule 2a-7 under the 1940
Act) that are determined to present minimal credit risks. In general, the term
"Eligible Securities" is limited to:
(i) securities with remaining maturities of 397 calendar days or less that
are rated (or have been issued by an issuer that is rated with respect
to a class of debt obligations, or any debt obligation within that
class, that are comparable in priority and security with the relevant
security) by the requisite number (i.e., two, if two organizations
have issued ratings and one if only one has issued a rating) of
nationally recognized statistical rating organizations ("NRSROs") in
one of the two highest rating categories for short-term debt
obligations (within which there may be sub-categories or gradations
indicating relative standing), or
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(ii) securities that at the time of issuance had remaining maturities of
more than 397 calendar days but that now have remaining maturities of
397 calendar days or less and which were issued by an issuer that has
received from the requisite NRSROs a rating, with respect to a class
of short-term debt obligations (or any debt obligation within that
class) that is comparable in priority and security with the relevant
security, in one of the two highest rating categories for short-term
debt obligations (within which there may be sub-categories or
gradations indicating relative standing), or
(iii) securities which are "unrated" (as defined in Rule 2a-7) but
determined to be of comparable quality to the foregoing by the Fund's
Board of Trustees or the investment manager under their supervision
(provided that a security that at the time of issuance had a remaining
maturity of more than 397 calendar days but that has a remaining
maturity of 397 calendar days or less and that is an "unrated"
security is not an "Eligible Security" if the security has a long-term
rating from any NRSRO that is not within the NRSRO's three highest
long-term categories (within which there may be sub-categories or
gradations indicating relative standing)).
As indicated in the Fund's Prospectus, at least 95% of the Fund's total
assets will consist of government securities and "first tier" eligible
securities as defined in Rule 2a-7 under the 1940 Act, with the balance of the
Fund's assets invested in "second tier" eligible securities as defined in Rule
2a-7. For this purpose, "second tier" eligible securities are those which have
been (i) rated by at least two nationally recognized statistical rating
organizations in one of the two highest rating categories for short-term
obligations (or so rated by one such organization if it alone has rated the
security), (ii) issued by an issuer with comparable short-term obligations that
are rated in one of the two highest rating categories, or (iii) if unrated,
determined to be comparable to such securities. The Fund may not invest more
than the greater of 1% of its total assets or $1 million in "second tier"
eligible securities of any single issuer.
Bank Money Investments. Bank money investments include but are not limited
to certificates of deposit, bankers' acceptances and time deposits. Certificates
of deposit are generally short-term (i.e., less than one year), interest-bearing
negotiable certificates issued by commercial banks or savings and loan
associations against funds deposited in the issuing institution. A banker's
acceptance is a time draft drawn on a commercial bank by a borrower, usually in
connection with an international commercial transaction (to finance the import,
export, transfer or storage of goods). A banker's acceptance may be obtained
from a domestic or foreign bank including a U.S. branch or agency of a foreign
bank. The borrower is liable for payment as well as the bank, which
unconditionally guarantees to pay the draft at its face amount on the maturity
date. Most acceptances have maturities of six months or less and are traded in
secondary markets prior to maturity. Time deposits are nonnegotiable deposits
for a fixed period of time at a stated interest rate. The Fund will not invest
in any such bank money
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investment unless the investment is issued by a U.S. bank
that is a member of the Federal Deposit Insurance Corporation ("FDIC"),
including any foreign branch thereof, a U.S. branch or agency of a foreign bank,
a foreign branch of a foreign bank, or a savings bank or savings and loan
association that is a member of the FDIC and which at the date of investment has
capital, surplus and undivided profits (as of the date of its most recently
published financial statements) in excess of $50 million. The Fund will not
invest in time deposits maturing in more than seven days and will not invest
more than 10% of its total assets in time deposits maturing in two to seven
days.
U.S. branches and agencies of foreign banks are offices of foreign banks
and are not separately incorporated entities. They are chartered and regulated
either federally or under state law. U.S. federal branches or agencies of
foreign banks are chartered and regulated by the Comptroller of the Currency,
while state branches and agencies are chartered and regulated by authorities of
the respective states or the District of Columbia. U.S. branches of foreign
banks may accept deposits and thus are eligible for FDIC insurance; however, not
all such branches elect FDIC insurance. Unlike U.S. branches of foreign banks,
U.S. agencies of foreign banks may not accept deposits and thus are not eligible
for FDIC insurance. Both branches and agencies can maintain credit balances,
which are funds received by the office incidental to or arising out of the
exercise of their banking powers and can exercise other commercial functions,
such as lending activities.
U.S. Government Securities. U.S. Government securities consist of various
types of marketable securities issued by the U.S. Treasury, i.e., bills, notes
and bonds. Such securities are direct obligations of the U.S. Government and
differ mainly in the lengths of their maturities. Treasury bills, the most
frequently issued marketable government security, have a maturity of up to one
year and are issued on a discount basis. U.S. Government securities also include
securities issued under the U.S. Department of Treasury's STRIPS program, which
is described in the Fund's Prospectus.
Government Agency and Similar Securities. Government agency securities
consist of fixed income securities issued or guaranteed by agencies and
instrumentalities of the U.S. Government, including the various types of
instruments currently outstanding or which may be offered in the future.
Agencies and instrumentalities include, among others, the Federal Housing
Administration, Government National Mortgage Association ("GNMA"), Federal
National Mortgage Association, Export-Import Bank of the U.S., Federal Maritime
Administration, General Services Administration and Tennessee Valley Authority.
Instrumentalities include, for example, the Central Bank for Cooperatives,
Federal Home Loan Banks, Federal Farm Credit Banks, Student Loan Marketing
Association, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit
Banks, Federal Land Banks and the U.S. Postal Service. The Fund will purchase
such securities only so long as they are backed by any of (i) the full faith and
credit of the U.S. Treasury (e.g., U.S. Treasury bills, bonds and notes and GNMA
participation certificates), (ii) the right of the issuer to borrow a limited
amount from the U.S. Treasury (e.g., securities of the Farmers Home
Administration), (iii) the discretionary
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authority of the U.S. Government to purchase certain obligations of the agency
or instrumentality (e.g., securities of the Federal National Mortgage
Association) or (iv) the credit of the agency or instrumentality (e.g.,
securities of a Federal Home Loan Bank).
The Fund may also invest in the obligations of mixed-ownership Government
corporations. Certain obligations of Resolution Funding Corporation, a
mixed-ownership Government corporation, are backed with respect to interest
payments by the U.S. Treasury, and with respect to principal payments by U.S.
Treasury obligations held in a segregated account with a Federal Reserve Bank.
Except for certain mortgage-related securities, the Fund will only invest in
obligations issued by mixed-ownership Government corporations where such
securities are guaranteed as to payment of principal or interest by the U.S.
Government or a U.S. Government agency or instrumentality, and any unguaranteed
principal or interest is otherwise supported by U.S. Government obligations held
in a segregated account.
Custodial Receipts. The Fund may acquire, subject to the limitations
described herein, custodial receipts that evidence ownership of future interest
payments, principal payments or both on certain U.S. Treasury notes or bonds in
connection with programs sponsored by banks and brokerage firms. Such notes and
bonds are held in custody by a bank on behalf of the owners of the receipts.
These custodial receipts are known by various names, including "Treasury
Receipts" ("TRs"), "Treasury Investment Growth Receipts" ("TIGRs") and
ACertificates of Accrual on Treasury Securities" ("CATS"), and may not be
treated as U.S. Government securities.
DEBT SECURITIES RATINGS
Description of Commercial Paper Ratings
Commercial paper rated within the "A" category (highest quality) by S&P is
issued by entities which have liquidity ratios which are adequate to meet cash
requirements. Long-term senior debt is rated A or better, although in some cases
credits within the "BBB" category may be allowed. The issuer has access to at
least two additional channels of borrowing. Basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances. Typically, the
issuer's industry is well established and the issuer has a strong position
within the industry. The reliability and quality of management are unquestioned.
The relative strength or weakness of the above factors determines whether the
issuer's commercial paper is rated A-1, A-2 or A-3. (Those A-1 issues determined
to possess overwhelming safety characteristics are denoted with a plus (+) sign:
A-1+.)
The rating Prime is the highest commercial paper rating category assigned
by Moody's. Among the factors considered by Moody's in assigning ratings are the
following: evaluation of the management of the issuer; economic evaluation of
the issuer's industry or industries and an appraisal of speculative-type risks
which may be inherent in certain areas; evaluation of the issuer's products in
relation to competition and customer acceptance; liquidity; amount and quality
of long-term debt; trend of earnings over a period of 10 years; financial
management of obligations which may be present or may arise as a result of
public interest questions and preparations to meet such obligations. These
factors are all considered in determining whether the commercial paper is rated
Prime-1, Prime-2 or Prime-3.
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Description of the highest corporate bond and debenture ratings of S&P
AAA: An obligation rated within the AAA category has the highest rating
assigned by S&P. Capacity to meet the financial commitment on the obligation is
extremely strong.
AA: An obligation rated within the AA category differs from AAA issues only
in small degree. Capacity to meet the financial commitment on the obligation is
very strong.
Description of the highest corporate bond and debenture ratings of Moody's
Aaa: Bonds which are rated within the Aaa category are judged to be of the
best quality. Interest payments are protected by a large or exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated within the Aa category are judged to be of high
quality by all standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may be
other elements present which make the long term risks appear somewhat greater
than in Aaa securities.
ADDITIONAL INFORMATION CONCERNING
CERTAIN INVESTMENTS
Restricted Securities
The Fund's policy is to not make an investment in restricted securities,
including Rule 144A and other restricted securities, if as a result more than
50% of its total assets are invested in such securities, provided not more than
10% of its total assets are invested in Non-Rule 144A restricted 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. The Trustees will periodically
monitor the liquidity determinations. 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
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purchasing such securities. Also, the Fund may be adversely impacted by the
possible illiquidity and subjective valuation of such securities in the absence
of a market for them.
Industry Classifications
In determining how much of the portfolio is invested in a given industry,
the following industry classifications are currently used. Securities issued by
foreign governments are excluded. Companies engaged in the business of financing
may be classified according to the industries of their parent or sponsor
companies, or industries that otherwise most affect such financing companies.
Issuers of asset-backed pools will be classified as separate industries based on
the nature of the underlying assets, such as mortgages and credit card
receivables. "Asset-backed Mortgages" includes private pools of
nongovernment-backed mortgages. The industry concentration limitations do not
apply to bank money instruments, e.g. interest bearing negotiable certificates,
issued by the foreign branch of a domestic bank, if the domestic parent would
be unconditionally liable in the event that the foreign branch failed to pay on
its instruments for any reason.
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<TABLE>
<S> <C> <C>
Aerospace Electronic Components Oil Service
Airline Electronic Equipment Paper Products
Asset-backed -- Mortgages Entertainment Personal Care
Asset-backed -- Credit Card Financial Service Photography
Receivables Food & Beverage Plastics
Automotive Forest Products Printing & Publishing
Automotive Parts Gaming & Lodging Railroad
Bank Gas Real Estate and Building
Building Gas Transmission Recreation
Business Service Grocery Retail Trade
Cable Healthcare & Hospital Savings & Loan
Capital Goods & Equipment Management Shipping & Transportation
Chemical Computer Software & Service Hospital Supply Technology & Communications
Conglomerate Hotel & Restaurant Telephone
Consumer Goods & Services Insurance Textile & Apparel
Container Machinery Tobacco
Cosmetics Media Truckers
Diversified Metal & Mining Trust Certificates--
Drug Office Equipment Governmental Related
Electric Oil Production Lending
Electric Equipment Oil Refining & Marketing
</TABLE>
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TRUSTEES AND OFFICERS
The Trustees and principal officers of the Trust, their addresses, and
their principal occupations and positions with certain affiliates of State
Street Research & Management Company (the "Investment Manager") are set forth
below.
*+Dyann H. Cowling, One Financial Center, Boston, MA 02111, serves as Vice
President of the Trust. She is 34. Her principal occupation is portfolio manager
and fixed income trader for State Street Research & Management Company. Her
principal occupation during the past five years has been fixed income trader for
State Street Research & Management Company.
+Steve A. Garban, The Pennsylvania State University, 210 Old Main,
University Park, PA 16802, serves as Trustee of the Trust. He is 60. He is
retired and was formerly Senior Vice President for Finance and Operations and
Treasurer of The Pennsylvania State University.
+Malcolm T. Hopkins, 14 Brookside Road, Biltmore Forest, Asheville, NC
28803, serves as Trustee of the Trust. He is 70. He is engaged principally in
private investments. Previously, he was Vice Chairman of the Board and Chief
Financial Officer of St. Regis Corp.
*+John H. Kallis, One Financial Center, Boston, MA 02111, serves as Vice
President of the Trust. He is 57. His principal occupation is Senior Vice
President of State Street Research & Management Company. During the past five
years he has also served as portfolio manager for State Street Research &
Management Company.
+Edward M. Lamont, Box 1234, Moores Hill Road, Syosset, NY 11791, serves as
Trustee of the Trust. He is 71. He is engaged principally in private investments
and civic affairs, and is an author of business history. Previously, he was with
an affiliate of J.P. Morgan & Co. in New York.
+Robert A. Lawrence, Saltonstall & Co., 175 Federal Street, Boston, MA
02110, serves as Trustee of the Trust. He is 71. His principal occupation during
the past five years has been Associate, Saltonstall & Co., a private investment
firm.
_________
* or + See footnotes on page 15.
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*+Gerard P. Maus, One Financial Center, Boston, MA 02111, serves as
Treasurer of the Trust. He is 46. His principal occupation is currently, and
during the past five years has been, Executive Vice President, Treasurer, Chief
Financial Officer and Director of State Street Research & Management Company.
Mr. Maus's other principal business affiliations include Executive Vice
President, Treasurer, Chief Financial Officer and Director of State Street
Research Investment Services, Inc. and Executive Vice President, Chief Financial
Officer, Administrative Officer and Director, GFM International Investors, Inc.
*+Francis J. McNamara, III, One Financial Center, Boston, MA 02111, serves
as Secretary and General Counsel of the Trust. He is 42. His principal
occupation is Executive Vice President, General Counsel and Secretary of State
Street Research & Management Company. During the past five years he has also
served as Senior Vice President of State Street Research & Management Company,
Senior Vice President of State Street Research Investment Services, Inc., and as
Senior Vice President, General Counsel and Assistant Secretary of The Boston
Company, Inc., Boston Safe Deposit and Trust Company and The Boston Company
Advisors, Inc. Mr. McNamara's other principal business affiliations include
Exective Vice President, General Counsel and Clerk of State Street Research
Investment Services, Inc. and Executive Vice President and General Counsel, GFM
International Investors, Inc.
+Dean O. Morton, 3200 Hillview Avenue, Palo Alto, CA 94304, serves as
Trustee of the Trust. He is 65. He is retired and was formerly Executive Vice
President, Chief Operating Officer and Director, Hewlett-Packard Company.
*JoAnne C. Mulligan, One Financial Center, Boston, MA 02111, serves as Vice
President of the Trust. She is 40. Her principal occupation is Senior Vice
President of State Street Research & Management Company. During the past five
years she has also served as Vice President and as portfolio manager and fixed
income trader for State Street Research & Management Company.
+Thomas L. Phillips, 141 Spring Street, Lexington, MA 02173 serves as
Trustee of the Trust. He is 73. He is retired and was formerly Chairman of the
Board and Chief Executive Officer of Raytheon Company, of which he remains a
Director.
+Toby Rosenblatt, 3409 Pacific Avenue, San Francisco, CA 94118, serves as
Trustee of the Trust. He is 59. His principal occupation during the past five
years has been President of The Glen Ellen Company, a private investment
company, and Vice President of Founders Investments Ltd.
________
* or + See footnotes on page 15.
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+Michael S. Scott Morton, Massachusetts Institute of Technology, 77
Massachusetts Avenue, Cambridge, MA 02139, serves as Trustee of the Trust. He is
60. 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.
*+Thomas A. Shively, One Financial Center, Boston, MA 02111, serves as Vice
President of the Trust. He is 43. 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 Senior Vice President of State Street
Research & Management Company. Mr. Shively's other principal business
affiliation is Director of State Street Research Investment Services, Inc.
*+Ralph F. Verni, One Financial Center, Boston, MA 02111, serves as
Chairman of the Board, President, Chief Executive Officer and Trustee of the
Trust. He is 55. His principal occupation is currently, and during the past five
years has been, Chairman of the Board, President, Chief Executive Officer and
Director of State Street Research & Management Company. Mr. Verni's other
principal business affiliations include Chairman of the Board and Director of
State Street Research Investment Services, Inc., (and until February, 1996,
prior positions as President and Chief Executive Officer of that company) and
Chairman of the Board, President, Chief Executive Officer and Director of GFM
International Investors, Inc.
+Jeptha H. Wade, 251 Old Billerica Road, Bedford, MA 01730, serves as
Trustee of the Trust. He is 73. He is retired and was formerly Of Counsel for
the law firm Choate, Hall & Stewart. He was a partner of that firm from 1960 to
1987.
________
* These Trustees and/or officers are or may be deemed to be "interested
persons" of the Trust under the 1940 Act because of their affiliations with
the Fund's investment adviser.
+ Serves as a Trustee/Director and/or officer of one or more of the following
investment companies, each of which has a direct or indirect advisory
relationship with the Investment Manager or its affiliates: State Street
Research Equity Trust, State Street Research Financial Trust, State Street
Research Income Trust, State Street Research Money Market Trust, State
Street Research Tax-Exempt Trust, State Street Research Capital Trust,
State Street Research Exchange Trust, State Street Research Growth Trust,
State Street Research Master Investment Trust, State Street Research
Securities Trust, State Street Research Portfolios, Inc. and Metropolitan
Series Fund, Inc.
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As of December 31, 1997, the following persons or entities were the record
and/or beneficial owners of the approximate amounts of each class of shares of
the Fund as set forth beside their names:
Shareholder %
Class B State Street Bank 11.2
Class C(e) Metropolitan Life 64.2
Class E Metropolitan Life 26.2
Class S(e) Chase Manhattan 39.5
State Street Bank 29.6
Metropolitan Life 19.2
The full name and address of each of the above persons or entities are as
follows:
Metropolitan Life Insurance Company (c)
One Madison Avenue
New York, New York 10010
State Street Bank and Trust Company (a)(d)
225 Franklin Street
Boston, Massachusetts 02110
The Chase Manhattan Bank (a)(b)
770 Broadway
New York, New York 10003
- --------------------
(a) The Fund believes that such entity does not have beneficial ownership of
such shares.
16
<PAGE>
(b) The Chase Manhattan Bank holds such shares as trustee under certain
employee benefit plans serviced by Metropolitan Life Insurance Company.
(c) Metropolitan Life Insurance Company ("Metropolitan"), a New York
corporation, was the record and/or beneficial owner, directly or indirectly
through its subsidiaries or affiliates, of such shares.
(d) Includes shares owned by the indicated holder of record for the benefit of
named owners who may separately own less than 5% of the share class.
(e) Prior to November 1, 1997, the Fund's current Class C shares were
designated as Class D shares and the Fund's current Class S shares were
designated as Class C shares.
As of December 31, 1997, the Trustees and principal officers of the Fund as
a group owned less than 1% of the Fund's outstanding Class E shares, and owned
no shares of the Fund's outstanding Class B, Class C or Class S shares.
Ownership of 25% or more of a voting security is deemed "control" as
defined in the 1940 Act. So long as 25% of a class of shares is so owned, such
owners will be presumed to be in control of such class of shares for purposes of
voting on certain matters submitted to a vote of shareholders, such as any
Distribution Plan for a given class.
The Trustees were compensated as follows:
- -----------------------------------------------------------------
Total
Compensation
Aggregate From Trust and
Name of Compensation Complex Paid
Trustee From Trust(a) to Trustees(b)
- -----------------------------------------------------------------
Steven A. Garban $0 $34,750
Malcolm T. Hopkins $0 $34,750
Edward M. Lamont $4,000 $59,375
Robert A. Lawrence $4,000 $92,125
Dean O. Morton $4,300 $96,125
Thomas L. Phillips $4,100 $59,375
Toby Rosenblatt $4,000 $59,375
Michael S. Scott Morton $4,500 $100,325
Ralph F. Verni $0 $0
Jeptha H. Wade $4,300 $63,375
(a) For the Fund's fiscal year ended March 31, 1997.
(b) Includes compensation on behalf of all series of 12 investment companies
for which the Investment Manager served directly or indirectly as
investment adviser or for which the Investment Manager served as
sub-investment adviser, and series of State Street Research Portfolios,
Inc., for which State Street Research Investment Services, Inc. served as
distributor. "Total Compensation from Trust and Complex Paid to Trustees"
is for the 12 months ended December 31, 1996. The Trust does not provide
any pension or retirement benefits for the Trustees.
17
<PAGE>
INVESTMENT ADVISORY SERVICES
State Street Research & Management Company, the Investment Manager, a
Delaware corporation, with offices at One Financial Center, Boston,
Massachusetts 02111-2690, acts as investment adviser to the Fund. The Advisory
Agreement provides that the Investment Manager shall furnish the Fund with an
investment program, office facilities and such investment advisory, research and
administrative services as may be required from time to time. The Investment
Manager compensates all executive and clerical personnel and Trustees of the
Trust if such persons are employees of the Investment Manager or its affiliates.
The Investment Manager is an indirect, wholly owned subsidiary of Metropolitan.
The advisory fee payable monthly by the Fund to the Investment Manager is
computed as a percentage of the average of the value of the Fund's net assets as
determined at the close of the New York Stock Exchange (the "NYSE") on each day
the NYSE is open for trading, at the annual rate of 0.50% of the net assets of
the Fund. For the fiscal years ended March 31, 1995, 1996 and 1997, the
investment advisory fees for the Fund were $843,948, $1,063,955 and $1,152,723,
respectively. The Distributor and its affiliates have from time to time and in
varying amounts voluntarily assumed some portion of fees or expenses relating to
the Fund. For the fiscal years ended March 31, 1995, 1996, and 1997, the
voluntary reduction of fees or assumption of expenses amounted to $922,515,
$600,157 and $377,715, respectively.
The Advisory Agreement provides that it shall continue in effect from year
to year with respect to the Fund as long as it is approved at least annually
both (i) by a vote of a majority of the outstanding voting securities of the
Fund (as defined in the 1940 Act) or by the Trustees of the Trust, and (ii) in
either event by a vote of a majority of the Trustees who are not parties to the
Advisory Agreement or "interested persons" of any party thereto, cast in person
at a meeting called for the purpose of voting on such approval. The Advisory
Agreement may be terminated on 60 days' written notice by either party and will
terminate automatically in the event of its assignment, as defined under the
1940 Act and regulations thereunder. Such regulations provide that a transaction
which does not result in a change of actual control or management of an adviser
is not deemed an assignment.
Under a Funds Administration Agreement between the Investment Manager and
the Distributor, the Distributor provides assistance to the Investment Manager
in performing certain fund administration services for the Trust, such as
assistance in determining the daily net asset value of shares of series of the
Trust and in preparing various reports required by regulations.
Under a Shareholders' Administrative Services Agreement between the Trust
and the Distributor, the Distributor provides shareholders' administrative
services, such as responding to inquiries and instructions from investors
respecting the purchase and redemption of shares of the Fund, and is entitled to
reimbursements of its costs for providing such services. Under
18
<PAGE>
certain arrangements for Metropolitan to provide subadministration services,
Metropolitan may receive a fee for the maintenance of certain share ownership
records for participants in sponsored arrangements, such as employee benefit
plans, through or under which Fund shares may be purchased.
Under the Code of Ethics of the Investment Manager, its employees in Boston
and selected other persons elsewhere involved in investment management
operations, are only permitted to engage in personal securities transactions in
accordance with certain conditions relating to such person's position, the
identity of the security, the timing of the transaction, and similar factors.
Such employees must report their personal securities transactions quarterly and
supply broker confirmations of such transactions to the Investment Manager.
PURCHASE AND REDEMPTION OF SHARES
Shares of the Fund are distributed by the Distributor. The Fund offers
multiple classes of shares which may be purchased at the next determined net
asset value per share plus, in the case of all classes except Class E and Class
S shares, a sales charge which is imposed on a deferred basis (the Class B and
Class C shares). General information on how to buy shares of the Fund, as well
as sales charges involved, are set forth under "urchase of Shares" in the
Prospectus. The following supplements that information.
Class S Shares - Class S shares are currently available to certain employee
benefit plans such as qualified retirement plans which meet criteria relating to
number of participants, service arrangements, or similar factors; insurance
companies; investment companies; advisory accounts of the Investment Manager;
endowment funds of nonprofit organizations with substantial minimum assets
(currently a minimum of $10 million); and other similar institutional investors.
Class S shares may be acquired through programs or products sponsored by
Metropolitan, its affiliates, or both for which Class S shares have been
designated. In addition, Class S shares are available through programs under
which, for example, investors pay an asset-based fee and/or a transaction fee to
intermediaries. Class S share availability is determined by the Distributor and
intermediaries based on the overall direct and indirect cost of a particular
program, expected assets, account sizes and similar considerations.
Reorganizations - In the event of mergers or reorganizations with other
public or private collective investment entities, including investment companies
as defined in the 1940 Act, as amended, the Fund may issue its shares at net
asset value (or more) to such entities or to their security holders.
Redemptions - 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. Although it has no present intention to do so, the Fund
may, under unusual circumstances, 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.
19
<PAGE>
NET ASSET VALUE
Securities held by the Fund are valued on the basis of amortized cost,
which involves a constant amortization of premium or accretion of discount to
maturity regardless of the impact of fluctuating interest rates on the market
value of the security. While this method provides certainty in valuation, it may
result in periods in which the value as determined by amortized cost is higher
or lower than the price the Fund would receive if it sold the security. On each
day that the NYSE is open for unrestricted trading, the net asset value of the
shares of the Fund is determined as of 12 noon and as of the close of regular
trading on the NYSE, which is ordinarily 4 P.M. New York City time. The NYSE is
currently closed on New Year's Day, Martin Luther King, Jr., Day, Presidents
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.
The Fund anticipates that under ordinary and usual circumstances it will be
able to maintain a constant net asset value of $1.00 per share and the Fund will
use its best efforts to do so. However, such maintenance at $1.00 might not be
possible if (1) there are changes in short-term interest rates or other factors
such as unfavorable changes in the credit of issuers affecting the values of the
securities held by the Fund and the Fund is compelled to sell such securities at
a time when the prices which it is able to realize vary significantly from the
values determined on the amortized cost basis or (2) the Fund should have
negative net income. It is expected that the Fund will have positive net income
at the time of each determination thereof. If for any reason the net income of
the Fund is negative, the Fund will first offset the negative amount with
respect to each shareholder account against the dividends which accrued during
the month with respect to each such account. If and to the extent that such
negative amount exceeds such accrued dividends at the end of the month (or at
any earlier time when redemption by the shareholder would reduce the net asset
value of the shares of the Fund in his account to less than the excess of such
negative account over accrued dividends), the Fund will reduce the number of its
outstanding shares by treating the shareholder as having contributed to the
capital of the Fund that number of shares of the Fund in the account of such
shareholder which represents the amount of such excess. Each shareholder will be
deemed to have agreed to such contributions in these circumstances by his
investment in the Fund.
The utilization of the amortized cost method of valuation requires
compliance with the requirements of Rule 2a-7 under the 1940 Act. Such
compliance requires, among other things, the following:
(1) The Trustees must adopt procedures whereby the extent of deviation, if
any, of the current net asset value per share calculated using
available market quotations (or an appropriate substitute which
reflects current market conditions) from the Fund's net asset value
per share under the amortized cost valuation method will be determined
at such intervals as the Trustees deem appropriate and reasonable in
light of current market conditions, and the Trustees must review
periodically the amount of the deviation as well as the methods used
to calculate the deviation;
20
<PAGE>
(2) In the event such deviation from the Fund's net asset value under the
amortized cost valuation method exceeds 1/2 of 1%, the Trustees must
promptly consider what action should be initiated by them, and when
the Trustees believe the extent of any deviation from the Fund's net
asset value per share under the amortized cost valuation method may
result in material dilution or any other unfair results to investors
or existing shareholders, they must take such action as they deem
appropriate to eliminate or reduce to the extent reasonably
practicable such dilution or unfair results (shareholders will be
notified in the event any such corrective action is taken by the
Trustees);
(3) The Fund may not purchase any instrument with a remaining maturity
greater than thirteen months or maintain a dollar-weighted average
portfolio maturity which exceeds 90 days;
(4) The Fund must limit its portfolio investments, including repurchase
agreements, to those United States dollar-denominated instruments
which the Trustees determine present minimal credit risks and which
are eligible securities as defined in Rule 2a-7; and
(5) The Fund must record, maintain and preserve certain records and
observe certain reporting obligations in accordance with Rule 2a-7.
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). Because the Fund only invests in securities with remaining
maturities of 397 calendar days or less, virtually all of which are excludable
in determining the rate of portfolio turnover, the portfolio turnover rate for
the Fund's two most recent fiscal year ends has been zero.
Brokerage Allocation
The Investment Manager's policy is to seek for its clients, including the
Fund, what in the Investment Manager's judgment will be the best overall
execution of purchase or sale orders and the most favorable net prices in
securities transactions consistent with its judgment
21
<PAGE>
as to the business qualifications of the various broker or dealer firms with
whom the Investment Manager may do business, and the Investment Manager may not
necessarily choose the broker offering the lowest available commission rate.
Decisions with respect to the market where the transaction is to be completed,
to the form of transaction (whether principal or agency), and to the allocation
of orders among brokers or dealers are made in accordance with this policy. In
selecting brokers or dealers to effect portfolio transactions, consideration is
given to their proven integrity and financial responsibility, their demonstrated
execution experience and capabilities both generally and with respect to
particular markets or securities, the competitiveness of their commission rates
in agency transactions (and their net prices in principal transactions), their
willingness to commit capital, and their clearance and settlement capability.
The Investment Manager makes every effort to keep informed of commission rate
structures and prevalent bid/ask spread characteristics of the markets and
securities in which transactions for the Fund occur. Against this background,
the Investment Manager evaluates the reasonableness of a commission or a net
price with respect to a particular transaction by considering such factors as
difficulty of execution or security positioning by the executing firm. The
Investment Manager may or may not solicit competitive bids based on its judgment
of the expected benefit or harm to the execution process for that transaction.
When it appears that a number of firms could satisfy the required standards
in respect of a particular transaction, consideration may also be given to
services other than execution services which certain of such firms have provided
in the past or may provide in the future. Negotiated commission rates and
prices, however, are based upon the Investment Manager's judgment of the rate
which reflects the execution requirements of the transaction without regard to
whether the broker provides services in addition to execution. Among such other
services are the supplying of supplemental investment research; general
economic, political and business information; analytical and statistical data;
relevant market information, quotation equipment and services; reports and
information about specific companies, industries and securities; purchase and
sale recommendations for stocks and bonds; portfolio strategy services;
historical statistical information; market data services providing information
on specific issues and prices; financial publications; proxy voting data and
analysis services; technical analysis of various aspects of the securities
markets, including technical charts; computer hardware used for brokerage and
research purposes; computer software and databases (including those used for
portfolio analysis and modeling 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.
In the case of the Fund and other registered investment companies advised
by the Investment Manager, the above services may include data relating to
performance, expenses and fees of those investment companies and other
investment companies; this information is used by the Trustees or directors of
the investment companies to fulfill their responsibility to oversee the quality
of the Investment Manager's advisory services and to review the fees and other
provisions contained in the advisory contracts between the investment companies
and the
22
<PAGE>
Investment Manager. The Investment Manager considers these investment company
services only in connection with the execution of transactions on behalf of its
investment company clients and not its other clients.
Certain of the nonexecution services provided by broker-dealers may in turn
be obtained by the broker-dealers from third parties who are paid for such
services by the broker-dealers. The Investment Manager has an investment in less
than ten percent of the outstanding equity of one such third party which is
engaged in the development and licensing of trading systems which include
portfolio analysis and modeling and other research and investment
decision-making capabilities. The Investment Manager may allocate brokerage to
broker-dealers who in turn pay this third party for the portion of the third
party's trading system provided to the Investment Manager which is estimated by
the Investment Manager to provide appropriate assistance in the investment
decision-making process. Because of its minority interest in the third party,
the Investment Manager could be said to benefit indirectly from such brokerage
allocation.
The Investment Manager regularly reviews and evaluates the services
furnished by broker-dealers. Among other measures, the Investment Manager's
investment management personnel seek to evaluate the quality of research and
other services received, and the results of this effort are made available to
the equity trading department which sometimes uses this information as a
consideration in the selection of brokers to execute portfolio transactions.
Some services furnished by broker-dealers may be used for research and
investment decision-making purposes, and also for marketing or administrative
purposes. Under these circumstances, the Investment Manager allocates the cost
of such services to determine the appropriate proportion of the cost which is
allocable to purposes other than research or investment decision-making and the
Investment Manager pays for that proportion directly from its own funds. Some
research and execution services may benefit the Investment Manager's clients as
a whole, while others may benefit a specific segment of clients. Not all such
services will necessarily be used exclusively in connection with the accounts
which pay the commissions to the broker-dealer producing the services.
The Investment Manager 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 Investment Manager or otherwise. There
may be, however, understandings with certain firms that in order for such firms
to be able to continuously supply certain services, they need to receive
allocation of a specified amount of brokerage business. These understandings are
honored to the extent possible in accordance with the policies set forth above.
It is not the Investment Manager's policy to intentionally pay a firm a
brokerage commission higher than that which another firm would charge for
handling the same transaction in recognition of services (other than execution
services) provided. However, the
23
<PAGE>
Investment Manager is aware that this is an area where differences of opinion as
to fact and circumstances may exist, and in such circumstances, if any, the
Investment Manager relies on the provisions of Section 28(e) of the Securities
Exchange Act of 1934, to the extent applicable. During the fiscal years ended
March 31, 1995, 1996 and 1997, the Fund paid no brokerage commissions in
secondary trading. During and at the end of its most recent fiscal year, the
Fund held in its portfolio no securities of any 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 Investment Manager 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 Investment Manager may make such allocations
to broker-dealers which have provided the Investment Manager with research and
brokerage services.
When more than one client of the Investment Manager is seeking to buy or
sell the same security, the sale or purchase is carried out in a manner which is
considered fair and equitable to all accounts. In allocating investments among
various clients (including in what sequence orders for trades are placed), the
Investment Manager will use its best business judgment and will take into
account such factors as the investment objectives of the clients, the amount of
investment funds available to each, the amount already committed for each client
to a specific investment and the relative risks of the investments, all in order
to provide on balance a fair and equitable result to each client over time.
Although sharing in large transactions may sometimes affect price or volume of
shares acquired or sold, overall it is believed there may be an advantage in
execution. The Investment Manager may follow the practice of grouping orders of
various clients for execution to get the benefit of lower prices or commission
rates. In certain cases where the aggregate order may be executed in a series of
transactions at various prices, the transactions are allocated as to amount and
price in a manner considered equitable to each so that each receives, to the
extent practicable, the average price of such transactions. Exceptions may be
made based on such factors as the size of the account and the size of the trade.
For example, the Investment Manager may not aggregate trades where it believes
that it is in the best interests of clients not to do so, including situations
where aggregation might result in a large number of small transactions with
consequent increased custodial and other transactional costs which may
disproportionately impact smaller accounts. Such disaggregation, depending on
the circumstances, may or may not result in such accounts receiving more or less
favorable execution relative to other clients.
CERTAIN TAX MATTERS
The Fund intends to qualify and elect to be treated each taxable year as a
"egulated investment company" under Subchapter M of the Internal Revenue Code of
1986, as amended
24
<PAGE>
(the "Code"), although it cannot give complete assurance that it will do so.
Accordingly, for each of the Fund's tax-years that has begun on or prior to
August 5, 1997, the Fund must, among other things, (a) derive at least 90% of
its gross income in each taxable year from dividends, interest, payments with
respect to securities loans, gains from the sale or other disposition of stock,
securities or foreign currencies, or other income (including, but not limited
to, gains from options, futures or forward contracts) derived with respect to
its business of investing in such stock, securities or currencies (the "90%
test"); (b) derive less than 30% of its gross income in each taxable year from
the sale or other disposition of any of the following held for less than three
months (the "30% test"): (i) stocks or securities, (ii) options, futures, or
forward contracts (other than options, futures or forward contracts on foreign
currencies), or (iii) foreign currencies (or options, futures, or forward
contracts on foreign currencies) but only if such currencies (or options,
futures or forward contracts) are not directly related to the Fund's principal
business of investing in stocks or securities (or options and futures with
respect to stocks or securities); (c) satisfy certain diversification
requirements; and (d) in order to be entitled to utilize the dividends paid
deduction, distribute annually at least 90% of its investment company taxable
income (determined without regard to the deduction for dividends paid). For any
Fund tax year beginning after August 5, 1997, the Fund will have to comply with
each of those requirements except the 30% test in order to qualify to be treated
as a regulated investment company under Subchapter M.
If the Fund should fail to qualify as a regulated investment company in any
year, it would lose the beneficial tax treatment accorded regulated investment
companies under Subchapter M of the Code and all of its taxable income would be
subject to tax at regular corporate rates without any deduction for
distributions to shareholders and such distributions will be taxable to
shareholders as ordinary income to the extent of the Fund's current or
accumulated earnings and profits. Also, the shareholders, if they received a
distribution in excess of current or accumulated earnings and profits, would
receive a return of capital that would reduce the basis of their shares of the
Fund.
The Fund will be liable for a nondeductible 4% excise tax on amounts not
distributed (or deemed distributed) on a timely basis in accordance with a
calendar year distribution requirement. To avoid the tax, during each calendar
year the Fund must distribute, or be deemed to have distributed an amount equal
to at least 98% of the sum of its ordinary income (not taking into account any
capital gains or losses) for the calendar year, and its capital gain net income
for the 12-month period ending on October 31, in addition to any undistributed
portion of the respective balances from the prior year. For this purpose, any
income or gain retained by the Fund that is subject to corporate tax will be
considered to have been distributed by year-end. The Fund intends to make
sufficient distributions to avoid this 4% excise tax.
Dividends paid by the Fund will be taxable for federal income tax purposes,
whether received in cash or reinvested in additional shares, as ordinary income.
Dividends paid by the
25
<PAGE>
Fund are not expected to be eligible for the dividends received deduction
available to corporations.
DISTRIBUTION OF SHARES OF THE FUND
State Street Research Money Market Trust is currently comprised of one
series: State Street Research Money Market Fund. The Trustees have authorized
the Fund to issue four classes of shares: Class B, Class C, Class E and Class S
shares. Prior to November 1, 1997, Class S shares were designated as Class C
shares and Class C shares were designated as Class D shares. The Trustees of the
Trust have authority to issue an unlimited number of shares of beneficial
interest of separate series, $.001 par value per share. A "series" is a separate
pool of assets of the Trust which is separately managed and has a different
investment objective and different investment policies from those of another
series. The Trustees have authority, without the necessity of a shareholder
vote, to create any number of new series or classes or to commence the public
offering of shares of any previously established series or class.
The Trust has entered into a Distribution Agreement with State Street
Research Investment Services, Inc., as Distributor, whereby the Distributor acts
as agent to sell and distribute shares of the Fund. Shares of the Fund are sold
through dealers who have entered into sales agreements with the Distributor. The
Distributor distributes shares of the Fund on a continuous basis at an offering
price which is based on the net asset value per share of the Fund plus a sales
charge which is imposed on a deferred basis (the Class B and Class C shares).
The Distributor may allow all or portions of such sales charges as concessions
to dealers.
For the periods shown below, the Distributor received contingent deferred
sales charges upon redemption of Class B and Class C shares of the Fund and paid
initial commissions to securities dealers for sales of such shares as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended
March 31, 1997 March 31, 1996 March 31, 1995
----------------- ----------------- -----------------
Contingent Commissions Contingent Commissions Contingent Commissions
Deferred Paid to Deferred Paid to Deferred Paid to
Sales Charges Dealers Sales Charges Dealers Sales Charges Dealers
------------- ----------- ------------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Class B $200,580 $13,752 $226,763 $13,749 $174,696 $7,654
Class C* $22,159 $3,502 $0 $198 $1,884 $123
</TABLE>
* Prior to November 1, 1997, the Fund's current Class C shares were designated
as Class D shares and Class S shares were designated as Class C shares.
For information on the amount of distribution fees paid by the Fund to
the Distributor, see below.
26
<PAGE>
The Fund has adopted a "Plan of Distribution Pursuant to Rule 12b-1" (the
"Distribution Plan") under which the Fund may engage, directly or indirectly, in
financing any activities primarily intended to result in the sale of Class B and
Class C shares, including, but not limited to, (1) the payment of commissions
and/or reimbursement to underwriters, securities dealers and others engaged in
the sale of shares, including payments to the Distributor to be used to pay
commissions and/or reimbursement to securities dealers (which securities dealers
may be affiliates of the Distributor) engaged in the distribution and marketing
of shares and furnishing ongoing assistance to investors, (2) reimbursement of
direct out-of-pocket expenditures incurred by the Distributor in connection with
the distribution and marketing of shares and the servicing of investor accounts
including expenses relating to the formulation and implementation of marketing
strategies and promotional activities such as direct mail promotions and
television, radio, newspaper, magazine and other mass media advertising, the
preparation, printing and distribution of Prospectuses of the Fund and reports
for recipients other than existing shareholders of the Fund, and obtaining such
information, analyses and reports with respect to marketing and promotional
activities and investor accounts as the Fund may, from time to time, deem
advisable, and (3) reimbursement of expenses incurred by the Distributor in
connection with the servicing of shareholder accounts including payments to
securities dealers and others in consideration of the provision of personal
services to investors and/or the maintenance or servicing of shareholder
accounts and expenses associated with the provision of personal service by the
Distributor directly to investors. In addition, the Distribution Plan is deemed
to authorize the Distributor and the Investment Manager to make payments out of
general profits, revenues or other sources to underwriters, securities dealers
and others in connection with sales of shares, to the extent, if any, that such
payments may be deemed to be within the scope of Rule 12b-1 under the 1940 Act.
The expenditures to be made pursuant to the Distribution Plan may not
exceed with respect to Class B and Class C shares, an annual rate of 0.75% of
the average daily value of the net assets represented by such Class B or Class C
shares (as the case may be) to finance sales or promotion expenses and an annual
rate of 0.25% of the average daily value of the net assets represented by such
Class B or Class C shares (as the case may be) to make payments for personal
services and/or the maintenance or servicing of shareholder accounts. Proceeds
from the service fee will be used by the Distributor to compensate securities
dealers and others selling shares of the Fund for rendering service to
shareholders on an ongoing basis. Such amounts are based on the net asset value
of shares of the Fund held by such dealers as nominee for their customers or
which are owned directly by such customers for so long as such shares are
outstanding and the Distribution Plan remains in effect with respect to the
Fund. Any amounts received by the Distributor and not so allocated may be
applied by the Distributor as reimbursement for expenses incurred in connection
with the servicing of investor accounts. The distribution and servicing expenses
of a particular class will be borne solely by that class.
During the fiscal year ended March 31, 1997, the Fund paid the Distributor
fees under the Distribution Plan and the Distributor used all of such payments
for expenses incurred on behalf of the Fund as follows:
27
<PAGE>
<TABLE>
<CAPTION>
Class B Class C**
------- ---------
<S> <C> <C>
Advertising $19,225 $1,617
Printing and mailing of prospectuses to
other than current shareholders 7,340 617
Compensation to dealers 33,348 0
Compensation to sales personnel 25,984 2,185
Interest 0 0
Carrying or other financing charges 0 0
-------- ------
Other expenses: marketing; general 30,077 2,530
-------- ------
Total fees received $133,726 $6,949
-------- ------
Difference $17,752*
========
</TABLE>
- ----------
* Net fees result from the timing of expenditures and are used against future
expenses.
** Prior to November 1, 1997, the Fund's current Class C shares were designated
as Class D shares and the Fund's current Class S shares were designated as
Class C shares.
The Distributor may have also used additional resources of its own for further
expenses on behalf of the Fund.
No interested Trustee of the Trust has any direct or indirect financial
interest in the operation of the Distribution Plan or any related agreements
thereunder. The Distributor's interest in the Distribution Plan is described
above.
To the extent that the Glass-Steagall Act may be interpreted as prohibiting
banks and other depository institutions from being paid for performing services
under the Distribution Plan, the Fund will attempt to make alternative
arrangements for such services for shareholders who acquired shares through such
institutions.
CALCULATION OF PERFORMANCE DATA
The average annual total return ("standard total return") and yield of the
Class B, Class C, Class E and Class S shares of the Fund will be calculated as
set forth below. Total return and yield are computed separately for each class
of shares of the Fund.
28
<PAGE>
Performance data for a specified class includes periods prior to the adoption of
class designations. Shares of the Fund had no class designations until June 1,
1993, when designations were assigned based on the pricing and Rule 12b-1 fees
applicable to shares sold thereafter.
The performance data reflects Rule 12b-1 fees and sales charges, where
applicable, as set forth below:
<TABLE>
<CAPTION>
Rule 12b-1 Fees Sales Charges
--------------------- --------------------------
Current
Class Amount Period
- ----- ------- ------
<S> <C> <C> <C>
B 1.00% 0% until June 1, 1993; 1- and 5-year periods reflect a
1.00% June 1, 1993 to 5% and a 2% contingent
present; fee will reduce deferred sales charge
performance for periods respectively
after June 1, 1993
C* 1-year period reflects a 1%
contingent deferred sales charge
1.00% 0% until June 1, 1993;
1.00% June 1, 1993 ro
present; fee will reduce
performance for periods
after June 1, 1993
E 0.00% Since commencement of None
operations to present
S* 0.00% Since commencement of None
operations to present
</TABLE>
* Prior to November 1, 1997, the Fund's current Class C shares were designated
as Class D shares and the Fund's current Class S shares were designated as
Class C shares.
All calculations of performance data in this section reflect the voluntary
measures, if any, by the Fund's affiliates to reduce fees or expenses relating
to the Fund; see "Accrued Expenses" later in this section.
The net income of the Fund, as defined below, is determined as of the
normal close of trading on the NYSE (currently 4 P.M. New York City time) on
each business day on which the NYSE is open and all the net income of the Fund
so determined is declared as a dividend to its shareholders as of that time. For
this purpose the net income of the Fund shall consist of all interest income
accrued on the portfolio assets of the Fund from the time of the immediately
preceding determination of net income, less all expenses and liabilities of the
Fund chargeable against such income. Interest income includes discounts or
premiums accrued (including both original issue and market discount) on discount
paper or otherwise pursuant to the amortized
29
<PAGE>
cost method of valuation, accrued ratably to the date of maturity. Expenses,
including the compensation payable to the Investment Manager, are accrued each
day.
Accrued Expenses
Accrued expenses include all recurring expenses that are charged to all
shareholder accounts in proportion to the length of the base period. Accrued
expenses do not take into account recurring and nonrecurring charges for
optional services which only certain shareholders elect and which involve
nominal fees, such as the $7.50 fee for wire orders. Accrued expenses do not
include the subsidization, if any, by affiliates of fees or expenses relating to
the Fund during the subject period. In the absence of such subsidization, the
performance of the Fund would have been lower.
Yield
The Fund's yield is its investment income, less expenses, expressed as a
percentage of assets on an annualized basis for a seven-day period. The yield is
expressed as a simple annualized yield and as a compounded effective yield.
The simple annualized yield for each of the Fund's Class B, Class C, Class
E and Class S shares is computed by determining the net change (exclusive of
realized gains and losses from the sale of securities and unrealized
appreciation and depreciation) in the value of a hypothetical pre-existing
account having a balance of one share at the beginning of the seven-day period,
dividing the net change in account value by the value of the account at the
beginning of the period, and annualizing the resulting quotient (base period
return) on a 365-day basis. The net change in account value reflects the value
of additional shares purchased with dividends from the original shares in the
account during the seven-day period, and expenses accrued during the period. The
compounded effective yield for each of the Fund's Class B, Class C, Class E and
Class S shares is computed by compounding the unannualized base period return,
by adding one to the base period return, raising the sum to a power equal to 365
divided by seven and subtracting one from the result.
The simple annualized and compounded effective yields as quoted in
advertisements will not be based on information as of a date more than 14 days
prior to the date of publication. Actual yield will vary depending on market
conditions, and principal is not insured. Actual yield also depends on the
qualities, maturities and types of instruments held by the Fund as well as its
operating expenses.
Any net realized capital gains of the Fund in excess of any available loss
carryforward will be distributed to shareholders of the Fund from time to time
as is deemed appropriate in maintaining the Fund's net asset value at one dollar
per share.
30
<PAGE>
Total Return
The standard total return of each class of shares of the Fund was as
follows:
<TABLE>
<CAPTION>
Ten Years Five Years One Year
Ended Ended Ended
September 30, 1997 September 30, 1997 September 30, 1997
------------------ ------------------ ------------------
<S> <C> <C> <C>
Class B 4.94% 2.87% -1.11%
Class C* 4.94% 3.24% 2.89%
Class E 5.39% 4.12% 4.95%
Class S* 5.39% 4.12% 4.95%
</TABLE>
* Prior to November 1, 1997, the Fund's current Class C shares were designated
as Class D shares and the Fund's current Class S shares were designated as
Class C shares.
Standard total return is computed by determining the average annual
compounded rates of return over the designated periods that, if applied to the
initial amount invested, would produce the ending redeemable value in accordance
with the following formula:
P(1+T)n = ERV
Where P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the designated
period assuming a hypothetical $1,000 payment made
at the beginning of the designated period
The calculation is based on the further assumptions that the highest
applicable initial or contingent deferred sales charge is deducted, and that all
dividends and distributions by the Fund are reinvested at net asset value on the
reinvestment dates during the periods. All accrued expenses and recurring
charges are also taken into account as described above.
Nonstandardized Total Return
The Fund may provide the above described standard total return results
for Class B, Class C, Class E and Class S shares for periods which end no
earlier than the most recent calendar quarter end and which begin one, five and
ten years before. In addition, the Fund may provide nonstandardized total return
results for differing periods, such as for the most
31
<PAGE>
recent six months, and/or without taking sales charges, if any, into account.
Such nonstandardized total return is computed as otherwise described under
"Total Return" except the result may or may not be annualized and as noted, any
applicable sales charge may not be taken into account and therefore not deducted
from the hypothetical initial payment of $1,000. For example, the Fund's
nonstandardized total returns for the six months ended September 30, 1997,
without taking sales charges into account, were as follows:
Class B 2.02%
Class C* 2.02%
Class E 2.53%
Class S* 2.53%
* Prior to November 1, 1997, the Fund's current Class C shares were designated
as Class D shares and the Fund's current Class S shares were designated as
Class C shares.
CUSTODIAN
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, is the Trust's custodian. As custodian, State Street Bank
and Trust Company is responsible for, among other things, safeguarding and
controlling the Fund's cash and securities, handling the receipt and delivery of
securities and collecting interest and dividends on the Fund's investments.
State Street Bank and Trust Company is not an affiliate of the Investment
Manager or its affiliates.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts 02110,
serves as the Trust's independent accountants, providing professional services
including (1) an audit of the Fund's annual financial statements, (2) assistance
and consultation in connection with Securities and Exchange Commission filings
and (3) review of the annual income tax returns filed on behalf of the Fund.
FINANCIAL STATEMENTS
In addition to the reports provided to holders of record on a semiannual
basis, other supplementary financial reports may be made available from time to
time through electronic or other media. Shareholders with substantial holdings
in one or more State Street Research Funds may also receive reports and other
information which reflect or analyze their positions in a consolidated manner.
For more information, call the State Street Research Service Center.
The following financial statements are for the Fund's fiscal year ended March
31, 1997 and for the semiannual period ended October 31, 1997 and reflect the
Fund's class designations prior to November 1, 1997. Information pertaining to
Class C and Class D in the financial statements now pertain to Class S and Class
C, respectively.
32
<PAGE>
STATE STREET RESEARCH MONEY MARKET FUND
INVESTMENT PORTFOLIO
March 31, 1997
Principal Maturity Value
Amount Date (Note 1)
- - ------------------------------------ ------------- ------------ ------------
COMMERCIAL PAPER 99.0%
Automotive 8.7%
Ford Motor Credit Co., 5.32% $ 5,000,000 4/28/1997 $ 4,980,050
Ford Motor Credit Co., 5.32% 3,000,000 5/01/1997 2,986,700
Ford Motor Credit Co., 5.25% 2,700,000 5/21/1997 2,680,312
General Motors Acceptance Corp.,
5.37% 2,000,000 4/14/1997 1,996,122
General Motors Acceptance Corp.,
5.34% 2,500,000 4/24/1997 2,491,471
General Motors Acceptance Corp.,
5.35% 4,500,000 6/09/1997 4,453,856
--------------
19,588,511
--------------
Bank 17.7%
Bank of America FSB, 5.37% 6,000,000 6/16/1997 5,931,980
Bank of America FSB, 5.44% 4,500,000 6/23/1997 4,443,560
Canadian Imperial Holdings, Inc.,
5.33% 5,000,000 4/25/1997 4,982,240
Canadian Imperial Holdings, Inc.,
5.30% 5,000,000 4/29/1997 4,979,389
J.P. Morgan & Co. Inc., 5.33% 3,500,000 4/04/1997 3,498,445
J.P. Morgan & Co. Inc., 5.53% 6,000,000 6/30/1997 5,917,050
Toronto Dominion Holdings, Inc.,
5.32% 3,355,000 4/07/1997 3,352,026
Toronto Dominion Holdings, Inc.,
5.32% 6,580,000 6/11/1997 6,510,961
--------------
39,615,651
--------------
Canadian 12.6%
Canadian Wheat Board, 5.31% 3,865,000 4/24/1997 3,851,888
Canadian Wheat Board, 5.34% 6,000,000 6/09/1997 5,938,590
Ontario Hydro, 5.32% 3,000,000 4/04/1997 2,998,670
Province of British Columbia, 5.31% 1,900,000 4/15/1997 1,896,077
Province of British Columbia, 5.35% 6,000,000 6/12/1997 5,935,800
Province of British Columbia, 5.40% 2,600,000 6/12/1997 2,571,920
Province of Quebec, 5.27% 5,000,000 5/15/1997 4,967,794
--------------
28,160,739
--------------
Chemical 9.3%
E.I. Du Pont De Nemours & Co., 5.28% 6,000,000 5/05/1997 5,970,080
E.I. Du Pont De Nemours & Co., 5.37% 4,500,000 6/17/1997 4,448,314
Monsanto Co., 5.31% 6,000,000 4/01/1997 6,000,000
Monsanto Co., 5.56% 4,500,000 6/06/1997 4,454,130
--------------
20,872,524
--------------
Consumer Goods & Services 2.2%
Proctor & Gamble Co., 5.31% $ 5,000,000 6/13/1997 $ 4,946,162
--------------
Diversified 4.4%
Cargill Inc., 5.55% 10,000,000 6/30/1997 9,861,250
--------------
Electrical Equipment 4.7%
General Electric Capital Corp.,
5.28% 4,500,000 5/14/1997 4,471,620
General Electric Capital Corp.,
5.28% 6,000,000 5/16/1997 5,960,400
--------------
10,432,020
--------------
Electronic Equipment 2.2%
Motorola Inc., 5.52% 5,000,000 6/05/1997 4,950,167
--------------
Financial Service 10.4%
American Express
Credit Corp., 5.25% 6,000,000 5/27/1997 5,951,000
American General Finance Corp.,
5.57% 4,000,000 7/01/1997 3,943,681
Beneficial Corp., 5.32% 4,000,000 4/14/1997 3,992,316
CIT Group Holdings Inc., 5.25% 4,500,000 5/29/1997 4,461,938
Household Finance Corp., 5.30% 5,000,000 5/12/1997 4,969,819
--------------
23,318,754
--------------
Insurance 3.0%
Transamerica Finance Group Inc.,
5.25% 1,500,000 4/11/1997 1,497,812
Transamerica Finance Group Inc.,
5.32% 5,300,000 4/29/1997 5,278,070
--------------
6,775,882
--------------
Machinery 2.2%
John Deere Capital Corp., 5.31% 5,000,000 4/16/1997 4,988,937
--------------
Natural Gas 3.6%
Consolidated Natural Gas Co., 5.52% 825,000 4/01/1997 825,000
Consolidated Natural Gas Co., 5.24% 4,980,000 4/30/1997 4,958,979
Northern Illinois Gas Co., 5.26% 2,360,000 4/01/1997 2,360,000
--------------
8,143,979
--------------
Office Equipment 2.7%
Pitney Bowes Inc., 5.50% 6,000,000 6/23/1997 5,923,917
--------------
Oil 0.6%
Shell Oil Co., 6.25% 1,402,000 4/01/1997 1,402,000
--------------
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
STATE STREET RESEARCH MONEY MARKET FUND
INVESTMENT PORTFOLIO (cont'd)
Principal Maturity Value
Amount Date (Note 1)
- - ------------------------------------ ------------- ------------ ------------
Printing & Publishing 2.2%
McGraw-Hill Inc., 5.24% $5,000,000 4/21/1997 $ 4,985,444
--------------
Recreation 0.8%
Walt Disney Co., 5.32% 1,720,000 4/25/1997 1,713,900
--------------
Retail Trade 4.9%
Sears Roebuck Acceptance Corp.,
5.26% 5,000,000 6/02/1997 4,954,705
Sears Roebuck Acceptance Corp.,
5.30% 6,000,000 6/04/1997 5,943,467
--------------
10,898,172
--------------
Telephone 6.1%
Ameritech Corp., 5.23% 1,666,000 4/23/1997 1,660,676
Ameritech Corp., 5.26% 3,300,000 4/24/1997 3,288,910
Bell Atlantic Financial Services,
Inc., 5.29% 2,583,000 4/07/1997 2,580,723
Bell Atlantic Financial Services,
Inc., 5.31% 3,779,000 4/08/1997 3,775,098
Bell Atlantic Financial Services,
Inc., 5.57% 2,321,000 5/02/1997 2,309,867
--------------
13,615,274
--------------
Tobacco 0.7%
Philip Morris Companies, Inc., 5.65% 1,469,000 4/02/1997 1,468,769
--------------
Total Investments (Cost $221,662,052)--99.0% 221,662,052
Cash and Other Assets, Less Liabilities--1.0% 2,348,040
--------------
Net Assets--100.0% $224,010,092
==============
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1997
Assets
Investments, at value (Cost $221,662,052) (Note 1) $221,662,052
Cash 2,337
Receivable for fund shares sold 3,526,916
Receivable from Distributor (Note 3) 69,510
Other assets 5,212
---------------
225,266,027
Liabilities
Payable for fund shares redeemed 639,916
Accrued transfer agent and shareholder services (Note 2) 264,163
Dividends payable 156,406
Accrued management fee (Note 2) 92,048
Accrued trustees' fees (Note 2) 12,980
Accrued distribution and service fees (Note 5) 12,635
Other accrued expenses 77,787
---------------
1,255,935
---------------
Net Assets $224,010,092
===============
Net Assets consist of:
Shares of beneficial interest $224,010,092
===============
Net Asset Value and offering price per share of
Class B shares ($15,981,520 / 15,981,520 shares of
beneficial interest)* $1.00
===============
Net Asset Value, offering price and redemption price per
share of Class C shares ($14,710,107 / 14,710,107
shares of beneficial interest) $1.00
===============
Net Asset Value and offering price per share of Class D
shares ($958,910 / 958,910 shares of beneficial
interest)* $1.00
===============
Net Asset Value, offering price and redemption price per
share of Class E shares ($192,359,555 / 192,359,555
shares of beneficial interest) $1.00
===============
* Redemption price per share for Class B and Class D is equal to net asset value
less any applicable contingent deferred sales charge.
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STATE STREET RESEARCH MONEY MARKET FUND
STATEMENT OF OPERATIONS
For the year ended March 31, 1997
Investment Income
Interest $12,529,971
Expenses
Management fee (Note 2) 1,152,723
Transfer agent and shareholder services (Note 2) 627,932
Custodian fee 100,911
Reports to shareholders 74,110
Registration fees 70,227
Audit fee 29,789
Trustees' fees (Note 2) 28,913
Distribution and service fees--Class B (Note 5) 133,726
Distribution and service fees--Class D (Note 5) 6,949
Legal fees 3,349
Miscellaneous 16,789
--------------
2,245,418
Expenses borne by the Distributor (Note 3) (377,715)
--------------
1,867,703
--------------
Net investment income and net increase in net assets
resulting from operations $10,662,268
==============
STATEMENT OF CHANGES IN NET ASSETS
Year ended March 31
-------------------------------
1997 1996
------------------------------ --------------- ---------------
Increase (Decrease) in Net
Assets
Operations:
Net investment income and net
increase resulting from
operations $ 10,662,268 $ 10,633,974
--------------- ---------------
Dividends from net investment income:
Class B (492,831) (454,124)
Class C (734,560) (716,481)
Class D (25,541) (28,738)
Class E (9,409,336) (9,434,631)
--------------- ---------------
(10,662,268) (10,633,974)
--------------- ---------------
Net increase (decrease) from
fund share transactions
(Note 6) (3,137,041) 58,605,553
--------------- ---------------
Total increase (decrease) in
net assets (3,137,041) 58,605,553
Net Assets
Beginning of year 227,147,133 168,541,580
--------------- ---------------
End of year $224,010,092 $227,147,133
=============== ===============
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATE STREET RESEARCH MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
Note 1
State Street Research Money Market Fund (the "Fund"), is a series of State
Street Research Money Market Trust (the "Trust"), which was organized as a
Massachusetts business trust in April, 1985 and is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company. The Fund commenced operations in August, 1986. The Fund is presently
the only active series of the Trust, although the Trustees have the authority to
create an unlimited number of series.
The investment objective of the Fund is to seek a high level of current income
consistent with preservation of capital and maintenance of liquidity. The Fund
seeks to achieve its investment objective by investing in securities issued or
guaranteed as to principal and interest by the U.S. Government or its agencies
or instrumentalities as well as high quality, short-term money market
instruments such as bank certificates of deposit, bankers' acceptances and such
short-term corporate debt securities as commercial paper and master demand
notes.
The Fund offers four classes of shares. Class B shares are subject to a
contingent deferred sales charge on certain redemptions made within five years
of purchase and pay annual distribution and service fees of 1.00%. Class B
shares automatically convert into Class E shares (which pay lower ongoing
expenses) at the end of eight years after the issuance of the Class B shares.
Class C shares are only offered to certain employee benefit plans and large
institutions. No sales charge is imposed at the time of purchase or redemption
of Class C shares. Class C shares do not pay any distribution or service fees.
Class D shares are subject to a contingent deferred sales charge of 1.00% on any
shares redeemed within one year of their purchase. Class D shares also pay
annual distribution and service fees of 1.00%. Class E shares are offered to any
individual. Class E shares are not subject to any initial or contingent deferred
sales charges and do not pay any distribution or service fees. The Fund's
expenses are borne pro rata by each class, except that each class bears
expenses, and has exclusive voting rights with respect to provisions of the Plan
of Distribution, related specifically to that class. The Trustees declare
separate dividends on each class of shares.
The following significant accounting policies are consistently followed by the
Fund in preparing its financial statements, and such policies are in conformity
with generally accepted accounting principles for investment companies.
A. Investment Valuation
The Fund values securities at amortized cost, pursuant to which the Fund must
adhere to certain conditions. The amortized cost method involves valuing a
portfolio security initially at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium regardless of the effect of
fluctuating interest rates on the market value of the investments.
B. Security Transactions
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). Realized gains or losses, if any, are reported on the
basis of identified cost of securities delivered.
C. Net Investment Income
Net investment income is determined daily and consists of interest accrued and
discount earned, less amortization of premium and the estimated daily expenses
of the Fund. Interest income is accrued daily as earned.
D. Dividends
Dividends from net investment income are declared daily and paid or reinvested
monthly. Net realized capital gains, if any, are distributed annually, unless
additional distributions are required for compliance with applicable tax
regulations.
E. Federal Income Taxes
No provision for Federal income taxes is necessary because the Fund has elected
to qualify under Subchapter M of the Internal Revenue Code and its policy is to
distribute all of its taxable income, including net realized capital gains,
within the prescribed time periods.
F. Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period.
Actual results could differ from those estimates.
Note 2
The Trust and State Street Research & Management Company (the "Adviser"), an
indirect wholly owned subsidiary of Metropolitan Life Insurance Company
("Metropolitan"), have entered into an agreement under which the Adviser earns
monthly fees at an annual rate of 0.50% of the Fund's average daily net assets.
In consideration of these fees, the Adviser furnishes the Fund with management,
investment advisory, statistical and research facilities and services. The
Adviser also pays all salaries, rent and certain other expenses of management.
During the year ended March 31, 1997, the fees pursuant to such agreement
amounted to $1,152,723.
State Street Research Shareholder Services, a division of State Street Research
Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly owned subsidiary of Metropolitan, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. During the year ended March 31, 1997, the amount of such
expenses was $123,029.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$28,913 during the year ended March 31, 1997.
Note 3
The Distributor and its affiliates may from time to time and in varying amounts
voluntarily assume some portion of fees or expenses relating to the Fund. During
the year ended March 31, 1997, the amount of such expenses assumed by the
Distributor and its affiliates was $377,715. Effective April 1, 1997, the Fund's
expenses will be limited to 0.65% of average daily net assets for Class C and
Class E shares and to 1.65% of average daily net assets for Class B and Class D
shares.
5
<PAGE>
STATE STREET RESEARCH MONEY MARKET FUND
Note 4
For the year ended March 31, 1997, purchases and sales, including maturities, of
securities aggregated $2,031,651,975 and $2,048,839,913, respectively.
Note 5
The Trust has adopted a Plan of Distribution Pursuant to Rule 12b-1 (the "Plan")
under the Investment Company Act of 1940. Under the Plan, the Fund pays annual
distribution and service fees to the Distributor at a rate of 0.75% and 0.25%,
respectively, of average daily net assets for Class B and Class D shares. The
Distributor uses such payments for personal services and/or the maintenance or
servicing of shareholder accounts, to reimburse securities dealers for
distribution and marketing services, to furnish ongoing assistance to investors
and to defray a portion of its distribution and marketing expenses. For the year
ended March 31, 1997, fees pursuant to such plan amounted to $133,726 and $6,949
for Class B and Class D shares, respectively.
The Fund has been informed that MetLife Securities, Inc., a wholly-owned
subsidiary of Metropolitan, earned commissions aggregating $7,821 on sales of
the Fund's Class B shares and that the Distributor collected contingent deferred
sales charges aggregating $200,580 and $22,159 on redemptions of Class B and
Class D shares, respectively, during the year ended March 31, 1997.
Note 6
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share.
At March 31, 1997, Metropolitan and certain of its affiliates held of record
44,347,455 Class E shares of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
Year ended March 31
--------------------------------------------------------------------
1997 1996
--------------------------------- ---------------------------------
Class B Shares Amount Shares Amount
--------------------------------------------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Shares sold 28,609,585 $ 28,609,585 25,459,225 $ 25,459,225
Issued upon reinvestment of dividends 414,928 414,928 310,628 310,628
Shares repurchased (24,926,640) (24,926,640) (23,208,467) (23,208,467)
---------------- ---------------- ---------------- ----------------
Net increase 4,097,873 $ 4,097,873 2,561,386 $ 2,561,386
================ ================ ================ ================
Class C Shares Amount Shares Amount
--------------------------------------------------------- ---------------- ---------------- ----------------
Shares sold 32,645,556 $ 32,645,556 32,210,132 $ 32,210,132
Issued upon reinvestment of dividends 675,535 675,535 663,095 663,095
Shares repurchased (34,802,202) (34,802,202) (24,568,290) (24,568,290)
---------------- ---------------- ---------------- ----------------
Net increase (decrease) (1,481,111) $ (1,481,111) 8,304,937 $ 8,304,937
================ ================ ================ ================
Class D Shares Amount Shares Amount
--------------------------------------------------------- ---------------- ---------------- ----------------
Shares sold 29,948,381 $ 29,948,381 7,691,536 $ 7,691,536
Issued upon reinvestment of dividends 15,948 15,948 17,289 17,289
Shares repurchased (30,968,955) (30,968,955) (6,587,059) (6,587,059)
---------------- ---------------- ---------------- ----------------
Net increase (decrease) (1,004,626) $ (1,004,626) 1,121,766 $ 1,121,766
================ ================ ================ ================
Class E Shares Amount Shares Amount
--------------------------------------------------------- ---------------- ---------------- ----------------
Shares sold 785,239,791 $ 785,239,791 880,060,476 $ 880,060,476
Issued upon reinvestment of dividends 6,052,998 6,052,998 6,168,315 6,168,315
Shares repurchased (796,041,966) (796,041,966) (839,611,327) (839,611,327)
---------------- ---------------- ---------------- ----------------
Net increase (decrease) (4,749,177) $ (4,749,177) 46,617,464 $ 46,617,464
================ ================ ================ ================
</TABLE>
6
<PAGE>
STATE STREET RESEARCH MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each year:
<TABLE>
<CAPTION>
Class B
--------------------------------------------
Year ended March 31
--------------------------------------------
1997 1996 1995 1994**
-------------------------------------------- ---------------------- --------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of year $ 1.000 $ 1.000 $ 1.000 $ 1.000
Net investment income* 0.037 0.041 0.032 0.012
Dividends from net investment income (0.037) (0.041) (0.032) (0.012)
---------------------- --------- ----------
Net asset value, end of year $ 1.000 $ 1.000 $ 1.000 $ 1.000
====================== ========= ==========
Total return 3.72%+ 4.16%+ 3.27%+ 1.27%+++
Net assets at end of year (000s) $15,982 $11,884 $ 9,322 $ 3,028
Ratio of operating expenses to average net
assets* 1.75% 1.75% 1.75% 1.75%++
Ratio of net investment income to average
net assets* 3.69% 4.06% 3.53% 1.54%++
*Reflects voluntary assumption of fees or
expenses per share in each year (Note 3). $ 0.002 $ 0.003 $ 0.004 $ 0.007
<CAPTION>
Class C
------------------------------------------
Year ended March 31
------------------------------------------
1997 1996 1995 1994**
-------------------------------------------- --------- --------- --------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of year $ 1.000 $ 1.000 $ 1.000 $ 1.000
Net investment income* 0.047 0.051 0.042 0.021
Dividends from net investment income (0.047) (0.051) (0.042) (0.021)
--------- --------- --------- ----------
Net asset value, end of year $ 1.000 $ 1.000 $ 1.000 $ 1.000
========= ========= ========= ==========
Total return 4.78%+ 5.20%+ 4.31%+ 2.08%+++
Net assets at end of year (000s) $14,710 $16,191 $ 7,886 $ 1,786
Ratio of operating expenses to average net
assets* 0.75% 0.75% 0.75% 0.75%++
Ratio of net investment income to average
net assets* 4.69% 5.03% 4.66% 2.54%++
*Reflects voluntary assumption of fees or
expenses per share in each year (Note 3). $ 0.002 $ 0.003 $ 0.003 $ 0.006
</TABLE>
<TABLE>
<CAPTION>
Class D
------------------------------------------
Year ended March 31
------------------------------------------
1997 1996 1995 1994**
- - ------------------------------------- --------- --------- --------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of year $ 1.000 $ 1.000 $ 1.000 $ 1.000
Net investment income* 0.037 0.041 0.032 0.013
Dividends from net investment income (0.037) (0.041) (0.032) (0.013)
--------- --------- --------- ----------
Net asset value, end of year $ 1.000 $ 1.000 $ 1.000 $ 1.000
========= ========= ========= ==========
Total return 3.72%+ 4.16%+ 3.28%+ 1.30%+++
Net assets at end of year (000s) $ 959 $ 1,964 $ 842 $ 174
Ratio of operating expenses to
average net assets* 1.75% 1.75% 1.75% 1.75%++
Ratio of net investment income to
average net assets* 3.68% 4.08% 3.30% 1.54%++
*Reflects voluntary assumption of
fees or expenses per share in each
year (Note 3) $ 0.002 $ 0.003 $ 0.005 $ 0.002
<CAPTION>
Class E
---------------------------------------------------------------------
Year ended March 31
---------------------------------------------------------------------
1997 1996 1995 1994*** 1993
- - ------------------------------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Net investment income* 0.047 0.051 0.042 0.025 0.028
Dividends from net investment income (0.047) (0.051) (0.042) (0.025) (0.028)
------------- ------------- ------------- ------------- -------------
Net asset value, end of year $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
============= ============= ============= ============= =============
Total return 4.78%+ 5.20%+ 4.31%+ 2.48%+ 2.88%+
Net assets at end of year (000s) $192,360 $197,109 $150,491 $138,129 $149,831
Ratio of operating expenses to
average net assets* 0.75% 0.75% 0.75% 0.75% 0.75%
Ratio of net investment income to
average net assets* 4.69% 5.06% 4.26% 2.46% 2.84%
*Reflects voluntary assumption of
fees or expenses per share in each
year (Note 3) $ 0.002 $ 0.003 $ 0.006 $ 0.003 $ 0.001
</TABLE>
**June 1, 1993 (commencement of share class designations) to March 31, 1994.
***Effective November 30, 1993, the Fund discontinued offering Class A shares
and any existing Class A shares were redesignated Class E shares. Net
investment income and dividends amounted to $.011 per share for Class A
shares during the period June 1, 1993 (commencement of share class
designations) to November 30, 1993.
++Annualized.
+Total return figures do not reflect any front-end or contingent deferred
sales charges. Total return would be lower if the Distributor and its
affiliates had not voluntarily assumed a portion of the Fund's expenses.
+++Represents aggregate return for the period without annualization and does not
reflect any front-end or contingent deferred sales charges. Total return
would be lower if the Distributor and its affiliates had not voluntarily
assumed a portion of the Fund's expenses.
7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of State Street Research Money Market Trust and
the Shareholders of State Street Research Money Market Fund
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of State Street Research Money Market
Fund (a series of State Street Research Money Market Trust, hereafter referred
to as the "Trust") at March 31, 1997, and the results of its operations, the
changes in its net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at March
31, 1997 by correspondence with the custodian, provide a reasonable basis for
the opinion expressed above.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Boston, Massachusetts
May 9, 1997
8
<PAGE>
STATE STREET RESEARCH MONEY MARKET FUND
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
September 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
PRINCIPAL MATURITY VALUE
AMOUNT DATE (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER 101.0%
AUTOMOTIVE 6.3%
Ford Motor Credit Co., 5.59% ....................... $2,000,000 10/21/1997 $ 1,993,867
Ford Motor Credit Co., 5.51% ....................... 605,000 12/01/1997 599,351
Ford Motor Credit Co., 5.49% ....................... 2,000,000 12/08/1997 1,979,260
General Motors Acceptance Corp., 5.61% .............. 3,000,000 10/06/1997 2,997,663
General Motors Acceptance Corp., 5.51% .............. 3,000,000 10/24/1997 2,989,439
General Motors Acceptance Corp., 5.50% .............. 4,000,000 11/26/1997 3,965,778
------------
14,525,358
------------
BANK 10.1%
Canadian Imperial Holdings, Inc., 5.49% ............ 3,800,000 11/13/1997 3,775,082
Canadian Imperial Holdings, Inc., 5.485% ............ 8,000,000 11/14/1997 7,946,369
J.P. Morgan & Co. Inc., 5.53% ...................... 500,000 11/18/1997 496,313
Toronto Dominion Holdings, Inc., 5.57% ............. 5,000,000 10/03/1997 4,998,453
Toronto Dominion Holdings, Inc., 5.50% ............. 1,940,000 11/13/1997 1,927,255
Toronto Dominion Holdings, Inc., 5.55% ............. 4,460,000 1/02/1998 4,396,055
------------
23,539,527
------------
CANADIAN 15.4%
Canadian Wheat Board, 5.53% ........................ 3,000,000 10/10/1997 2,995,853
Canadian Wheat Board, 5.50% ........................ 5,000,000 11/06/1997 4,972,500
Manitoba Hydro Electric Board, 5.52% ............... 6,000,000 10/02/1997 5,999,088
Manitoba Hydro Electric Board, 5.52% ............... 5,000,000 11/20/1997 4,961,667
Province of British Columbia, 5.57% ................ 5,000,000 10/03/1997 4,998,453
Province of British Columbia, 5.55% ................ 4,000,000 10/29/1997 3,982,733
Province of Quebec, 5.50% .......................... 5,200,000 10/07/1997 5,195,233
Province of Quebec, 5.52% .......................... 2,700,000 12/29/1997 2,663,154
------------
35,768,681
------------
CHEMICAL 4.5%
E.I. Du Pont De Nemours & Co., 5.52% ............... 5,500,000 1/12/1998 5,413,136
Monsanto Co., 5.50% ................................. 5,000,000 11/21/1997 4,961,042
------------
10,374,178
------------
CONSUMER GOODS & SERVICES 0.6%
Proctor & Gamble Co., 5.50% ........................ 1,350,000 12/31/1997 1,331,231
------------
DIVERSIFIED 5.1%
Cargill Inc., 5.50% ................................. 9,000,000 10/08/1997 8,990,375
Cargill Inc., 5.49% ................................. 2,800,000 11/18/1997 2,779,504
------------
11,769,879
------------
ELECTRICAL EQUIPMENT 4.9%
General Electric Capital Corp., 5.56% .............. 550,000 10/03/1997 549,830
General Electric Capital Corp., 5.60% .............. 5,000,000 11/18/1997 4,963,200
General Electric Capital Corp., 5.50% .............. 6,000,000 11/21/1997 5,953,250
------------
11,466,280
------------
ELECTRIC UTILITY 5.2%
Southern California Edison Co., 5.50% .............. 6,000,000 10/07/1997 5,994,500
Southern California Edison Co., 5.50% .............. 6,000,000 10/20/1997 5,982,583
------------
11,977,083
------------
FINANCIAL SERVICE 20.2%
American Express Credit Corp., 5.57% ............... $5,000,000 10/31/1997 4,977,125
American Express Credit Corp., 5.50% ............... 5,000,000 11/03/1997 4,974,791
American Express Credit Corp., 5.57% ............... 1,700,000 11/03/1997 1,691,445
Beneficial Corp., 5.48% ............................ 3,360,000 12/01/1997 3,328,800
CIT Group Holdings Inc., 5.47% ..................... 7,900,000 11/07/1997 7,855,587
CIT Group Holdings Inc., 5.51% ..................... 4,000,000 12/08/1997 3,958,369
Merrill Lynch & Company Inc., 5.58% ................ 8,000,000 10/01/1997 8,000,000
Merrill Lynch & Company Inc., 5.58% ................ 400,000 10/31/1997 398,167
Merrill Lynch & Company Inc., 5.57% ................ 3,200,000 1/09/1998 3,150,489
Norwest Financial Inc., 5.53% ...................... 4,000,000 11/20/1997 3,969,278
Norwest Financial Inc., 5.50% ...................... 2,614,000 12/12/1997 2,585,246
Norwest Financial Inc., 5.50% ...................... 2,000,000 12/16/1997 1,976,778
------------
46,866,075
------------
<PAGE>
NATURAL GAS 4.2%
Pacific Gas & Electric Co., 5.49% .................. 1,700,000 10/16/1997 1,696,111
Pacific Gas & Electric Co., 5.51% .................. 4,605,000 10/22/1997 4,590,199
Pacific Gas & Electric Co., 5.53% .................. 3,500,000 11/03/1997 3,482,258
------------
9,768,568
------------
OIL 3.0%
Atlantic Richfield Co., 5.55% ...................... 7,000,000 10/10/1997 6,990,288
------------
PRINTING & PUBLISHING 4.7%
McGraw-Hill Inc., 5.49% ............................ 5,000,000 11/25/1997 4,958,062
McGraw-Hill Inc., 5.48% ............................ 6,000,000 12/18/1997 5,928,760
------------
10,886,822
------------
RETAIL TRADE 12.9%
Associates Corp. of North America, 5.50% ............ 7,000,000 12/05/1997 6,930,486
J.C. Penney Funding Corp., 5.50% ................... 7,000,000 12/15/1997 6,919,792
J.C. Penney Funding Corp., 5.51% ................... 4,500,000 12/17/1997 4,446,966
Sears Roebuck Acceptance Corp., 5.50% ............... 5,000,000 10/17/1997 4,987,778
Sears Roebuck Acceptance Corp., 5.50% ............... 6,675,000 12/10/1997 6,603,614
------------
29,888,636
------------
TELEPHONE 3.9%
Ameritech Corp., 5.53% .............................. 3,300,000 10/07/1997 3,296,991
Bell Atlantic Financial Services, Inc., 5.53% ...... 2,426,000 10/03/1997 2,425,259
GTE Corp., 5.55% .................................... 3,390,000 10/30/1997 3,374,844
------------
9,097,094
------------
Total Investments (Cost $234,249,700) -- 101.0% ............................................... 234,249,700
Cash and Other Assets, Less Liabilities -- (1.0%) ............................................. (2,403,572)
------------
Net Assets -- 100.0% .......................................................................... $231,846,128
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
STATE STREET RESEARCH MONEY MARKET FUND
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- -----------------------------------------------------------------------------
September 30, 1997 (Unaudited)
ASSETS
Investments, at value (Cost $234,249,700) (Note 1) ....... $234,249,700
Cash ..................................................... 15,917
Receivable for fund shares sold .......................... 2,748,763
Receivable from Distributor (Note 3) ..................... 88,395
Other assets ............................................. 49,062
------------
237,151,837
LIABILITIES
Payable for fund shares redeemed ......................... 4,570,653
Accrued transfer agent and shareholder services (Note 2) 209,862
Accrued management fee (Note 2) .......................... 197,597
Dividends payable ........................................ 192,909
Accrued distribution and service fees (Note 5) ........... 26,408
Accrued trustees' fees (Note 2) .......................... 13,244
Other accrued expenses ................................... 95,036
------------
5,305,709
------------
NET ASSETS $231,846,128
============
Net Assets consist of:
Shares of beneficial interest .......................... $231,846,128
============
Net Asset Value and offering price per share of
Class B shares ($14,308,779 / 14,308,779 shares
of beneficial interest)* ............................... $1.00
=====
Net Asset Value, offering price and redemption price
per share of Class C shares ($13,795,506 / 13,795,506
shares of beneficial interest) ......................... $1.00
=====
Net Asset Value and offering price per share of
Class D shares ($831,273 / 831,273 shares of
beneficial interest)* .................................. $1.00
=====
Net Asset Value, offering price and redemption
price per share of Class E shares
($202,910,570 / 202,910,570 shares o
beneficial interest) ................................... $1.00
=====
- -----------------------------------------------------------------------------
*Redemption price per share for Class B and Class D is equal to
net asset value less any applicable contingent deferred sales charge.
STATE STREET RESEARCH MONEY MARKET FUND
- -----------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- -----------------------------------------------------------------------------
For the six months ended September 30, 1997 (Unaudited)
INVESTMENT INCOME
Interest ............................................. $6,628,112
EXPENSES
Management fee (Note 2) .............................. 586,940
Transfer agent and shareholder services (Note 2) ..... 292,319
Custodian fee ........................................ 53,290
Registration fees .................................... 32,033
Reports to shareholders .............................. 19,983
Trustees' fees (Note 2) .............................. 15,336
Audit fee ............................................ 12,819
Distribution and service fees-Class B (Note 5) ....... 76,440
Distribution and service fees-Class D (Note 5) ....... 4,596
Legal fees ........................................... 4,312
Miscellaneous ........................................ 6,898
----------
1,104,966
Expenses borne by the Distributor (Note 3) ........... (260,936)
----------
844,030
----------
Net investment income and net increase in net assets
resulting from operations .......................... $5,784,082
==========
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STATE STREET RESEARCH MONEY MARKET FUND
- -----------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30, 1997 YEAR ENDED
(UNAUDITED) MARCH 31, 1997
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income and net
increase resulting from operations ..................... $ 5,784,082 $ 10,662,268
------------ ------------
Dividends from net investment income: ....................
Class B ................................................ (305,134) (492,831)
Class C ................................................ (387,650) (734,560)
Class D ................................................ (18,310) (25,541)
Class E ................................................ (5,072,988) (9,409,336)
------------ ------------
(5,784,082) (10,662,268)
------------ ------------
Net increase (decrease) from fund
share transactions (Note 6) ............................ 7,836,036 (3,137,041)
------------ ------------
Total increase (decrease) in net assets .................. 7,836,036 (3,137,041)
NET ASSETS
Beginning of period ...................................... 224,010,092 227,147,133
------------ ------------
End of period ............................................ $231,846,128 $224,010,092
============ ============
</TABLE>
STATE STREET RESEARCH MONEY MARKET FUND
- -------------------------------------------------------------------------------
NOTES TO UNAUDITED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
September 30, 1997
NOTE 1
State Street Research Money Market Fund (the "Fund"), is a series of State
Street Research Money Market Trust (the "Trust"), which was organized as a
Massachusetts business trust in April, 1985 and is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company. The Fund commenced operations in August, 1986. The Fund is
presently the only active series of the Trust, although the Trustees have the
authority to create an unlimited number of series.
The investment objective of the Fund is to seek a high level of current income
consistent with preservation of capital and maintenance of liquidity. The Fund
seeks to achieve its investment objective by investing in securities issued or
guaranteed as to principal and interest by the U.S. Government or its agencies
or instrumentalities as well as high quality, short-term money market
instruments such as bank certificates of deposit, bankers' acceptances and
such short-term corporate debt securities as commercial paper and master
demand notes.
The Fund offers four classes of shares. Class B shares are subject to a
contingent deferred sales charge on certain redemptions made within five years
of purchase and pay annual distribution and service fees of 1.00%. Class B
shares automatically convert into Class E shares (which pay lower ongoing
expenses) at the end of eight years after the issuance of the Class B shares.
Class C shares are only offered to certain employee benefit plans and large
institutions. No sales charge is imposed at the time of purchase or redemption
of Class C shares. Class C shares do not pay any distribution or service fees.
Class D shares are subject to a contingent deferred sales charge of 1.00% on
any shares redeemed within one year of their purchase. Class D shares also pay
annual distribution and service fees of 1.00%. Class E shares are offered to
any individual. Class E shares are not subject to any initial or contingent
deferred sales charges and do not pay any distribution or service fees. The
Fund's expenses are borne pro rata by each class, except that each class bears
expenses, and has exclusive voting rights with respect to provisions of the
Plan of Distribution, related specifically to that class. The Trustees declare
separate dividends on each class of shares.
The following significant accounting policies are consistently followed by the
Fund in preparing its financial statements, and such policies are in
conformity with generally accepted accounting principles for investment
companies.
A. INVESTMENT VALUATION
The Fund values securities at amortized cost, pursuant to which the Fund must
adhere to certain conditions. The amortized cost method involves valuing a
portfolio security initially at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium regardless of the effect
of fluctuating interest rates on the market value of the investments.
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
B. SECURITY TRANSACTIONS
Security transactions are accounted for on the trade date (date the order to
buy or sell is executed). Realized gains or losses, if any, are reported on
the basis of identified cost of securities delivered.
C. NET INVESTMENT INCOME
Net investment income is determined daily and consists of interest accrued and
discount earned, less amortization of premium and the estimated daily expenses
of the Fund. Interest income is accrued daily as earned.
D. DIVIDENDS
Dividends from net investment income are declared daily and paid or reinvested
monthly. Net realized capital gains, if any, are distributed annually, unless
additional distributions are required for compliance with applicable tax
regulations.
E. FEDERAL INCOME TAXES
No provision for Federal income taxes is necessary because the Fund has
elected to qualify under Subchapter M of the Internal Revenue Code and its
policy is to distribute all of its taxable income, including net realized
capital gains, within the prescribed time periods.
F. ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE 2
The Trust and State Street Research & Management Company (the "Adviser"), an
indirect wholly owned subsidiary of Metropolitan Life Insurance Company
("Metropolitan"), have entered into an agreement under which the Adviser earns
monthly fees at an annual rate of 0.50% of the Fund's average daily net
assets. In consideration of these fees, the Adviser furnishes the Fund with
management, investment advisory, statistical and research facilities and
services. The Adviser also pays all salaries, rent and certain other expenses
of management. During the six months ended September 30, 1997, the fees
pursuant to such agreement amounted to $586,940.
State Street Research Shareholder Services, a division of State Street
Research Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly owned subsidiary of Metropolitan, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. During the six months ended September 30, 1997, the amount
of such expenses was $52,032.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$15,336 during the six months ended September 30, 1997.
NOTE 3
The Distributor and its affiliates may from time to time and in varying
amounts voluntarily assume some portion of fees or expenses relating to the
Fund. During the six months ended September 30, 1997, the amount of such
expenses assumed by the Distributor and its affiliates was $260,936.
NOTE 4
For the six months ended September 30, 1997, purchases and sales, including
maturities, of securities aggregated $1,078,986,502 and $1,072,982,295,
respectively.
NOTE 5
The Trust has adopted a Plan of Distribution pursuant to Rule
12b-1 (the "Plan") under the Investment Company Act of 1940. Under the Plan,
the Fund pays annual distribution and service fees to the Distributor at a
rate of 0.75% and 0.25%, respectively, of average daily net assets for Class B
and Class D shares. The Distributor uses such payments for personal services
and/or the maintenance or servicing of shareholder accounts, to reimburse
securities dealers for distribution and marketing services, to furnish ongoing
assistance to investors and to defray a portion of its distribution and
marketing expenses. For the six months ended September 30, 1997, fees pursuant
to such plan amounted to $76,440 and $4,596 for Class B and Class D shares,
respectively.
The Fund has been informed that MetLife Securities, Inc., a wholly-owned
subsidiary of Metropolitan, earned commissions aggregating $7,414 on sales of
the Fund's Class B shares and that the Distributor collected contingent
deferred sales charges aggregating $111,085 and $6,174 on redemptions of Class
B and Class D shares, respectively, during the six months ended September 30,
1997.
5
<PAGE>
NOTE 6
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share.
At September 30, 1997, Metropolitan and certain of its affiliates held of
record 52,259,580 Class E shares of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30, 1997 YEAR ENDED
(UNAUDITED) MARCH 31, 1997
------------------------------------- -------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ............. 18,564,218 $ 18,564,218 28,609,585 $ 28,609,585
Issued upon reinvestment
of dividends ............ 259,066 259,066 414,928 414,928
Shares repurchased ...... (20,496,025) (20,496,025) (24,926,640) (24,926,640)
------------ -------------- ----------- --------------
Net increase (decrease) . (1,672,741) $ (1,672,741) 4,097,873 $ 4,097,873
============ ============== =========== ==============
<CAPTION>
CLASS C SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ............. 7,784,716 $ 7,784,716 32,645,556 $ 32,645,556
Issued upon reinvestment
of dividends ............ 367,126 367,126 675,535 675,535
Shares repurchased ...... (9,066,443) (9,066,443) (34,802,202) (34,802,202)
------------ -------------- ----------- --------------
Net decrease ............ (914,601) $ (914,601) (1,481,111) $ (1,481,111)
============ ============== =========== ==============
<CAPTION>
CLASS D SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ............. 6,289,469 $ 6,289,469 29,948,381 $ 29,948,381
Issued upon reinvestment
of dividends ............ 14,767 14,767 15,948 15,948
Shares repurchased ...... (6,431,873) (6,431,873) (30,968,955) (30,968,955)
------------ -------------- ----------- --------------
Net decrease ............ (127,637) $ (127,637) (1,004,626) $ (1,004,626)
============ ============== =========== ==============
<CAPTION>
CLASS E SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ............. 418,888,084 $ 418,888,084 785,239,791 $ 785,239,791
Issued upon reinvestment
of dividends ............ 3,646,403 3,646,403 6,052,998 6,052,998
Shares repurchased ...... (411,983,472) (411,983,472) (796,041,966) (796,041,966)
------------ -------------- ----------- --------------
Net increase (decrease) . 10,551,015 $ 10,551,015 (4,749,177) $ (4,749,177)
============ ============== =========== ==============
</TABLE>
6
<PAGE>
STATE STREET RESEARCH MONEY MARKET FUND
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED MARCH 31
SEPTEMBER 30, 1997 -----------------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994**
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- ------- ------- ------- -------
Net investment income* 0.020 0.037 0.041 0.032 0.012
Dividends from net investment income (0.020) (0.037) (0.041) (0.032) (0.012)
------- ------- ------- ------- -------
Net asset value, end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======= ======= =======
Total return 2.02%++ 3.72%+ 4.16%+ 3.27%+ 1.27%++
Net assets at end of period (000s) $14,309 $15,982 $11,884 $9,322 $3,028
Ratio of operating expenses to
average net assets* 1.65%(+) 1.75% 1.75% 1.75% 1.75%(+)
Ratio of net investment income to
average net assets* 3.99%(+) 3.69% 4.06% 3.53% 1.54%(+)
*Reflects voluntary assumption of
fees or expenses per share
in each period (Note 3) $0.001 $0.002 $0.003 $0.004 $0.007
<CAPTION>
CLASS C
----------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED MARCH 31
SEPTEMBER 30, 1997 -----------------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994**
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- ------- ------- ------- -------
Net investment income* 0.025 0.047 0.051 0.042 0.021
Dividends from net investment income (0.025) (0.047) (0.051) (0.042) (0.021)
------- ------- ------- ------- -------
Net asset value, end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======= ======= =======
Total return 2.53%++ 4.78%+ 5.20%+ 4.31%+ 2.08%++
Net assets at end of period (000s) $13,796 $14,710 $16,191 $7,886 $1,786
Ratio of operating expenses to
average net assets* 0.65%(+) 0.75% 0.75% 0.75% 0.75%(+)
Ratio of net investment income to
average net assets* 4.99%(+) 4.69% 5.03% 4.66% 2.54%(+)
*Reflects voluntary assumption of
fees or expenses per share
in each period (Note 3) $0.001 $0.002 $0.003 $0.003 $0.006
- -----------------------------------------------------------------------------------------------------------------------------------
** June 1, 1993 (commencement of share class designations) to March 31, 1994.
(+) Annualized.
+ Total return figures do not reflect any front-end or contingent deferred sales charges. Total return would be lower if the
Distributor and its affiliates had not voluntarily assumed a portion of the Fund's expenses.
++ Represents aggregate return for the period without annualization and does not reflect any front-end or contingent deferred
sales charges. Total return would be lower if the Distributor and its affiliates had not voluntarily assumed a portion of
the Fund's expenses.
</TABLE>
7
<PAGE>
STATE STREET RESEARCH MONEY MARKET FUND
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS D
----------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED MARCH 31
SEPTEMBER 30, 1997 -----------------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994**
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- ------- ------- ------- -------
Net investment income* 0.020 0.037 0.041 0.032 0.013
Dividends from net investment income (0.020) (0.037) (0.041) (0.032) (0.013)
------- ------- ------- ------- -------
Net asset value, end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======= ======= =======
Total return 2.02%++ 3.72%+ 4.16%+ 3.28%+ 1.30%++
Net assets at end of period (000s) $831 $959 $1,964 $842 $174
Ratio of operating expenses to
average net assets* 1.65%(+) 1.75% 1.75% 1.75% 1.75%(+)
Ratio of net investment income to
average net assets* 3.98%(+) 3.68% 4.08% 3.30% 1.54%(+)
*Reflects voluntary assumption of
fees or expenses per share
in each period (Note 3) $0.001 $0.002 $0.003 $0.005 $0.002
<CAPTION>
CLASS E
----------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED MARCH 31
SEPTEMBER 30, 1997 ----------------------------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994** 1993
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- ------- ------- ------- ------- -------
Net investment income* 0.025 0.047 0.051 0.042 0.025 0.028
Dividends from net
investment income (0.025) (0.047) (0.051) (0.042) (0.025) (0.028)
------- ------- ------- ------- ------- -------
Net asset value, end
of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======= ======= ======= =======
Total return 2.53%++ 4.78%+ 5.20%+ 4.31%+ 2.48%+ 2.88%+
Net assets at end of
period (000s) $202,911 $192,360 $197,109 $150,491 $138,129 $149,831
Ratio of operating
expenses to average
net assets* 0.65%(+) 0.75% 0.75% 0.75% 0.75% 0.75%
Ratio of net
investment income to
average net assets* 5.00%(+) 4.69% 5.06% 4.26% 2.46% 2.84%
*Reflects voluntary
assumption of fees or
expenses per share
in each period (Note 3) $0.001 $0.002 $0.003 $0.006 $0.003 $0.001
- -----------------------------------------------------------------------------------------------------------------------------------
** June 1, 1993 (commencement of share class designations) to March 31, 1994.
*** Effective November 30, 1993, the Fund discontinued offering Class A shares and any existing Class A shares were
redesignated Class E shares. Net investment income and dividends amounted to $.011 per share for Class A shares during the
period June 1, 1993 (commencement of share class designations) to November 30, 1993.
(+) Annualized.
+ Total return figures do not reflect any front-end or contingent deferred sales charges. Total return would be lower if the
Distributor and its affiliates had not voluntarily assumed a portion of the Fund's expenses.
++ Represents aggregate return for the period without annualization and does not reflect any front-end or contingent deferred
sales charges. Total return would be lower if the Distributor and its affiliates had not voluntarily assumed a portion of
the Fund's expenses.
</TABLE>
8
