As filed with the Securities and Exchange Commission on August 29, 1995
Securities Act of 1933 Registration No. 33-4296
Investment Company Act of 1940 File No. 811-4624
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. ____ [ ]
Post-Effective Amendment No. 17 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 18 [X]
----------------------------
METLIFE - STATE STREET EQUITY TRUST
-------------------------------------
(Exact Name of Registrant as Specified in Charter)
One Financial Center, Boston, Massachusetts 02111
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (617) 357-1200
Francis J. McNamara, III
Senior Vice President, Secretary & General Counsel
State Street Research & Management Company
One Financial Center
Boston, Massachusetts 02111
(Name and Address of Agent for Service)
Copy to:
Donald J. Evans, P.C.
Edward T. O'Dell, P.C.
Goodwin, Procter & Hoar
Exchange Place, Boston, Massachusetts 02109
It is proposed that this filing will become effective under Rule 485:
[ ] Immediately upon filing [ ] 75 days after filing pursuant
pursuant to paragraph (b). to paragraph (c)(2).
[ ] On _____________________ pursuant [ ] On _____________ pursuant to
to paragraph (b). paragraph (a)(2).
[ ] 60 days after filing pursuant If appropriate, check the
to paragraph (a)(1). following box:
[X] On November 1, 1995 pursuant to
paragraph (a)(1).
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
______________________________________
The Registrant hereby declares that, pursuant to Rule 24f-2 promulgated
under the Investment Company Act of 1940, as amended, it has registered an
indefinite number of shares of beneficial interest, par value $.001 per share,
in each of the MetLife - State Street Research Capital Appreciation Fund series,
the MetLife - State Street Research Equity Investment Fund series, the MetLife -
State Street Research Equity Income Fund series, and the State Street Research
Global Resources Fund series of the Registrant, which shares are designated as
Class A shares, Class B shares, Class C shares and Class D shares in each such
series.
A Rule 24f-2 Notice for the most recent fiscal year ended June 30, 1995,
will be filed by the Registrant on or about August 25, 1995.
<PAGE>
The Registrant, MetLife - State Street Equity Trust, expects to change its
name to "State Street Research Equity Trust" immediately prior to the
effectiveness of this Post-Effective Amendment.
The following series of the Registrant expect to change their names as
follows immediately prior to the effectiveness of this Post-Effective Amendment:
"MetLife - State Street Research Capital Appreciation Fund" will change its
name to "State Street Research Capital Appreciation Fund"; "MetLife-State Street
Research Equity Investment Fund" will change its name to "State Street Research
Equity Investment Fund"; and "MetLife - State Street Research Equity Income
Fund" will change its name to "State Street Research Equity Income Fund."
Accordingly, all references to previous names herein shall be deemed to
refer to the new names.
<PAGE>
CROSS REFERENCE SHEET
Pursuant to Rule 481(a)
Part A
CAPTION OR LOCATION IN
PROSPECTUS FOR METLIFE -
STATE STREET RESEARCH
CAPITAL APPRECIATION FUND,
METLIFE - STATE STREET CAPTION OR LOCATION
RESEARCH EQUITY INVESTMENT IN PROSPECTUS
FUND AND METLIFE - STATE FOR STATE STREET
STREET RESEARCH RESEARCH GLOBAL
FORM N-1A ITEM NO. EQUITY INCOME FUND RESOURCES FUND
- ------------------ ------------------ --------------
1. Cover Page........... Same Same
2. Synopsis ............ Table of Expenses Table of Expenses
3. Condensed Financial Financial Highlights; Financial Highlights;
Information.......... Calculation of Performance Calculation of Performance
Data Data
4. General Description The Funds' Investments; The Fund's Investments;
of Registrant........ Limiting Investment Risk; Limiting Investment Risk;
The Funds and Their The Fund and its Shares
Shares; Appendix
5. Management of the Management of the Funds; Management of the Fund;
Fund................. Purchase of Shares Purchase of Shares
5A.Management's [To be included in [To be included in
Discussion of Annual Reports Annual Reports
Fund Performance .... to Shareholders] to Shareholders
6. Capital Stock and Shareholder Services; The Shareholder Services; The
Other Securities..... Funds and Their Shares; Fund and its Shares;
Management of the Management of the
Funds; Dividends Fund; Dividends and
and Distributions; Taxes Distributions; Taxes
7. Purchase of
Securities Being Purchase of Shares; Purchase of Shares;
Offered............. Shareholder Services Shareholder Services
8. Redemption or Redemption of Shares; Redemption of Shares;
Repurchase.......... Shareholder Services Shareholder Services
9. Legal Proceedings... Not Applicable Not Applicable
<PAGE>
Part B
CAPTION OR LOCATION IN
STATEMENT OF ADDITIONAL
INFORMATION FOR METLIFE -
STATE STREET RESEARCH
CAPITAL APPRECIATION FUND, CAPTION OR LOCATION
METLIFE - STATE STREET IN STATEMENT OF
RESEARCH EQUITY INVESTMENT ADDITIONAL INFORMATION
FUND AND METLIFE - STATE FOR STATE STREET
STREET RESEARCH RESEARCH GLOBAL
FORM N-1A ITEM NO. EQUITY INCOME FUND RESOURCES FUND
- ------------------ ------------------ --------------
10. Cover Page.......... Same Same
11. Table of Contents... Same Same
12. General Information
and History......... Not Applicable Not Applicable
13. Investment Additional Investment Additional Investment
Objectives Policies and Restrictions; Policies and Restrictions;
and Policies........ Additional Information Additional Information
Concerning Certain Concerning Certain
Investment Techniques; Investment Techniques;
Debt Instruments and Additional Information
Permitted Cash Investments; Concerning Debt
Portfolio Transactions Instruments and Permitted
Cash Investments;
Rating Categories of
Debt Securities;
Portfolio Transactions
14. Management of the
Registrant.......... Trustees and Officers Trustees and Officers
15. Control Persons and
Principal Holders of
Securities.......... Trustees and Officers Trustees and Officers
16. Investment Investment Advisory Investment Advisory
Advisory and Services; Custodian; Services; Custodian;
Other Services...... Independent Accountants; Independent Accountants;
Distribution of Shares Distribution of Shares
of the Funds of the Fund
17. Brokerage
Allocation.......... Portfolio Transactions Portfolio Transactions
18. Capital Stock and Not Applicable Not Applicable
Other Securities.....(Description in Prospectus) (Description in Prospectus)
19. Purchase, Redemption
and Pricing of
Securities Being Purchase and Redemption Purchase and Redemption
Offered............. of Shares; Net Asset Value of Shares; Net Asset Value
20. Tax Status.......... Certain Tax Matters Certain Tax Matters
21. Underwriters........ Distribution of Shares Distribution of Shares of
of the Funds the Fund
<PAGE>
CAPTION OR LOCATION IN
STATEMENT OF ADDITIONAL
INFORMATION FOR METLIFE -
STATE STREET RESEARCH
CAPITAL APPRECIATION FUND, CAPTION OR LOCATION
METLIFE - STATE STREET IN STATEMENT OF
RESEARCH EQUITY INVESTMENT ADDITIONAL INFORMATION
FUND AND METLIFE - STATE FOR STATE STREET
STREET RESEARCH RESEARCH GLOBAL
FORM N-1A ITEM NO. EQUITY INCOME FUND RESOURCES FUND
- ------------------ ------------------ --------------
22. Calculation of
Performance
Data............... Calculation of Calculation of
Performance Data Performance Data
23. Financial
Statements......... Financial Statements Financial Statements
<PAGE>
State Street Research
Capital Appreciation Fund
Equity Investment Fund
Equity Income Fund
Prospectus--November 1, 1995
STATE STREET RESEARCH CAPITAL APPRECIATION FUND (the "Capital Appreciation
Fund" or the "Fund") seeks to achieve maximum capital appreciation by
investing primarily in common stocks of emerging growth companies and of
companies considered to be undervalued special situations. Current income is
not a consideration in the selection of investments for the Fund. The Fund
may engage in short-term trading of portfolio securities. See page 12.
STATE STREET RESEARCH EQUITY INVESTMENT FUND (the "Equity Investment Fund" or
the "Fund") seeks to achieve long-term growth of capital and, secondarily,
long-term growth of income by investing primarily in common stocks of
established companies with above-average prospects for growth. See page 12.
STATE STREET RESEARCH EQUITY INCOME FUND (the "Equity Income Fund" or the
"Fund") seeks to provide a high level of current income and, secondarily,
long-term growth of capital by investing primarily in common stocks offering
above-average dividend yields and in securities convertible into common
stocks. The Fund seeks to provide a higher income yield than that of the
Standard & Poor's 500 Stock Index. The Fund has authority to invest from time
to time in lower rated fixed income securities. See page 12.
State Street Research & Management Company serves as investment adviser for
the Funds (the "Investment Manager"). As of June 30, 1995, the Investment
Manager had assets of approximately $26.2 billion under management. State
Street Research Investment Services, Inc. serves as distributor (the
"Distributor") for the Funds.
Shareholders may have their shares redeemed directly by the Funds at net
asset value plus the applicable contingent deferred sales charge, if any;
redemptions processed through securities dealers may be subject to processing
charges.
There are risks in any investment program, including the risk of changing
economic and market conditions, and there is no assurance that a Fund will
achieve its investment objective. The net asset value of a share of a Fund
will fluctuate as market conditions change.
This Prospectus sets forth concisely the information a prospective investor
ought to know about the Funds before investing. It should be retained for
future reference. A Statement of Additional Information about the Funds dated
November 1, 1995 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 Funds at the address indicated on the back cover
or by calling 1-800-562-0032.
Each Fund is a diversified series of State Street Research Equity Trust (the
"Trust"), an open-end management investment company.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Table of Contents Page
Table of Expenses ........................ 2
Financial Highlights ..................... 6
The Funds' Investments ................... 12
Limiting Investment Risk ................. 15
Purchase of Shares ....................... 16
Redemption of Shares ..................... 25
Shareholder Services ..................... 27
The Funds and Their Shares ............... 31
Management of the Funds .................. 32
Dividends and Distributions; Taxes ....... 33
Calculation of Performance Data .......... 34
Appendix--Description of Debt/Bond Ratings 36
<PAGE>
The Funds offer four 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 C shares, a sales charge which, at the election of the investor, may be
imposed (i) at the time of purchase (the Class A shares) or (ii) on a
deferred basis (the Class B and Class D shares).
Class A shares are subject to (i) an initial sales charge of up to 4.5% and
(ii) an annual service fee of 0.25% of the average daily net asset value of
the Class A shares.
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 A 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 offered only 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 (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.
<TABLE>
<CAPTION>
Table of Expenses Class A Class B Class C Class D
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses (1)
Maximum Sales Charge Imposed on Purchases (as a percentage of
offering price) 4.5% None None None
Maximum Sales Charge Imposed on Reinvested Dividends (as a
percentage of offering price) None None None None
Maximum Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable) None(2) 5% None 1%
Redemption Fees (as a percentage of amount redeemed,
if applicable) None None None None
Exchange Fees None None None None
</TABLE>
- -----------
(1) Reduced sales charge purchase plans are available for Class A shares. 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 D 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 a class of shares with a distribution fee
may, over a period of years, pay more than the economic equivalent of the
maximum sales charge permissible under applicable rules. See "Purchase of
Shares."
(2) Purchases of Class A shares of $1 million or more are not subject to a
sales charge. If such shares are redeemed within 12 months of purchase, a
contingent deferred sales charge of 1% will be applied to the redemption.
See "Purchase of Shares."
2
<PAGE>
<TABLE>
<CAPTION>
Capital Appreciation Fund Class A Class B Class C Class D
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees 0.75% 0.75% 0.75% 0.75%
12b-1 Fees 0.25% 1.00% None 1.00%
Other Expenses 0.64% 0.64% 0.64% 0.64%
---- ---- ---- ----
Total Fund Operating Expenses 1.64% 2.39% 1.39% 2.39%
==== ==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
Equity Investment Fund Class A Class B Class C Class D
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees 0.65% 0.65% 0.65% 0.65%
12b-1 Fees 0.25% 1.00% None 1.00%
Other Expenses 0.83% 0.83% 0.83% 0.83%
Less Voluntary Reduction (0.48%) (0.48%) (0.48%) (0.48%)
----- ----- ----- -----
Total Fund Operating Expenses
(after voluntary reduction) 1.42% 2.00% 1.00% 2.00%
==== ==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
Equity Income Fund Class A Class B Class C Class D
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees 0.65% 0.65% 0.65% 0.65%
12b-1 Fees 0.25% 1.00% None 1.00%
Other Expenses 0.77% 0.77% 0.77% 0.77%
Less Voluntary Reduction (0.42%) (0.42%) (0.42%) (0.42%)
----- ----- ----- -----
Total Fund Operating Expenses
(after voluntary reduction) 1.42% 2.00% 1.00% 2.00%
==== ==== ==== ====
</TABLE>
3
<PAGE>
Example:
You would pay the following expenses on a $1,000 investment including, for
Class A shares, the maximum applicable initial sales charge and assuming (1)
5% annual return and (2) redemption of the entire investment at the end of
each time period:
Capital Appreciation Fund 1 Year 3 Years 5 Years 10 Years
- ----------------------------------------------------------------------------
Class A shares $61 $ 94 $130 $231
Class B shares (1) $74 $105 $148 $254
Class C shares $14 $ 44 $ 76 $167
Class D shares $34 $ 75 $128 $273
Equity Investment Fund 1 Year 3 Years 5 Years 10 Years
- ----------------------------------------------------------------------------
Class A shares $57 $83 $111 $189
Class B shares (1) $70 $93 $128 $213
Class C shares $10 $32 $ 55 $122
Class D shares $30 $63 $108 $233
Equity Income Fund 1 Year 3 Years 5 Years 10 Years
- ----------------------------------------------------------------------------
Class A shares $57 $83 $111 $189
Class B shares (1) $70 $93 $128 $213
Class C shares $10 $32 $ 55 $122
Class D shares $30 $63 $108 $233
You would pay the following expenses on the same investment, assuming no
redemption:
Capital Appreciation Fund 1 Year 3 Years 5 Years 10 Years
- ----------------------------------------------------------------------------
Class B shares (1) $24 $75 $128 $254
Class D shares $24 $75 $128 $273
Equity Investment Fund 1 Year 3 Years 5 Years 10 Years
- ----------------------------------------------------------------------------
Class B shares (1) $20 $63 $108 $213
Class D shares $20 $63 $108 $233
Equity Income Fund 1 Year 3 Years 5 Years 10 Years
- ----------------------------------------------------------------------------
Class B shares (1) $20 $63 $108 $213
Class D shares $20 $63 $108 $233
(1) Ten-year figures assume conversion of Class B shares to Class A 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 experiences with expenses during the fiscal year ended June 30, 1995;
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
4
<PAGE>
of the Funds"; and for further information on 12b-1 fees, see "Purchase of
Shares--Distribution Plan."
The Equity Investment Fund and the Equity Income Fund have 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 such
Funds. For the fiscal year ended June 30, 1995, Total Fund Operating Expenses
as a percentage of average net assets of Class A, Class B, Class C and Class
D shares, respectively, would have been 1.91%, 2.48%, 1.48% and 2.48% of the
Equity Investment Fund, and 1.84%, 2.41%, 1.41% and 2.42% of the Equity
Income Fund, in the absence of the voluntary assumption of fees or expenses
by the Distributor and its affiliates. Such assumption of fees or expenses,
as a percentage of average net assets, amounted to 0.49%, 0.48%, 0.48% and
0.48% of the Class A, Class B, Class C and Class D shares of the Equity
Investment Fund, respectively, and 0.42%, 0.41%, 0.41% and 0.42% of the Class
A, Class B, Class C and Class D shares of the Equity Income Fund,
respectively. The amount of fees or expenses assumed during the fiscal year
ended June 30, 1995 differed among classes because of fluctuations during the
year in relative levels of assets in each class and in expenses before
reimbursement. The Equity Investment Fund and the Equity Income Fund expect
the subsidization of fees or expenses to continue in the current year,
although they cannot give complete assurance that such assistance will be
received.
5
<PAGE>
Financial Highlights
The data set forth below has been audited by Price Waterhouse LLP,
independent accountants, and their reports thereon for the latest five years
are included in the Statement of Additional Information. For further
information about the performance of the Funds, see the Funds' Annual Reports
which appear under the caption "Financial Statements" in the Statement of
Additional Information.
Capital Appreciation Fund
<TABLE>
<CAPTION>
Class A
--------------------------------------------------------------------------------------------------------
August 25, 1986
(Commencement of
Year ended June 30 Operations) to
1995** 1994 1993 1992 1991 1990 1989 1988 June 30, 1987
------ ---- ---- ---- ---- ---- ---- ---- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $ 9.11 $ 10.42 $ 8.33 $ 6.55 $ 6.70 $ 6.46 $ 5.49 $ 5.93 $ 4.66
Net investment income
(loss)* (.09) (.04) (.05) (.05) (.01) .02 .02 .04 .01
Net realized and
unrealized gain
(loss) on investments 2.95 .09 2.81 1.83 (.12) 1.04 .96 (.23) 1.27
Dividends from net
investment income -- -- -- -- (.01) (.02) (.01) (.04) (.01)
Dividends in excess of
net investment income -- -- -- -- (.01) -- -- -- --
Distributions from net
realized gains (.45) (1.36) (.67) -- -- (.80) -- (.21) --
---- ----- ---- ---- ---- ---- ---- ---- ----
Net asset value, end
of year $ 11.52 $ 9.11 $ 10.42 $ 8.33 $ 6.55 $ 6.70 $ 6.46 $ 5.49 $ 5.93
======== ======== ======== ======== ======= ======= ======= ======= =======
Total return 32.56%+ (0.28%)+ 35.78%+ 27.03%+ (1.69)%+ 17.25%+ 18.08%+ (3.43)%+ 27.70%+
Net assets at end of
year (000s) $296,471 $231,356 $183,886 $116,687 $62,898 $59,093 $33,872 $29,757 $23,672
Ratio of operating
expenses to average
net assets* 1.55% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%++
Ratio of net
investment income
(loss) to average net
assets* (0.87)% (0.81)% (0.63)% (0.71)% (0.13)% 0.39% 0.29% 0.77% 0.31%++
Portfolio turnover
rate 217.28% 147.73% 135.17% 128.10% 245.55% 238.94% 223.19% 330.50% 200.56%
*Reflects the
voluntary
assumption of fees
or expenses per
share in each year $ 0.03 $ 0.02 $ 0.01 $ 0.01 $ 0.03 $ 0.02 $ 0.04 $ 0.04 $ 0.04
</TABLE>
**Per-share figures have been calculated using the average shares method.
++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.
6
<PAGE>
Capital Appreciation Fund
<TABLE>
<CAPTION>
Class B Class C
------------------------------------ ---------------------------------------
June 1, 1993 June 1, 1993
(Commencement (Commencement
of Share Class of Share Class
Year ended June 30 Designations) to Year ended June 30 Designations) to
1995** 1994 June 30, 1993 1995** 1994 June 30, 1993
------ ---- ------------- ------ ---- -------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 9.05 $ 10.41 $ 10.44 $ 9.16 $ 10.42 $ 10.44
Net investment income (loss)* (.15) (.06) (.00) (.05) (.02) .00
Net realized and unrealized gain (loss) on
investments 2.93 .06 (.03) 2.98 .12 (.02)
Dividends from net investment income -- -- -- -- -- --
Dividends in excess of net investment income -- -- -- -- -- --
Distributions from net realized gains (.45) (1.36) -- (.45) (1.36) --
---- ----- ------- ---- ----- -------
Net asset value, end of year $ 11.38 $ 9.05 $ 10.41 $ 11.64 $ 9.16 $ 10.42
======= ======= ======= ========= ======= =======
Total return 31.86%+ (0.83)%+ (0.29)%+++ 33.06%+ 0.25%+ (0.19)%+++
Net assets at end of year (000s) $93,088 $49,236 $ 2,790 $106,675 $62,662 $37,826
Ratio of operating expenses to average net
assets* 2.15% 2.00% 2.00%++ 1.15% 1.00% 1.00%++
Ratio of net investment income (loss) to
average net assets* (1.47)% (1.29)% (0.95)%++ (0.46)% (0.30)% 0.50%++
Portfolio turnover rate 217.28% 147.73% 135.17% 217.28% 147.73% 135.17%
*Reflects voluntary assumption of fees or
expenses per share in each year $ 0.02 $ 0.02 $ 0.00 $ 0.02 $ 0.02 $ 0.00
</TABLE>
<TABLE>
<CAPTION>
Class D
------------------------------------
June 1, 1993
(Commencement
Year ended June 30 of Share Class
Designations) to
1995** 1994 June 30, 1993
------ ---- -------------
<S> <C> <C> <C>
Net asset value, beginning of year $ 9.07 $ 10.41 $ 10.44
Net investment income (loss)* (.15) (.07) (.01)
Net realized and unrealized gain (loss) on
investments 2.94 .09 (.02)
Dividends from net investment income -- -- --
Dividends in excess of net investment income -- -- --
Distributions from net realized gains (.45) (1.36) --
---- ----- -------
Net asset value, end of year $ 11.41 $ 9.07 $ 10.41
======= ======= =======
Total return 31.79%+ (0.61)%+ (0.29)%++
Net assets at end of year (000s) $ 4,061 $ 2,201 $ 623
Ratio of operating expenses to average net
assets* 2.15%+ 2.00% 2.00%++
Ratio of net investment income (loss) to
average net assets* (1.47%) (1.29)% (1.10)%++
Portfolio turnover rate $217.28% 147.73% 135.17%
*Reflects voluntary assumption of fees or
expenses per share in each year $ 0.02 $ 0.02 $ 0.00
</TABLE>
**Per-share figures have been calculated using the average shares method.
++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>
Equity Investment Fund
<TABLE>
<CAPTION>
Class A
--------------------------------------------------------------------------------------------------
August 25, 1986
(Commencement of
Year ended June 30 Operations) to
1995** 1994 1993 1992 1991 1990 1989 1988 June 30, 1987
------ ---- ---- ---- ---- ---- ---- ---- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $ 12.44 $ 14.52 $ 13.16 $ 11.19 $ 12.15 $ 10.83 $ 9.70 $ 11.33 $ 9.31
Net investment income
(loss)* .08 .01 .04 .05 .14 .22 .33 .28 .20
Net realized and
unrealized gain
(loss) on investments 2.14 .18 2.48 1.99 (.89) 1.54 1.16 (.99) 1.94
Dividends from net
investment income (.05) -- (.04) (.07) (.19) (.29) (.31) (.22) (.12)
Distributions from net
realized gains (.33) (2.27) (1.12) -- (.02) (.15) (.05) (.70) --
---- ----- ----- ----- ---- ---- ---- ---- ----
Net asset value, end
of year $ 14.28 $ 12.44 $ 14.52 $ 13.16 $ 11.19 $ 12.15 $ 10.83 $ 9.70 $ 11.33
======= ======= ======= ======= ======= ======= ======= ======= =======
Total return 18.34%+ 0.93%+ 20.37%+ 18.27%+ (6.10)%+ 16.54%+ 15.87%+ (6.87)%+ 23.14%+++
Net assets at end of
year (000s) $31,174 $29,821 $26,933 $48,473 $35,733 $35,647 $24,066 $25,197 $22,210
Ratio of operating
expenses to average
net assets* 1.42% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%++
Ratio of net
investment income
(loss) to average net
assets* 0.64% 0.08% 0.23% 0.43% 1.29% 1.99% 3.17% 2.92% 2.57%++
Portfolio turnover
rate 47.93% 62.93% 92.35% 81.89% 72.03% 43.22% 98.70% 175.30% 118.70%
- --------------
*Reflects the
voluntary
assumption of fees
or expenses per
share in each year $ 0.06 $ 0.04 $ 0.02 $ 0.02 $ 0.03 $ 0.04 $ 0.05 $ 0.05 $ 0.05
</TABLE>
** Per-share figures have been calculated using the average shares method.
++ 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.
8
<PAGE>
Equity Investment Fund
<TABLE>
<CAPTION>
Class B Class C
------------------------------------ ------------------------------------
June 1, 1993 June 1, 1993
(Commencement (Commencement
of Share Class of Share Class
Year ended June 30 Designations) to Year ended June 30 Designations) to
1995** 1994 June 30, 1993 1995** 1994 June 30, 1993
------ ---- ------------- ------ ---- -------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $12.36 $14.51 $14.78 $ 12.48 $ 14.51 $ 14.78
Net investment income (loss)* .01 (.02) .00 .14 .07 (.00)
Net realized and unrealized gain (loss) on
investments 2.12 .14 (.26) 2.15 .17 (.25)
Dividends from net investment income -- -- (.01) (.17) -- (.02)
Distributions from net realized gains (.33) (2.27) -- (.33) (2.27) --
---- ----- ----- ---- ----- -----
Net asset value, end of year $14.16 $12.36 $14.51 $ 14.27 $ 12.48 $ 14.51
====== ====== ====== ======= ======= =======
Total return 17.70%+ 0.37%+ (1.77)%+++ 18.83%+ 1.41%+ (1.69)%+++
Net assets at end of year (000s) $5,933 $4,029 $ 663 $50,503 $32,991 $18,796
Ratio of operating expenses to average net
assets* 2.00% 2.00% 2.00%++ 1.00% 1.00% 1.00%++
Ratio of net investment income (loss) to
average net assets* 0.08% (0.39)% 0.03%++ 1.09% 0.59% (0.39)%++
Portfolio turnover rate 47.93% 62.93% 92.35% 47.93% 62.93% 92.35%
*Reflects voluntary assumption of fees or
expenses per share in each year $ 0.06 $ 0.04 $ 0.00 $ 0.06 $ 0.06 $ 0.00
</TABLE>
<TABLE>
<CAPTION>
Class D
-------------------------------------
June 1, 1993
(Commencement
of Share Class
Year ended June 30, Designations) to
1995** 1994 June 30, 1993
------ ---- -------------
<S> <C> <C> <C>
Net asset value, beginning of year $12.36 $14.51 $14.78
Net investment income (loss)* .01 (.05) .00
Net realized and unrealized gain (loss) on
investments 2.11 .17 (.26)
Dividends from net investment income -- -- (.01)
Distributions from net realized gains (.33) (2.27) --
---- ----- -------
Net asset value, end of year $14.15 $12.36 $ 14.51
====== ====== =======
Total return 17.53%+ 0.45%+ (1.77)%+++
Net assets at end of year (000s) $ 699 $ 551 $ 491
Ratio of operating expenses to average net
assets* 2.00% 2.00% 2.00%++
Ratio of net investment income (loss) to
average net assets* 0.08% (0.41)% 0.12%++
Portfolio turnover rate 47.93% 62.93% 92.35%
*Reflects voluntary assumption of fees or
expenses per share in each year $ 0.06 $ 0.06 $ 0.00
</TABLE>
**Per-share figures have been calculated using the average shares method.
++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.
9
<PAGE>
Equity Income Fund
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------------------------------------------------
August 25,
1986
(Commencement
of
Year ended June 30 Operations) to
1995** 1994 1993 1992 1991 1990 1989 1988 June 30, 1987
------ ---- ---- ---- ---- ---- ---- ---- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year $10.87 $10.79 $ 9.19 $8.33 $9.83 $9.87 $8.93 $10.35 $ 9.31
Net investment income* .28 .24 .44 .39 .45 .55 .47 .53 .38
Net realized and unrealized
gain (loss) on investments 1.37 .25 1.52 .83 (1.08) .54 .99 (.82) .86
Dividends from net investment
income (.28) (.26) (.36) (.36) (.48) (.52) (.51) (.66) (.20)
Distributions from net
realized gains (.54) (.15) -- -- (.39) (.61) (.01) (.47) --
---- ---- ----- ----- ---- ---- ---- ---- ------
Net asset value, end of year $11.70 $10.87 $10.79 $9.19 $8.33 $9.83 $9.87 $ 8.93 $10.35
====== ====== ====== ===== ===== ===== ===== ====== ======
Total return 16.12%+ 4.30%+ 21.64%+ 14.81%+ (6.51)%+ 11.33%+ 17.01%+ (2.35)%+ 13.42%+++
Net assets at end of year
(000s) $37,327 $40,484 $28,995 $51,585 $45,233 $49,842 $40,411 $30,315 $31,277
Ratio of operating expenses
to average net assets* 1.42% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%++
Ratio of net investment
income (loss) to average
net assets* 2.55% 2.42% 3.76% 4.27% 5.30% 5.43% 5.20% 5.91% 5.59%++
Portfolio turnover rate 67.50% 73.96% 80.42% 102.39% 131.43% 106.40% 87.43% 163.00% 74.24%
*Reflects the voluntary
assumption of fees or
expenses per share in each
year $0.05 $0.05 $0.01 $0.01 $0.01 $0.02 $0.02 $0.03 $0.02
</TABLE>
**Per-share figures have been calculated using the average shares method.
++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.
10
<PAGE>
Equity Income Fund
<TABLE>
<CAPTION>
Class B Class C
------------------------------------ -------------------------------------
June 1, 1993 June 1, 1993
(Commencement (Commencement
of Share Class of Share Class
Year ended June 30 Designations) to Year ended June 30 Designations) to
------------------ ---------------- ------------------ ----------------
1995** 1994 June 30, 1993 1995** 1994 June 30, 1993
------ ---- ------------- ------ ---- -------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 10.86 $ 10.79 $10.81 $ 10.86 $ 10.79 $ 10.81
Net investment income* .21 .21 .02 .32 .33 .03
Net realized and unrealized gain (loss) on
investments 1.38 .21 (.02) 1.39 .21 (.02)
Dividends from net investment income (.23) (.20) (.02) (.33) (.32) (.03)
Distributions from net realized gains (.54) (.15) -- (.54) (.15) --
Net asset value, end of year $ 11.68 $ 10.86 $10.79 $ 11.70 $ 10.86 $ 10.79
Total return 15.43+ 3.79%+ 0.05%+++ 16.64%+ 4.84%+ 0.14%+++
Net assets at end of year (000s) $16,130 $10,752 $1,060 $34,827 $20,266 $15,988
Ratio of operating expenses to average net
assets* 2.00% 2.00% 2.00%++ 1.00% 1.00% 1.00%++
Ratio of net investment income to average net
assets* 1.95% 1.80% 1.53%++ 2.93% 2.92% 1.65%++
Portfolio turnover rate 67.50% 73.96% 80.42% 67.50% 73.96% 80.42%
*Reflects the voluntary assumption of fees or
expenses per share in each year $ 0.05 $ 0.07 $ 0.00 $ 0.05 $ 0.06 $ 0.00
</TABLE>
<TABLE>
<CAPTION>
Class D
------------------------------------
June 1, 1993
(Commencement
Year ended June 30 of Share Class
Designations) to
1995** 1994 June 30, 1993
------ ---- -------------
<S> <C> <C> <C>
Net asset value, beginning of year $10.86 $10.79 $10.81
Net investment income* .22 .21 .02
Net realized and unrealized gain (loss) on
investments 1.36 .21 (.02)
Dividends from net investment income (.23) (.20) (.02)
Distributions from net realized gains (.54) (.15) --
---- ---- -----
Net asset value, end of year $11.67 $10.86 $10.79
====== ====== ======
Total return 15.33%+ 3.78%+ 0.04%+++
Net assets at end of year (000s) $1,366 $1,280 $ 628
Ratio of operating expenses to average net
assets* 2.00% 2.00% 2.00%++
Ratio of net investment income to average net
assets* 1.96% 1.88% 1.49%++
Portfolio turnover rate 67.50% 73.96% 80.42%
*Reflects the voluntary assumption of fees or
expenses per share in each year $ 0.05 $ 0.06 $ 0.00
</TABLE>
**Per-share figures have been calculated using the average shares method.
++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.
11
<PAGE>
The Funds' Investments
Each of the Capital Appreciation Fund, the Equity Investment Fund and the
Equity Income Fund has its own investment objective and policies, as
described below. Each Fund's investment objective is a fundamental policy of
that Fund and may not be changed without approval of the shareholders of that
Fund.
State Street Research
Capital Appreciation Fund
The investment objective of the Capital Appreciation Fund is to achieve
maximum capital appreciation by investing primarily in common stocks (and
equity and debt securities convertible into or carrying the right to acquire
common stocks) of emerging growth companies and of companies considered to be
undervalued special situations. Current income is not a consideration in the
selection of investments for the Fund.
The Capital Appreciation Fund considers emerging growth companies to be less
mature companies that are growing substantially faster than the U.S. economy.
The Fund will invest in those emerging growth companies believed by the
Investment Manager to offer appreciation potential greater than the stock market
as a whole. The Fund considers undervalued special situations to include common
stocks of companies, such as larger, more mature companies, which trade at
prices believed by the Investment Manager to be below the companies' intrinsic
values and which therefore offer the potential for above-average investment
returns. In selecting investments, the Investment Manager may also consider a
variety of other factors. These include a company's expected growth in earnings,
relative financial condition and cash flow, competitive position, management and
business strategy, overall potential as an enterprise, entrepreneurial
character, and/or new or innovative products, services or processes. Investing
in stocks of companies which offer high appreciation potential carries greater
than average risks. The length of time that the Fund may hold a particular
security is generally not a consideration in making investment decisions.
State Street Research
Equity Investment Fund
The investment objective of the Equity Investment Fund is to achieve
long-term growth of capital and, secondarily, long-term growth of income by
investing primarily in common stocks (and equity and debt securities
convertible into or carrying the right to acquire common stocks) of
established companies with above-average prospects for growth. It is a
fundamental policy of the Fund under normal market conditions to invest at
least 65% of its assets in equity securities (and securities convertible into
equity securities).
The Equity Investment Fund invests primarily in a diversified portfolio of
companies in a broad range of industries whose earnings and/or assets are
expected to grow at a rate above the average for the Standard & Poor's 500
Stock Index (the "S&P 500") over the long term. Consequently, the Investment
Manager seeks to identify those industries which offer the greatest
possibilities for profitable expansion and, within such industries, those
companies which appear most capable of sustained growth. Investments will
also be made in securities of companies believed by the Investment Manager to
be selling below their intrinsic values or in securities of cyclical
companies believed by the Investment Manager to be at a low point in their
cycles. Although the Fund's investments are not limited to companies of any
particular size, it is anticipated that a majority of the securities in which
the Fund invests will be listed on a national securities exchange.
The Equity Investment Fund will not ordinarily trade in securities for
short-term profits. However, when circumstances warrant, securities may be
sold without regard to the length of time held.
State Street Research
Equity Income Fund
The investment objective of the Equity Income Fund is to provide a high level
of current income and, secondarily, long-term growth of capital by investing
primarily in common stocks offering above-average dividend yields and in
equity and debt securities convertible into or carrying the right to acquire
common stocks. The Fund seeks to provide a higher income yield than that of
the S&P 500. It is a fundamental policy of the Fund under normal market
conditions to invest at least 65% of its assets in equity securities and
securities convertible into equity securities.
12
<PAGE>
In seeking high current income, the Equity Income Fund will invest primarily
in companies with established operating histories, potential for dividend
growth, low price to earnings and/or price to book ratios relative to the S&P
500, and/or whose securities are trading at prices believed by the Investment
Manager to be below the true value of such securities, i.e., value stocks. It is
anticipated that a majority of the equity securities in which the Fund invests
will be listed on a national securities exchange.
In order to further enhance its income, the Equity Income Fund may invest
up to 35% of its total assets in nonconvertible debt securities (corporate
and government bonds of various maturities) and warrants (limited in the
latter case to 5% of net assets) when the Investment Manager believes such
investments will help to achieve the Fund's investment objective of high
current income.
The Fund may invest up to 15% of its total assets in lower quality,
nonconvertible debt securities rated at the time of purchase BB or B by
Standard & Poor's Corporation ("S&P") or Ba or B by Moody's Investors
Service, Inc. ("Moody's") or securities that are not rated but considered by
the Investment Manager to be of equivalent investment quality to comparable
rated securities. The Fund is not subject to any rating limitations with
respect to its investments in convertible securities. The mix of convertible
and nonconvertible securities in different rating categories varies over time
depending on, among other factors, changes in investment strategy.
Lower quality convertible or nonconvertible debt securities generally
involve more credit risk than higher rated securities and are considered by
S&P and Moody's to be speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. Further,
such securities may be subject to greater market fluctuations and risk of
loss of income and principal than lower yielding, higher rated debt
securities. Risks of lower quality debt securities, commonly known as "junk
bonds," include (i) limited liquidity and secondary market support; (ii)
substantial market price volatility resulting from changes in prevailing
interest rates and/or investor perceptions; (iii) subordination to the prior
claims of banks and other senior lenders; (iv) the operation of mandatory
sinking fund or call/redemption provisions during periods of declining
interest rates when the Fund may be required to reinvest premature redemption
proceeds in lower yielding portfolio securities; (v) the possibility that
earnings of the issuer may be insufficient to meet its debt service; and (vi)
the issuer's low creditworthiness and potential for insolvency during periods
of rising interest rates and economic downturn. For further information
concerning the ratings of debt securities, see the Appendix to this
Prospectus.
For the fiscal year ended June 30, 1995, the percentage of the Equity Income
Fund's total investments on an average annual basis invested in nonconvertible
debt and convertible securities of any particular rating category or its
equivalent, as determined by the Investment Manager, was as follows: 0.6% BB,
11.5% B, 2.1% CCC and 0.2% D, as determined on a dollar weighted basis,
comprising 14.4% of total investments. Of these securities, 70.9% were rated by
a nationally recognized statistical rating organization and 29.1% were unrated
but considered to be equivalent, as determined by the Investment Manager, to
comparable rated securities. The above percentages reflect ratings, as of the
time of purchase and subsequent changes, if any, including downgrades, for the
period the securities were held.
In the event the rating of a security is downgraded, the Investment Manager
will determine whether the security should be retained or sold depending on
an assessment of all facts and circumstances at that time.
The Equity Income Fund will not ordinarily trade in securities for
short-term profits. However, when circumstances warrant, securities may be
sold without regard to the length of time held.
Investment Practices
Foreign Investments
Each Fund reserves the right to invest without limitation in securities of
non-U.S. issuers directly, or indirectly in the form of American Depositary
Receipts ("ADRs") and European Depositary Receipts
13
<PAGE>
("EDRs"). Under current policy, however, each Fund limits such investments,
including ADRs and EDRs, to a maximum of 35% of its total assets.
ADRs are receipts, typically issued by a U.S. bank or trust company, which
evidence ownership of underlying securities issued by a foreign corporation
or other entity. EDRs are receipts issued in Europe which evidence a similar
ownership arrangement. Generally, ADRs in registered form are designed for
use in U.S. securities markets and EDRs are designed for use in European
securities markets. The underlying securities are not always denominated in
the same currency as the ADRs or EDRs. Although investment in the form of
ADRs or EDRs facilitates trading in foreign securities, it does not mitigate
all the risks associated with investing in foreign securities.
ADRs are available through facilities which may be either "sponsored" or
"unsponsored." In a sponsored arrangement, the foreign issuer establishes the
facility, pays some or all of the depository's fees, and usually agrees to
provide shareholder communications. In an unsponsored arrangement, the
foreign issuer is not involved, and the ADR holders pay the fees of the
depository. Sponsored ADRs are generally more advantageous to the ADR holders
and the issuer than are unsponsored ADRs. More and higher fees are generally
charged in an unsponsored program compared to a sponsored facility. Only
sponsored ADRs may be listed on the New York or American Stock Exchanges.
Unsponsored ADRs may prove to be more risky due to (a) the additional costs
involved to a Fund; (b) the relative illiquidity of the issue in U.S.
markets; and (c) the possibility of higher trading costs in the
over-the-counter market as opposed to exchange based tradings. Each Fund will
take these and other risk considerations into account before making an
investment in an unsponsored ADR.
The risks associated with investments in foreign securities include those
resulting from fluctuations in currency exchange rates, revaluation of
currencies, future political and economic developments, including the risks
of nationalization or expropriation, the possible imposition of currency
exchange blockages, higher operating expenses, foreign withholding and other
taxes which may reduce investment return, reduced availability of public
information concerning issuers, the difficulties in obtaining and enforcing a
judgment against a foreign issuer and the fact that foreign issuers are not
generally subject to uniform accounting, auditing and financial reporting
standards or to other regulatory practices and requirements comparable to
those applicable to domestic issuers. Moreover, securities of many foreign
issuers may be less liquid and their prices more volatile than those of
securities of comparable domestic issuers.
It is anticipated that a majority of the foreign investments by each Fund
will consist of securities of issuers in countries with developed economies.
However, each Fund may also invest in the securities of issuers in countries
with less developed economies as deemed appropriate by the Investment
Manager, although no Fund presently expects to invest more than 5% of its
total assets in issuers in such less developed countries. Such countries
include countries that have an emerging stock market that trades a small
number of securities; countries with low- to middle-income economies; and/or
countries with economies that are based on only a few industries. Eastern
European countries are considered to have less developed capital markets.
For further information regarding foreign investments, see the Statement of
Additional Information.
Currency Transactions
In order to protect against the effect of uncertain future exchange rates
on securities denominated in foreign currencies, each Fund may engage in
currency exchange transactions either on a spot (i.e., cash) basis at the
rate prevailing in the currency exchange market or by entering into forward
contracts to purchase or sell currencies. Although such contracts tend to
minimize the risk of loss resulting from a correctly predicted decline in
value of hedged currency, they tend to limit any potential gain that might
result should the value of such currency increase. In entering a forward
currency transaction, the Funds are dependent upon the creditworthiness and
good faith of the counterparty. The Funds will attempt to reduce the risks of
nonperformance by a counterparty by dealing only with established, large
14
<PAGE>
institutions with which the Investment Manager has done substantial business
in the past. For further information, see the Statement of Additional
Information.
Other Investment Policies
Each Fund may lend portfolio securities with a value of up to 33-1/3% of its
total assets. A Fund will receive cash or cash equivalents (e.g., U.S.
Government obligations) as collateral in an amount equal to at least 100% of
the current market value of the loaned securities plus accrued interest.
Collateral received by a Fund will generally be held in the form tendered,
although cash may be invested in securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities, irrevocable stand-by letters
of credit issued by a bank, or any combination thereof. The investing of cash
collateral received from loaning portfolio securities involves leverage which
magnifies the potential for gain or loss on monies invested and, therefore,
results in an increase in the volatility of a Fund's outstanding securities.
Such loans may be terminated at any time.
A Fund will retain most rights of ownership including rights to dividends,
interest or other distributions on the loaned securities. Voting rights pass
with the lending, although a Fund may call loans to vote proxies if desired.
Should the borrower of the securities fail financially, there is a risk of
delay in recovery of the securities or loss of rights in the collateral.
Loans are made only to borrowers which are deemed by the Investment Manager
to be of good financial standing.
Each Fund may, subject to certain limitations, buy and sell options,
futures contracts and options on futures contracts on securities and
securities indices, enter into repurchase agreements and purchase securities
on a "when issued" basis. A Fund may not establish a position in a commodity
futures contract or purchase or sell a commodity option contract for other
than bona fide hedging purposes if immediately thereafter the sum of the
amount of initial margin deposits and premiums required to establish such
positions for such nonhedging purposes would exceed 5% of the market value of
a Fund's net assets; similar policies apply to options which are not
commodities. Each Fund may enter various forms of swap arrangements, which
have simultaneously the characteristics of a security and a futures contract,
although none of the Funds presently expect to invest more than 5% of its
total assets in such items. These swap arrangements include interest rate
swaps, currency swaps and index swaps. See the Statement of Additional
Information.
The Funds may invest in restricted securities in accordance with Rule 144A
under the Securities Act of 1933, which allows for the resale of such
securities among certain qualified institutional buyers. Because the market
for such securities is still developing, such securities could possibly
become illiquid in particular circumstances. See the Statement of Additional
Information.
As detailed above, each Fund seeks to attain a particular investment
objective. From time to time, however, the Funds, in seeking to achieve their
different investment objectives, may hold securities which are issued by
similar companies and traded in the same markets. It is also possible that a
particular security may be held by more than one Fund when the Investment
Manager determines that holding such security is in the best interests of
each such Fund and the security meets the criteria set forth above. For
example, a stock which is deemed by the Investment Manager to have
above-average potential for long-term earnings growth, to be undervalued
relative to other stocks with similar earnings potential and to have an
above-average dividend yield could be held simultaneously by all three Funds.
In all cases, securities will be selected for each Fund by the Investment
Manager with a view to realizing that Fund's investment objective.
During periods when the Investment Manager deems it advisable, the Funds
may engage in active trading of portfolio securities. This could result in a
high rate of portfolio turnover and correspondingly greater transaction costs
to the Funds, including brokerage commissions.
Limiting Investment Risk
In seeking to lessen investment risk, each Fund operates under certain
fundamental and nonfundamental investment restrictions. Under the fundamental
investment restrictions, no Fund may (a) purchase a security of any
15
<PAGE>
one issuer (other than securities issued or guaranteed by the U.S. Government
or its agencies or instrumentalities), if such purchase would cause more than 5%
of the Fund's total assets to be invested in the securities of such issuer; (b)
purchase for its portfolio a security of any one issuer if such purchase would
cause more than 10% of the outstanding voting securities of such issuer to be
held by the Fund; or (c) invest more than 25% of the Fund's total assets in
securities of issuers principally engaged in any one industry. Under the
nonfundamental investment restrictions, no Fund may invest more than 15% of such
Fund's total assets in illiquid securities including repurchase agreements
extending for more than seven days and may not invest more than 5% of such
Fund's total assets in restricted securities excluding securities eligible for
resale under Rule 144A under the Securities Act of 1933. Although many illiquid
securities may also be restricted, and vice versa, compliance with each of these
policies will be determined independently.
The foregoing fundamental investment restrictions may not be changed except
by vote of the holders of a majority of the outstanding voting securities of
each Fund. The foregoing nonfundamental investment restriction may be changed
without a shareholder vote. For further information on the above and other
fundamental and nonfundamental investment restrictions, see the Statement of
Additional Information.
A Fund may not lend money; however, a Fund may lend portfolio securities
and purchase bonds, debentures, notes and similar obligations (and enter into
repurchase agreements with respect thereto). The Capital Appreciation and
Equity Investment Funds may not invest in warrants.
Each Fund may hold up to 100% of its assets in cash or short-term debt
securities for temporary defensive purposes. A Fund will adopt a temporary
defensive position when, in the opinion of the Investment Manager, such a
position is more likely to provide protection against adverse market
conditions than adherence to the Fund's other investment policies. The types
of short-term instruments in which the Funds may invest for such purposes
include short-term money market securities such as repurchase agreements and
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, certificates of deposit, time deposits and bankers'
acceptances of certain qualified financial institutions and corporate
commercial paper rated at the time of purchase at least "A" by S&P or "Prime"
by Moody's (or, if not rated, issued by companies having an outstanding
long-term unsecured debt issue rated at least "A" by S&P or Moody's). See the
Statement of Additional Information.
Information on the Purchase of Shares, Redemption of Shares and Shareholder
Services is set forth on pages 16 to 30 below.
A 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 Accounts ("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 a Fund.
Participants in 401(k) and other plans should first consult with the
appropriate person at their employer or refer to the plan materials before
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
Shares of the Funds are continuously offered through securities dealers who
have entered into sales agreements with the Distributor. Purchases through
dealers
16
<PAGE>
are confirmed at the offering price, which is the net asset value plus the
applicable sales charge, next determined after the order is duly received by
State Street Research Shareholder Services ("Shareholder Services"), 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 Shareholder Services in
order to permit the investor to obtain the current price. See "Purchase of
Shares--Net Asset Value" herein.
By Mail
Initial investments in a Fund may be made by mailing or delivering to the
investor's securities 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 Shareholder Services 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.
Shareholder Services will deliver the purchase order to the transfer agent
and dividend paying agent, State Street Bank and Trust Company (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.
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 Shareholder Services at
1-800-521-6548 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 = Name of Fund and class of shares
(A, B, C or D)
AC = 99029761
OBI = Shareholder Name
Shareholder Account Number
Control #K (assigned by State Street Research Shareholder Services)
In order for a wire investment to be processed on the same day (i) the
investor must notify Shareholder Services 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 must be received by 4 P.M. Boston time that same day.
An investor making an initial investment by wire must promptly complete the
Application accompanying this Prospectus and deliver it to his or her
securities dealer, who should forward it as required. No redemptions will be
effected until the Application has been duly processed.
A 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 a Fund. Each Fund reserves
the right to reject any purchase order, including orders in connection with
exchanges, for any reason which the Fund in its sole discretion deems
appropriate. Each Fund reserves the right to suspend the sale of shares.
17
<PAGE>
Minimum Investment
<TABLE>
<CAPTION>
Class of Shares
------------------------------
A B C D
------ ------ --- ------
<S> <C> <C> <C> <C>
Minimum Initial Investment
By Wire $5,000 $5,000 (a) $5,000
IRAs $2,000 $2,000 (a) $2,000
By Investamatic $1,000 $1,000 (a) $1,000
All other $2,500 $2,500 (a) $2,500
Minimum Subsequent Investment
By Wire $5,000 $5,000 (a) $5,000
IRAs $ 50 $ 50 (a) $ 50
By Investamatic $ 50 $ 50 (a) $ 50
All other $ 50 $ 50 (a) $ 50
(a) Special conditions apply; contact the Distributor.
</TABLE>
The Funds reserve the right to vary the minimums for initial or subsequent
investments from time to time 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 such as for reinvestment of dividends and
distributions or for periodic investments (e.g., Investamatic Check Program).
Alternative Purchase Program
General
Alternative classes of shares permit investors to select a purchase program
which they believe will be the most advantageous for them, given the amount
of their purchase, the length of time they anticipate holding Fund shares, or
the flexibility they desire in this regard, and other relevant circumstances.
Investors will be able to determine whether in their particular circumstances
it is more advantageous to incur an initial sales charge and not be subject
to certain ongoing charges or to have their entire initial purchase price
invested in a Fund with the investment being subject thereafter to ongoing
service fees and distribution fees.
As described in greater detail below, securities dealers are paid differing
amounts of commission and other compensation depending on which class of
shares they sell.
18
<PAGE>
The major differences among the various classes of shares are as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales Charges Initial sales charge Contingent deferred None Contingent deferred
at time of sales charge of 5% to sales charge of 1%
investment of up 2% applies to any applies to any shares
to 4.5% depending shares redeemed redeemed within one
on amount of investment within first five years year following their
following their purchase
purchase; no
contingent deferred
sales charge
after five years
On investments of $1
million or more, no
initial sales charge;
but contingent deferred
sales charge of 1%
applies to any shares
redeemed within
one year following
their purchase
Distribution Fee None 0.75% for first None 0.75% each year
eight years;
Class B shares
convert auto-
matically to
Class A shares
after eight years
Service Fee 0.25% each year 0.25% each year None 0.25% each year
Initial Commission Above described 4% None 1%
Received by Selling initial sales charge
Securities Dealer less 0.25% to 0.50%
retained by Distributor
On investments of $1
million or more,
0.25% to 1% paid
to dealer by Distributor
</TABLE>
19
<PAGE>
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 A shares are sold at net asset value plus an initial sales charge of
up to 4.5% of the public offering price. Because of the sales charge, not all
of an investor's purchase amount is invested unless the purchase equals
$1,000,000 or more. 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 D 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 D shareholders, therefore, the entire purchase amount is immediately
invested in a Fund.
An investor who qualifies for a significantly reduced initial sales charge,
or a complete waiver of the sales charge on investments of $1,000,000 or
more, on the purchase of Class A shares might elect that option to take
advantage of the lower ongoing service and distribution fees that
characterize Class A shares compared with Class B or Class D shares.
Class A, Class B and Class D 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
A shares. Class D 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 initial or contingent deferred sales
charges in estimating the costs of investing in the various classes of a
Fund's shares.
Only certain employee benefit plans and large institutions may make
investments in Class C shares.
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 securities 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 incentives may include merchandise and
trips to and attendance at sales seminars at resorts.
Class A Shares--Initial Sales Charges
Sales Charges
The purchase price of a Class A share of a Fund is the Fund's per share net
asset value next determined after the purchase order is duly received, as
defined herein, plus a sales charge which varies depending on the dollar
amount of the shares purchased as set forth in the table below. A major
portion of this sales charge is reallowed by the Distributor to the
securities dealer responsible for the sale.
<TABLE>
<CAPTION>
Sales Sales
Charge Charge
Paid by Paid by Dealer
Dollar Investor Investor Concession
Amount of As % of As % of As % of
Purchase Purchase Net Asset Purchase
Transaction Price Value Price
----------- ----- ----- -----
<S> <C> <C> <C>
Less than $100,000 4.50% 4.71% 4.00%
- -----------------------------------------------------------
$100,000 or above
but less than $250,000 3.50% 3.63% 3.00%
- -----------------------------------------------------------
$250,000 or above
but less than $500,000 2.50% 2.56% 2.00%
- -----------------------------------------------------------
$500,000 or above
but less than
$1 million 2.00% 2.04% 1.75%
- -----------------------------------------------------------
$1 million and above See
0% 0% following discussion
- -----------------------------------------------------------
</TABLE>
On any sale of Class A shares to a single investor in the amount of
$1,000,000 or more, the Distributor will pay the authorized securities dealer
a commission as follows:
20
<PAGE>
<TABLE>
<CAPTION>
Amount of Sale Commission
-------------- ----------
<S> <C>
(a) $1 million to $3 million 1.00%
(b) Next $2 million 0.50%
(c) Amount over $5 million 0.25%
</TABLE>
On such sales of $1,000,000 or more, the investor is subject to a 1%
contingent deferred sales charge on any portion of the purchase redeemed
within one year of the sale. However, such redeemed shares will not be
subject to the contingent deferred sales charge to the extent that their
value represents (1) capital appreciation 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" below (as otherwise applicable to
Class B shares).
Class A shares of a Fund that are purchased without a sales charge may be
exchanged for Class A shares of certain other Eligible Funds, as described
below, without the imposition of a contingent deferred sales charge, although
contingent deferred sales charges may apply upon a subsequent redemption
within one year of the Class A shares which are acquired through such
exchange. 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.
Reduced Sales Charges
The reduced sales charges set forth in the table above are applicable to
purchases made at any one time by any "person," as defined in the Statement
of Additional Information, of $100,000 or more of Class A shares of a Fund or
a combination of "Eligible Funds." "Eligible Funds" include the Funds and
other funds so designated by the Distributor from time to time. Class B,
Class C and Class D shares may also be included in the combination under
certain circumstances. Securities dealers should call Shareholder Services
for details concerning the other Eligible Funds and any persons who may
qualify for reduced sales charges and related information. See the Statement
of Additional Information.
Letter of Intent
Any investor who provides a Letter of Intent may qualify for a reduced sales
charge on purchases of no less than an aggregate of $100,000 of Class A
shares of the Funds and any other Eligible Funds within a 13-month period.
Class B, Class C and Class D shares may also be included in the combination
under certain circumstances. Additional information on a Letter of Intent is
available from dealers, or from the Distributor, and also appears in the
Statement of Additional Information.
Right of Accumulation
Investors may purchase Class A shares of a Fund or a combination of shares of
the Funds and other Eligible Funds at reduced sales charges pursuant to a
Right of Accumulation. Under the Right of Accumulation, the sales charge is
determined by combining the current purchase with the value of the Class A
shares of other Eligible Funds held at the time of purchase. Class B, Class C
and Class D shares may also be included in the combination under certain
circumstances. See the Statement of Additional Information and call
Shareholder Services for details concerning the Right of Accumulation.
Other Programs
Class A shares of the Funds may be sold or issued in an exchange at a reduced
sales charge or without a sales charge pursuant to certain sponsored
arrangements, which include programs under which a company, employee benefit
plan or other organization makes recommendations to, or permits group
solicitation of, its employees, members or participants, except any
organization created primarily for the purpose of obtaining shares of the
Funds at a reduced sales charge or without a sales charge. Sales without a
sales charge, or with a reduced sales charge, may also be made through
brokers, financial planners, institutions, and others, under managed
fee-based programs (e.g., "wrap fee" or similar programs) which meet certain
requirements established from time to time by the Distributor, in the event
the Distributor determines to implement such arrangements. Information on
such arrangements and further conditions and limitations is available from
the Distributor.
21
<PAGE>
In addition, no sales charge is imposed in connection with the sale of
Class A shares of a Fund to the following entities and persons: (A) the
Investment Manager, Distributor, or any affiliated entities, including any
direct or indirect parent companies and other subsidiaries of such parents
(collectively "Affiliated Companies"); (B) employees, officers, sales
representatives or current or retired directors or trustees of the Affiliated
Companies or any investment company managed by any of the Affiliated
Companies, any relatives of any such individuals whose relationship is
directly verified by such individuals to the Distributor, or any beneficial
account for such relatives or individuals; and (C) employees, officers, sales
representatives or directors of dealers and other entities with a selling
agreement with the Distributor to sell shares of any aforementioned
investment company, any spouse or child of such person, or any beneficial
account for any of them. The purchase must be made for investment and the
shares purchased may not be resold except through redemption. This purchase
program is subject to such administrative policies, regarding the
qualification of purchasers and any other matters, as may be adopted by the
Distributor from time to time.
Class B Shares--Contingent Deferred
Sales Charges
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 Funds. However, a
contingent deferred sales charge may be imposed upon redemptions of Class B
shares as described below.
The Distributor will pay securities dealers at the time of sale a 4%
commission for selling Class B 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
Net Asset Value
Redemption During At Redemption
- ----------------- -------------
<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 a Fund acquired through an exchange from another
Eligible Fund will be measured from the date that such shares were initially
acquired in the other Eligible Fund, and 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.
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 withdrawal plan which meets certain
conditions. In
22
<PAGE>
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 a 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 a Fund.) Each Fund may modify or terminate the waivers at
any time; for example, a Fund may limit the application of multiple waivers.
Conversion of Class B Shares to Class A 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 A shares of a 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 A 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--Institutional; No Sales Charge
The purchase price of a Class C share of a 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 Funds will receive the full amount of the investor's purchase
payment.
Class C shares are only available for new investments by certain employee
benefit plans and large institutions. See the Statement of Additional
Information. Information on the availability of Class C shares and further
conditions and limitations with respect thereto is available from the
Distributor.
Class C shares may be also issued in connection with mergers and
acquisitions involving a Fund, and under certain other circumstances as
described in this Prospectus (e.g., see "Shareholder Services--Exchange
Privilege").
Class C shares may have also been issued directly or through exchanges to
those shareholders of the Funds or other Eligible Funds who previously held
shares not subject to any future sales charge or service fees or distribution
fees.
Class D Shares--Spread Sales Charges
The purchase price of a Class D share of a 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 Funds.
Class D 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 securities dealers a 1% commission for selling Class D 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 D shares without an initial sales charge.
Class D 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 redemp-
23
<PAGE>
tion. The amount of any contingent deferred sales charge will be paid to the
Distributor.
Net Asset Value
Each Fund's per share net asset values are determined Monday through Friday
as of the close of the New York Stock Exchange (the "NYSE") exclusive of days
on which the NYSE is closed. The NYSE ordinarily closes at 4 P.M. New York
City time. Assets held by a Fund are valued on the basis of the last reported
sale price or quotations as of the close of business on the valuation date,
except that securities and assets for which market quotations are not readily
available are valued as determined in good faith by or under the authority of
the Trustees of the Trust. In determining the value of certain assets for
which market quotations are not readily available, the Funds may use one or
more pricing services. The pricing services utilize information with respect
to market transactions, quotations from dealers and various relationships
among securities in determining value and may provide prices determined as of
times prior to the close of the NYSE. The Trustees have authorized the use of
the amortized cost method to value short-term debt instruments issued with a
maturity of one year or less and having a remaining maturity of 60 days or
less when the value obtained is fair value. Further information with respect
to the valuation of the Funds' assets is included in the Statement of
Additional Information.
Distribution Plan
The Funds have adopted a Plan of Distribution Pursuant to Rule 12b-1 (the
"Distribution Plan") in accordance with the regulations under the Investment
Company Act of 1940, as amended (the "1940 Act"). Under the provisions of the
Distribution Plan, each 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>
A 0.25% None
B 0.25% 0.75%
C None None
D 0.25% 0.75%
</TABLE>
Some or all of the service fees are used to reimburse securities dealers
(including securities dealers that are affiliates of the Distributor) for
personal services and/or the maintenance of shareholder accounts. A portion
of any initial commission paid to dealers for the sale of shares of a Fund
represents payment for personal services and/or the maintenance of
shareholder accounts by such dealers. Dealers who have sold Class A shares
are eligible for further reimbursement commencing as of the time of such
sale. Dealers who have sold Class B and Class D 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 of shareholder
accounts.
The distribution fees are used primarily to offset initial and ongoing
commissions paid to securities 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 marketing
efforts, including special promotional fees and cash and noncash incentives
based upon sales by securities 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 Funds), 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 a Fund may incur under the Distribution
Plan to 1%, of which 0.75% may be used to pay dis-
24
<PAGE>
tribution expenses and 0.25% may be used to pay shareholder service fees. The
NASD rule also limits the aggregate amount which a 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 Shareholder Services and delivery of the
request by Shareholder Services 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 a potential need for immediate access
to their investments should, therefore, purchase shares by wire. Except as
noted, redemption proceeds from a 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 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 Shareholder Services, 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
Shareholder Services 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 for shares held in certificate form or if the address of
record has been changed within 30 days of the redemption request. The Funds
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.
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. To make the request, the shareholder should call
1-800-521-6548 prior to 4 P.M. Boston time. A $7.50 charge against the
shareholder's account will be imposed for each wire redemption. This charge
is
25
<PAGE>
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 $5,000.
Request to Dealer to Repurchase
For the convenience of shareholders, each Fund has authorized the Distributor
as its agent to accept orders from dealers by wire or telephone for the
repurchase of shares by the Distributor from the dealer. The Funds may revoke
or suspend this authorization at any time. The repurchase price is the net
asset value for the applicable shares next determined following the time at
which the shares are offered for repurchase by the dealer to the Distributor.
The dealer is responsible for promptly transmitting a shareholder's order to
the Distributor. Payment of the repurchase proceeds is made to the dealer who
placed the order promptly upon delivery of certificates for shares in proper
form for transfer or, for Open Accounts, upon the receipt of a stock power
with signatures guaranteed as described below, and, if required, any
supporting documents. Neither the Funds nor the Distributor imposes any
charge upon such a repurchase. However, a dealer may impose a charge as agent
for a shareholder in the repurchase of his or her shares.
The Funds have 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, each 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. A Fund may
increase such minimum account value above such amount in the future after
notice to affected shareholders. Involuntarily redeemed shares will be priced
at the net asset value on the date fixed for redemption by a Fund, and the
proceeds of the redemption will be mailed to the affected shareholder at the
address of record. 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
a 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 shareholder account that has been determined to be
subject to escheat under applicable state laws.
A 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 Funds, 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: (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 corpo-
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rations and certain fiduciaries and other intermediaries; and (4) requests to
transfer the registration of shares to another owner. 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 Shareholder Services at 1-800-562-0032 for
specific requirements relating to your account.
Shareholder Services
The Open Account System
Under the Open Account System full and fractional shares of each Fund owned
by shareholders are credited to their accounts by the Transfer Agent, State
Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts
02110. Certificates representing Class B or Class D shares will not be
issued, while certificates representing Class A or Class C shares will only
be issued if specifically requested in writing and, in any case, will only be
issued for full shares, with any fractional shares to be carried on the
shareholder's account. Shareholders will receive periodic statements of
transactions in their accounts.
The Funds' Open Account System provides the following options:
1. Additional purchases of shares of any Fund may be made through dealers, by
wire or by mailing a check payable to the applicable Fund to Shareholder
Services 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 are available:
(a) All income dividends and capital gains distributions reinvested in
additional shares of the applicable Fund.
(b) All income dividends in cash; all capital gains distributions
reinvested in additional shares of the applicable Fund.
(c) All income dividends and capital gains distributions in cash.
(d) All income dividends and capital gains distributions invested in any
one available Eligible Fund designated by the shareholder as described
below. 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
applicable Fund. Selections may be changed at any time by telephone or
written notice to Shareholder Services. Dividends and distributions are
reinvested at net asset value without a sales charge.
Exchange Privilege
Shareholders of a Fund may exchange their shares for available shares with
corresponding characteristics of any of the other Eligible Funds at any time
on the basis of the relative net asset values of the respective shares to be
exchanged, subject to compliance with applicable securities laws.
Shareholders of any other Eligible Fund may similarly exchange their shares
for Fund shares with corresponding characteristics. Prior to making an
exchange, shareholders should obtain the Prospectus of the Eligible Fund into
which they are exchanging. Under the Direct Program, subject to certain
conditions, shareholders may make arrangements for regular exchanges from a
Fund into other Eligible Funds. To effect an exchange, Class A, Class B and
Class D shares may be redeemed without the payment of any contingent deferred
sales charge that might otherwise be due upon an ordinary redemption of such
shares. The State Street Research Money Market Fund issues Class E shares
which are sold without any sales charge. Exchanges of State Street Research
Money Market Fund Class E shares into Class A shares of the Funds or any
other Eligible Fund are subject to the initial sales charge or contingent
deferred sales charge applicable to an initial investment in such Class A
shares, unless a prior Class A sales charge has been paid directly or
indirectly with respect to the shares redeemed. For purposes of computing the
contingent deferred sales charge that may be payable upon disposition of any
acquired Class A, Class B and Class D shares, the holding period of the
redeemed shares is "tacked" to
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<PAGE>
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.
For the convenience of the shareholders who have Telephone Privileges, the
Funds permit 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 1-800-521-6548. 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
Shareholder Services 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.
The exchange privilege is not designed for use in connection with
short-term trading or market timing strategies. To protect the interests of
shareholders, each Fund reserves the right to temporarily or permanently
terminate the exchange privilege for any person who makes more than six
exchanges out of or into such Fund per calendar year. Accounts under common
ownership or control, including accounts with the same taxpayer
identification number, may be aggregated for purposes of the six exchange
limit. Notwithstanding the six exchange limit, each Fund reserves the right
to refuse exchange redemptions or purchases by any person or group if, in the
Investment Manager's judgment, the Fund would be unable to invest effectively
in accordance with its investment objective and policies, or would otherwise
potentially be adversely affected. Exchanges may be restricted or refused if
a Fund receives or anticipates simultaneous orders affecting significant
portions of the Fund's assets. In particular, a pattern of exchanges that
coincides with a "market timing" strategy may be disruptive to a Fund. Each
Fund may impose these restrictions at any time. The exchange limit may be
modified for accounts in certain institutional retirement plans because of
plan exchange limits, Department of Labor regulations or administrative and
other considerations. Subject to the foregoing, if an exchange request in
good order is received by Shareholder Services and delivered by Shareholder
Services 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 Shareholder Services.
Reinvestment Privilege
A shareholder of a Fund who has redeemed shares or had shares repurchased at
his or her request may reinvest all or any portion of the proceeds (plus that
amount necessary to acquire a fractional share to round off his or her
reinvestment to full shares) in shares, of the same class as the shares
redeemed, of a 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 Shareholder
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<PAGE>
Services of such shareholder's written purchase request and delivery of the
request by Shareholder Services 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 a Fund. No charge is imposed by the Funds 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
Each Fund offers Class A, Class B and Class D shareholders the Investamatic
Check Program. Under this Program, shareholders may make regular investments
by authorizing withdrawals from their bank accounts each month or quarter on
the Application available from Shareholder Services.
The Funds also offer tax-sheltered retirement plans, including prototype
and other employee benefit plans for employees, sole proprietors,
partnerships and corporations and IRAs. Details of these investment plans and
their availability may be obtained from securities dealers or from
Shareholder Services.
Systematic Withdrawal Plan
A shareholder who owns noncertificated Class A or Class C shares with a value
of $5,000 or more, or Class B or Class D shares with a value of $10,000 or
more, may elect, by participating in the Funds' 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 of
the designated Fund shall be credited to participating shareholders in
additional shares of that 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 relevant Fund or
Funds, 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 Funds. A participating shareholder
may withdraw from the Plan, and a 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 participate
in the Investamatic Check Program and the Systematic Withdrawal Plan at the
same time.
Dividend Allocation Plan
The Dividend Allocation Plan allows shareholders to elect to have all their
dividends and any other distributions from a 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 investment
is made is initially funded with the requisite minimum amount. The number of
shares purchased will be determined as of the dividend payment date. The
Dividend Allocation Plan is subject to state securities law requirements, 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 Funds' 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 each Fund will be sent to shareholders of record of that Fund at
least semiannually. These
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<PAGE>
reports will include a list of the securities owned by the applicable 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; and
(3) the privilege allowing the shareholder to make telephone redemptions for
amounts over $5,000, 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 1-800-521-6548.
The Telephone Redemption-by-Wire Form 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 Shareholder Services 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 Shareholder Services 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; 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 Funds,
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
1-800-521-6548. Although it is unlikely, during periods of extraordinary
market conditions, a shareholder may have difficulty in reaching Shareholder
Services at such telephone number. In that event, the shareholder should
contact Shareholder Services at 1-800-562-0032, 1-617-357-7805 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 Funds. Account inquiries may also be made
in writing to State Street Research Shareholder Services, 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 1-800-521-6548
Call this number for assistance in purchasing shares by wire and for
telephone redemptions or telephone exchange transactions. Shareholder
Services will require some form of personal identification prior to acting
upon instructions received by telephone. Written confirmation of each
transaction will be provided.
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The Funds and Their Shares
The Funds were organized in 1986 as series of State Street Research Equity
Trust, a Massachusetts business trust. The Trustees have authorized shares of
the Funds to be issued in four classes: Class A, Class B, Class C and Class D
shares. The Trust is registered with the Securities and Exchange Commission
as an open-end management investment company. The fiscal year end of the
Funds is June 30.
Except for those differences between the classes of shares described below
and elsewhere in the Prospectus, each share of a Fund has equal dividend,
redemption and liquidation rights with other shares of the Fund and when
issued is fully paid and nonassessable. In the future, certain classes may be
redesignated, for administrative purposes only, to conform to standard class
designations and common usage of terms which may develop in the mutual fund
industry. For example, Class C shares may be redesignated as Class Y shares
and Class D shares may be redesignated as Class C shares. Any redesignation
would not affect any substantive rights respecting the shares.
Each share of each class of shares represents an identical legal interest
in the same portfolio of investments of a Fund, has the same rights and is
identical in all respects, except that Class A, Class B and Class D 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 Funds 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. Under the Master Trust Agreement, the Trustees
may reorganize, merge or liquidate a Fund without prior shareholder approval.
On any matter submitted to the shareholders, the holder of each Fund share is
entitled to one vote per share (with proportionate voting for fractional
shares) regardless of the relative net asset value thereof.
Under the Trust's 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 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 a Fund held
personally liable for the obligations of the Trust. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which a 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 July 31, 1995, Metropolitan Life Insurance Company ("Metropolitan")
was the record and/or beneficial owner, directly or indirectly through its
subsidiaries or affiliates, of approximately 83% and
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42% of the outstanding Class D shares of the Equity Investment Fund and the
Equity Income Fund, respectively, and may be deemed to be in control of such
Class D shares of the Funds. 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 Funds
Under the provisions of the Trust's Master Trust Agreement and the laws of
Massachusetts, responsibility for the management and supervision of the Funds
rests with the Trustees.
The Funds' 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 Funds, 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 each Fund in
consideration of a fee from each Fund.
Under its Advisory Agreement with the Trust, the Investment Manager
receives a monthly investment advisory fee equal to 0.65% (on an annual
basis) of the average daily value of the net assets of each of the Equity
Investment Fund and the Equity Income Fund and 0.75% (on an annual basis) of
the average daily value of the net assets of the Capital Appreciation Fund.
The advisory fee payable by the Capital Appreciation Fund is higher than
advisory fees paid by many other investment companies. Each Fund bears all
costs of its operation other than those incurred by the Investment Manager
under the Advisory Agreement. In particular, the Funds pay, among other
expenses, investment advisory fees, certain distribution expenses under the
Funds' 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 will reduce its management fee
payable by each Fund up to the amount of any expenses (excluding permissible
items, such as brokerage commissions, Rule 12b-1 payments, interest, taxes
and litigation expenses) paid or incurred in any year in excess of the most
restrictive expense limitation imposed by any state in which the Funds sell
shares, if any. The Investment Manager compensates Trustees of the Trust if
such persons are employees or affiliates of the Investment Manager or its
affiliates.
The Capital Appreciation Fund is managed by Frederick R. Kobrick. Mr.
Kobrick has managed the Fund since its inception in August 1986. Mr.
Kobrick's principal occupation currently is, and during the past five years
has been, Senior Vice President of State Street Research & Management
Company.
The Equity Investment Fund is managed by Steven P. Somes. Mr. Somes has
managed the Fund since November 1994. Mr. Somes's principal occupation
currently is Vice President of State Street Research & Management Company.
During the past five years he has also served as Senior Vice President of
Gardner & Preston Moss, a Boston-based investment advisory firm, and prior
thereto, as Vice President and portfolio manager for State Street Research &
Management Company.
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The Equity Income Fund is managed by Bartlett R. Geer. Mr. Geer has managed
the Fund since January 1992. Mr. Geer's principal occupation currently is
Senior Vice President of State Street Research & Management Company. During
the past five years he has also served as Vice President of State Street
Research & Management Company.
Subject to the policy of seeking best overall price and execution, sales of
shares of a Fund may be considered by the Investment Manager in the selection
of broker or dealer firms for a 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.
Dividends and Distributions; Taxes
Each Fund is treated as a separate entity for federal tax purposes. Each Fund
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 a Fund 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, each 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).
Dividends from net investment income, if any, normally will be paid twice
each year for the Capital Appreciation Fund, and four times each year for the
Equity Investment Fund and the Equity Income Fund. Distributions of capital
gain net income, if any, will generally be made after the end of the fiscal
year or as otherwise required for compliance with applicable tax regulations.
Both dividends from net investment income and distributions of capital gain
net income will be declared and paid to shareholders in additional shares of
the relevant Fund at net asset value (except in the case of shareholders who
elect a different available distribution method).
Each 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 a Fund from taxable net investment income and
distributions of 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, and a portion may be eligible
for the 70% dividends-received deduction for corporations. The percentage of
a Fund's dividends eligible for such tax treatment may be less than 100% to
the extent that less than 100% of a Fund's gross income may be from
qualifying dividends of domestic corporations. Distributions of net capital
gains (the excess of net long-term capital gains over net short-term capital
losses) 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, and are not eligible for the
dividends-received deduction. If shares of a Fund which are sold at a loss
have been held six months or less, the loss will be considered as a long-term
capital loss to the extent of any capital gains distributions received.
Dividends and other distributions and the 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. Therefore,
prospective shareholders are urged to consult their own tax advisers
regarding tax matters, including state and local tax consequences.
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Calculation of Performance Data
From time to time, in advertisements or in communications to shareholders or
prospective investors, a Fund may compare the performance of its Class A,
Class B, Class C or Class D shares to that of other mutual funds with similar
investment objectives, to certificates of deposit and/or to other financial
alternatives. A Fund may also compare its performance to appropriate indices,
such as Standard & Poor's 500 Index, Consumer Price Index and Dow Jones
Industrial Average and/or to appropriate rankings and averages such as those
compiled by Lipper Analytical Services, Inc., Morningstar, Inc., Money
Magazine, Business Week, Forbes Magazine, The Wall Street Journal and
Investor's Daily. For example, the performance of the Capital Appreciation
Fund might be compared to the Lipper Capital Appreciation Funds Group, the
Russell 3000 Index and the Small Stock Index. The performance of the Equity
Investment and Equity Income Funds might be compared to the Lipper Growth and
Income Funds Group and the Lipper Equity Income Funds Group, respectively.
Total return is computed separately for each class of shares of the Funds.
The average annual total return ("standard total return") for shares of a
Fund is computed by determining the average annual compounded rate of return
for a designated period that, if applied to a hypothetical $1,000 initial
investment (less the maximum initial or contingent deferred sales charge, if
applicable), would produce the redeemable value of that investment at the end
of the period, assuming reinvestment of all dividends and distributions and
with recognition of all recurring charges. 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 into account.
A Fund's yield is computed separately for each class of shares by dividing
the net investment income, after recognition of all recurring charges, per
share earned during the most recent month or other specified 30-day period by
the applicable maximum offering price per share on the last day of such
period and annualizing the result.
The standard total return and yield results take sales charges into
account, if applicable, but 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 remittance of
redemption proceeds by wire. Where sales charges are not applicable and
therefore not taken into account in the calculation of standard total return
and yield, the results will be increased. Any voluntary waiver of fees or
assumption of expenses by the Funds' affiliates will also increase
performance results.
A Fund's distribution rate is calculated separately for each class of
shares by annualizing the latest distribution and dividing the result by the
maximum offering price per share as of the end of the period to which the
distribution relates. The distribution rate is not computed in the same
manner as the above described yield, and therefore, can be significantly
different from it. In its supplemental sales literature, a Fund may quote its
distribution rate together with the above described standard total return and
yield information. The use of such distribution rates would be subject to an
appropriate explanation of how the components of the distribution rate differ
from the above described yield.
Performance information may be useful in evaluating a Fund and for
providing a basis for comparison with other financial alternatives. Since the
performance of a Fund changes in response to fluctuations in economic and
market conditions, interest rates and Fund expenses, among other things, no
performance quotation should be considered a representation as to a Fund's
performance for any future period. In addition, the net asset value of shares
of a Fund will fluctuate, with the result that shares of a Fund, when
redeemed, may be worth more or less than their original cost. Neither an
investment in a Fund nor its performance is insured or guaranteed; such lack
of insurance or guarantees should accordingly be given appropriate
consideration when comparing a Fund to financial alternatives which have such
features.
Shares of the Funds had no class designations until June 1, 1993, when
designations were assigned based on the pricing and Rule 12b-1 fees
applicable to
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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 will 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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APPENDIX
Description of Debt/Bond Ratings
Standard & Poor's Corporation
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for debt in this category than in higher rated categories.
Debt rated BB, B, CCC, CC and C is regarded as having speculative
characteristics with respect to capacity to pay interest and repay principal.
BB indicates the least degree of speculation and C the highest. While such
debt will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major exposures to adverse conditions.
BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B: Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied BB or BB- rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial and economic conditions
to meet timely payment of interest and repayment of principal. In the event
of adverse business, financial or economic conditions, it is not likely to
have the capacity to pay interest and repay principal. The CCC rating
category is also used for debt subordinated to senior debt that is assigned
an actual or implied B or B- rating.
CC: The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
C: The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating. The C rating may be
used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.
CI: The rating CI is reserved for income bonds on which no interest is
being paid.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the due date even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
Plus (+) or Minus (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
S&P may attach the "r" symbol to derivative, hybrid, and certain other
obligations that S&P believes may experience high volatility or high
variability in expected returns due to noncredit risks created by the terms
of the obligation, such as securities whose principal or interest return is
indexed to equi-
36
<PAGE>
ties, commodities, or currencies, certain swaps and options, and interest
only (IO) and principal only (PO) mortgage securities.
Moody's Investors Service, Inc.
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin, and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger than
in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
Baa: Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment characteristics
and in fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during other good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
1, 2 or 3: The ratings from Aa through B may be modified by the addition of
a numeral indicating a bond's rank within its rating category.
37
<PAGE>
[BACK COVER]
STATE STREET RESEARCH
CAPITAL APPRECIATION FUND
EQUITY INVESTMENT FUND
EQUITY INCOME FUND
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
SHAREHOLDER SERVICES
State Street Research
Shareholder Services
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
Exchange Place
Boston, MA 02109
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
ET-610D-1195IBS
CONTROL NUMBER: XXXXXXXXXXXXXXXXXXXXXXXXXX
[FRONT COVER]
<PAGE>
[State Street Logo] State Street Research
State Street Research
Capital Appreciation Fund
Equity Investment Fund
Equity Income Fund
November 1, 1995
P R O S P E C T U S
<PAGE>
State Street Research
Global Resources Fund
Prospectus
November 1, 1995
The investment objective of State Street Research Global Resources Fund (the
"Fund") is to provide long-term growth of capital. In seeking to achieve its
investment objective, the Fund invests primarily in equity securities of
domestic and foreign companies in the energy and natural resources
industries. See page 6.
State Street Research & Management Company serves as investment adviser for
the Fund (the "Investment Manager"). As of June 30, 1995, the Investment
Manager had assets of approximately $26.2 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 net asset
value plus the applicable contingent deferred sales charge, if any;
redemptions processed through securities dealers may be subject to processing
charges.
There are risks in any investment program, including the risk of changing
conditions in the securities markets generally and in the energy, natural
resources and related industries in particular, and there is no assurance
that the Fund will achieve its investment objective. The net asset value of a
share of the Fund will fluctuate as market conditions change.
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 November 1, 1995 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 nondiversified series of State Street Research Equity Trust
(the "Trust"), an open-end management investment company.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Table of Contents Page
Table of Expenses 2
Financial Highlights 4
The Fund's Investments 6
Limiting Investment Risk 10
Purchase of Shares 11
Redemption of Shares 19
Shareholder Services 20
The Fund and its Shares 24
Management of the Fund 25
Dividends and Distributions; Taxes 26
Calculation of Performance Data 27
<PAGE>
The Fund offers four 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 C shares, a sales charge which, at the election of the investor, may be
imposed (i) at the time of purchase (the Class A shares) or (ii) on a
deferred basis (the Class B and Class D shares).
Class A shares are subject to (i) an initial sales charge of up to 4.5% and
(ii) an annual service fee of 0.25% of the average daily net asset value of
the Class A shares.
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 A 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 offered only 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 (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.
Table of Expenses
<TABLE>
<CAPTION>
Class A Class B Class C Class D
-------- -------- -------- ----------
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses (1)
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 4.5% None None None
Maximum Sales Charge Imposed on Reinvested
Dividends (as a percentage of offering price) None None None None
Maximum Deferred Sales Charge (as a
percentage of original purchase price or
redemption proceeds, as applicable) None (2) 5% None 1%
Redemption Fees (as a percentage of amount
redeemed, if applicable) None None None None
Exchange Fees None None None None
</TABLE>
(1) Reduced sales charge purchase plans are available for Class A shares. 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 D 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 a class of shares with a distribution fee may, over a period of
years, pay more than the economic equivalent of the maximum sales charge
permissible under applicable rules. See "Purchase of Shares."
(2) Purchases of Class A shares of $1 million or more are not subject to a
sales charge. If such shares are redeemed within 12 months of purchase, a
contingent deferred sales charge of 1% will be applied to the redemption. See
"Purchase of Shares."
2
<PAGE>
<TABLE>
<CAPTION>
Class A Class B Class C Class D
------- ------- ------- ---------
<S> <C> <C> <C> <C>
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees 0.75% 0.75% 0.75% 0.75%
12b-1 Fees 0.25% 1.00% None 1.00%
Other Expenses 1.57% 1.57% 1.57% 1.57%
Less Voluntary Reduction (0.82%) (0.82%) (0.82%) (0.82%)
------- ------- ------- ---------
Total Fund Operating Expenses
(after voluntary reduction) 1.75% 2.50% 1.50% 2.50%
======= ======= ======= =========
</TABLE>
<TABLE>
<CAPTION>
Example: 1 Year 3 Years 5 Years 10 Years
------- ------- ------- ---------
<S> <C> <C> <C> <C>
You would pay the following expenses
on a $1,000 investment including, for
Class A shares, the maximum applicable
initial sales charge and assuming (1)
5% annual return and (2) redemption of
the entire investment at the end of
each time period:
Class A shares $62 $ 98 $136 $242
Class B shares (1) $75 $108 $153 $265
Class C shares $15 $ 47 $ 82 $179
Class D shares $35 $ 78 $133 $284
</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) $25 $78 $133 $265
Class D shares $25 $78 $133 $284
</TABLE>
(1) Ten-year figures assume conversion of Class B shares to Class A 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 June 30, 1995; 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 June 30, 1995, Total
Fund Operating Expenses as a percentage of average net assets of Class A, Class
B, Class C and Class D shares of the Fund would have been 2.57%, 3.12%, 2.06%
and 3.10%, respectively, in the absence of the voluntary assumption of fees or
expenses by the Distributor and its affiliates, which amounted to 0.82%, 0.79%,
0.73% and 0.77% of average net assets of each of the Class A, Class B, Class C
and Class D shares of the Fund, respectively. The amount of fees or expenses
assumed during the fiscal year ended June 30, 1995 differed among classes
because of fluctuations during the year in the relative levels of assets in each
class and in expenses before reimbursement. 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 has been audited by Price Waterhouse LLP,
independent accountants, and their report thereon for the latest five years
is included in the Statement of Additional Information. For further
information about the performance of the Fund, see the Fund's Annual Report
which appears under the caption "Financial Statements" in the Statement of
Additional Information. Past performance may not be indicative of future
performance because of, among other things, changes in the Fund's investment
strategy in July 1995; see "Calculation of Performance Data."
<TABLE>
<CAPTION>
Class A Class B
----------------------------------------------------------------- -------------------------------------
June 1, 1993
March 2, 1990 (Commencement
Commencement of Share Class
Year ended June 30 of Operations) to Year Ended June 30 Designations) to
------------------------------------------------- ------------------- June 30,1993
1995** 1994** 1993 1992 1991 June 30, 1990 1995** 1994**
------- ------- ------- ------- ------- -------------- ------- ------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $11.84 $13.51 $ 8.02 $9.12 $11.23 $11.94 $11.78 $13.51 $12.99
Net investment income
(loss)* (.16) (.17) (.13) (.12) .03 .03 (.23) (.23) (.02)
Net realized and
unrealized gain
(loss) on investments .48 (1.50) 5.62 (.98) (2.07) (.74) .48 (1.50) .54
Distribution from net
realized gains -- -- -- -- (.06) -- -- -- --
Dividend from net
investment income -- -- -- -- (.01) -- -- -- --
------- ------- ------- ------- ------- ------------ ------- ------- -------------
Net asset value, end
of period $12.16 $11.84 $13.51 $8.02 $ 9.12 $11.23 $12.03 $11.78 $13.51
======= ======= ======= ======= ======= ============ ======= ======= =============
Total return 2.70%+ (12.36)%+ 68.45%+ (12.06)%+ (18.28)%+ (5.95)%+++ 2.12%+ (12.81)%+ 4.00%+++
Net assets at end of
period (000s) $25,692 $30,679 $33,513 $19,227 $29,760 $35,321 $7,030 $6,333 $1,048
Ratio of operating
expenses to average
net assets* 1.75% 1.75% 1.75% 1.75% 1.75% 1.75%++ 2.33% 2.25% 2.25%++
Ratio of net
investment income
(loss) to average net
assets* (1.41)% (1.46)% (1.44)% (1.16)% 0.25% .81%++ (1.98)% (1.93)% (1.98)%++
Portfolio turnover
rate 62.94% 30.98% 61.00% 47.09% 108.18% 17.09% 62.94% 30.98% 61.00%
*Reflects voluntary
assumption of fees or
expenses per share in
each period $ 0.09 $0.11 $0.03 $0.05 $0.03 $0.01 $0.09 $0.14 $0.00
</TABLE>
**Per-share figures have been calculated using the average shares method.
++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 C Class D
--------------------------------------- -----------------------------------
June 1, 1993 June 1, 1993
(Commencement (Commencement
of Share Class of Share Class
Year ended June 30 Designations )to Year ended June 30 Designations) to
------------------- ----------------- ------------------ ----------------
1995** 1994** June 30, 1993 1995** 1994** June 30, 1993
------ -------- ----------------- ------ -------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $11.90 $ 13.52 $12.99 $11.77 $ 13.51 $12.99
Net investment income (loss)* (.11) (.15) (.00) (.23) (.23) (.02)
Net realized and unrealized gain
(loss) on investments .48 (1.47) .53 .48 (1.51) .54
Distribution from net realized gains -- -- -- -- -- --
Dividend from net investment income -- -- -- -- -- --
------ -------- ----------- ------ -------- -------------
Net asset value, end of period $12.27 $ 11.90 $13.52 $12.02 $ 11.77 $13.51
====== ======== =========== ====== ======== =============
Total return 3.11%+ (11.98)%+ 4.08%+++ 2.12%+ (12.88)%+ 4.00%+++
Net assets at end of period (000s) $3,288 $ 960 $ 146 $2,350 $ 1,931 $ 588
Ratio of operating expenses to average
net assets* 1.33% 1.25% 1.25%++ 2.33% 2.25% 2.25%++
Ratio of net investment income (loss)
to average net assets* (1.01)% (0.95)% (1.05)%++ (1.99)% (1.94)% (2.00)%++
Portfolio turnover rate 62.94% 30.98% 61.00% 62.94% 30.98% 61.00%
*Reflects voluntary assumption of
fees or expenses per share in each
period $ 0.08 $ 0.16 $ 0.00 $ 0.09 $ 0.13 $ 0.00
</TABLE>
**Per-share figures have been calculated using the average shares method.
++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>
The Fund's Investments
The Fund's investment objective is to provide long- term growth of capital.
The Fund's investment objective is a fundamental policy that may not be
changed without approval of the holders of a majority of the outstanding
voting securities of the Fund.
In seeking to achieve its investment objective, the Fund invests not less
than 65% of its total assets under normal market conditions in equity
securities of domestic and foreign companies in the energy and natural
resources industries. Such investments can provide long-term growth of
capital and a measure of protection during inflationary periods. The noted
industries include companies engaged in the exploration, development and
production of energy, energy sources, metals and other resources; the
extraction, refining, processing, distribution, marketing, transportation and
transmission of energy and natural resource products; research,
experimentation, and development respecting such resources and products;
ownership or control of leases, rights or royalty interests in such products;
and manufacturing and supplying equipment, components, parts or services
related to such products.
Energy and energy sources include oil, oil shale, methane gas, propane, coal,
nuclear, solar, biomass, geothermal and similar conventional or new forms of
energy. Other natural resources include ferrous metals such as iron and
steel, aluminum and copper; non-ferrous metals; precious metals such as
gold, silver and platinum; timberland; and similar resources. The kind of
issuers in which the Fund may invest include, for example, gas and oil
exploration companies, oil and oil service companies, utilities, steel mills,
gold and other mining companies. The Investment Manager deems a particular
company to be in an energy or natural resource industry if at the time of
investment at least 50% of the company's assets or gross revenues is directly
connected with or derived from the relevant industry. Under ordinary
conditions, the Fund will invest in the securities markets of at least three
countries, including the United States.
The Fund may also invest up to 35% of its total assets under normal market
conditions in the securities of issuers in industries that are not related to
the energy or natural resources industries. Such securities include domestic
or foreign equity securities, bonds, debentures and notes of varying
maturities.
Equity securities are defined as domestic and foreign common stocks,
preferred stocks, warrants (limited to 5% of the Fund's net assets) to
acquire common stock, depositary receipts in respect of foreign equity
securities and debt securities convertible into or carrying the right to
acquire common stock. The Fund may invest in the equity securities of both
large and small capitalization companies; small capitalization companies
include those whose outstanding publicly traded equity securities have a
market value of less than $1 billion at the time of the investment. These may
include equity securities of companies with above-average prospects for
long-term growth, more cyclical or lesser growing companies when the
securities thereof are considered by the Investment Manager to be
undervalued, and companies which may be attractive because of assets they own
or other circumstances. The Fund anticipates that a majority of the total
value of the equity securities in which it will invest will be listed on a
major domestic or foreign securities exchange or included on the National
Association of Securities Dealers Automated Quotation ("NASDAQ") system. The
Fund does not presently expect over-the-counter securities which are not
included on NASDAQ to comprise a substantial portion of the total value of
its portfolio.
The debt securities in which the Fund may invest include investment grade
securities as well as lower quality securities; however, the Fund will not
invest more than 10% of its total assets in lower quality debt securities.
Investment grade securities are securities rated at the time of purchase AAA,
AA, A or BBB by Standard & Poor's Corporation ("S&P") or Aaa, Aa, A or Baa by
Moody's Investors Service, Inc. ("Moody's"), or debt securities that are not
rated but considered by the Investment Manager to be of equivalent investment
quality to comparable rated securities. Bonds rated Baa by Moody's lack
outstanding investment characteristics and in fact have speculative
characteristics as well. Lower quality debt securities include securities
rated, at the time of purchase, BB or lower by S&P or Ba or lower by Moody's,
or debt securities that
6
<PAGE>
are not rated but considered by the Investment Manager to be of equivalent
investment quality to comparable rated securities.
Owing principally to the volatility of price levels of securities of issuers
in the energy and natural resources industries, the Fund may trade portfolio
securities without regard to the length of time held and will engage in
short-term trading whenever the Investment Manager determines market
conditions warrant. For example, if portfolio holdings of an issuer
experienced significant short-term appreciation as a result of changes in its
industry or in circumstances unique to the particular issuer, the Investment
Manager might deem it appropriate to realize such appreciation on behalf of
shareholders. Conversely, the Investment Manager might seek to avoid losses
by disposing of securities held for a relatively short time if significant,
unanticipated decreases in value occurred or appeared imminent. The Fund
might also invest in bonds and other debt securities to preserve capital if
conditions warranted. As part of its investment strategy, the Investment
Manager may employ a portfolio rotation approach, which involves a
reallocation, from time to time, among the best performing areas of the
relevant industries.
As indicated above, the Fund reserves full freedom with respect to portfolio
turnover. In periods when there are rapid changes in economic conditions or
security price levels or when investment strategy is changed significantly,
portfolio turnover may be significantly higher than during times of economic
and market price stability or when investment strategy remains relatively
constant.
A significant level of short-term trading activities will result in higher
brokerage, transaction and administrative costs. In addition, such short-term
trading may increase the amount of capital gains realized by the Fund in a
given year, and thus the amount of taxable distributions to shareholders.
Risk Factors and Special Considerations
Value of Shares and Assets
The value of the Fund's investments (and accordingly the net asset value of
its shares) will be subject to fluctuation in response to a variety of
economic, political and other factors, especially recessionary or
inflationary economies or expectations in the United States and other
countries. Historically, increases in the prices of energy and other natural
resources have often corresponded to periods of high inflation. Under some
circumstances, the securities of companies in the energy and natural
resources industries may increase in response to appreciation in the price of
the underlying energy and other natural resources products relevant to such
companies. To the extent the value of the Fund's portfolio participates in
this appreciation, such investments can provide a measure of inflation
protection during inflationary periods. There can be no assurance that any
such rise in energy or material resources price levels will correspond to
increases in general price levels, or that the value of the securities held
by the Fund will appreciate during inflationary periods. Because the Fund's
investments are concentrated in the energy and natural resources industries,
the value of its shares is especially affected by factors peculiar to those
industries and may fluctuate more widely than the value of shares of a
portfolio that invests in a broader range of industries. The securities of
companies in the energy and natural resources industries are affected by
changes in the supply and demand of oil, natural gas and other energy fuels,
as well as ferrous, non- ferrous and precious metals. Supply and demand can
fluctuate significantly over a short period of time due to changes in, for
example, weather, international politics (including particularly developments
in the former Soviet Union and in the Middle East), policies of the
Organization of Petroleum Exporting Countries ("OPEC"), relationships between
OPEC nations, conservation, the regulatory environment, governmental tax
policies and the economic growth and stability of countries which consume or
produce large amounts of energy and other natural resources.
Issuers of securities in which the Fund invests, particularly those whose
securities are traded over-the-counter, may be limited in product lines,
markets and financial resources and may be dependent on entrepreneurial
management. The securities of such companies may have limited marketability
and may be subject to more abrupt or erratic market movements over time than
securities of larger, more sea-
7
<PAGE>
soned companies or the market as a whole. Such companies also typically
reinvest most of their net income in the enterprise and typically do not pay
dividends.
The Fund may invest from time to time in equity securities of public
utilities. Such issuers are subject to regulation by local governmental
authorities which may inhibit the potential for capital appreciation of their
securities.
The Fund is a nondiversified fund, which is defined under the Investment
Company Act of 1940, as amended (the "1940 Act"), as any fund other than a
diversified fund. A diversified fund means, with certain exceptions, any fund
that with respect to 75% of its total assets does not invest more than 5% of
its total assets in any one issuer or invest in more than 10% of the
outstanding voting securities of any such issuer. As a nondiversified fund,
it will not be subject to the 75% limit noted; the Fund therefore will be
subject to greater risk from adverse developments which affect such issuers
than would a fund that has greater diversification of investments. However,
with respect to 50% of its total assets, the Fund will not invest more than
5% of its total assets in any single issuer.
As noted above, the Fund may invest up to 10% of its total assets in debt
securities rated BB or lower by S&P or Ba or lower by Moody's or debt
securities that are unrated but considered by the Investment Manager to be of
equivalent investment quality to comparable rated securities. Such securities
generally involve more credit risk than higher rated securities and are
considered by S&P and Moody's to be predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with the terms of
the obligation. Further, such securities may be subject to greater market
fluctuations and risk of loss of income and principal than lower yielding,
higher rated debt securities. Risks of lower quality debt securities include
(i) limited liquidity and secondary market support; (ii) substantial market
price volatility resulting from changes in prevailing interest rates and/or
investor perceptions; (iii) subordination to the prior claims of banks and
other senior lenders; (iv) the operation of mandatory sinking fund or
call/redemption provisions during periods of declining interest rates when
the Fund may be required to reinvest premature redemption proceeds in lower
yielding portfolio securities; (v) the possibility that earnings of the
issuer may be insufficient to meet its debt service; and (vi) the issuer's
low creditworthiness and potential for insolvency during periods of rising
interest rates and economic downturn. For further information concerning the
ratings of debt securities, see the Statement of Additional Information. In
the event the rating of a security is downgraded, the Investment Manager will
determine whether the security should be retained or sold depending on an
assessment of all facts and circumstances at that time.
Foreign Investments
Under normal conditions, the Fund will invest in the underlying securities of
issuers organized under the laws of at least three different countries,
including the United States. The Fund will invest in securities of non- U.S.
issuers directly, or indirectly in the form of American Depositary Receipts
("ADRs"), European Depositary Receipts ("EDRs") or similar securities
representing interests in the securities of foreign issuers. ADRs are
receipts, typically issued by a U.S. bank or trust company, which evidence
ownership of underlying securities issued by a foreign corporation or other
entity. EDRs are receipts issued in Europe which evidence a similar ownership
arrangement. Generally, ADRs, in registered form, are designed for use in
U.S. securities markets, and EDRs are designed for use in European securities
markets. The underlying securities are not always denominated in the same
currency as the ADRs or EDRs. Although investment in the form of ADRs or EDRs
facilitates trading in foreign securities, it does not mitigate the risks
associated with investing in foreign securities. It is anticipated that most
of the foreign investments of the Fund will consist of securities of issuers
in countries with developed economies. However, the Fund may also invest in
the securities of issuers in countries with less developed economies as
deemed appropriate by the Investment Manager. Such countries include
countries that have an emerging stock market that trades a small number of
securities; countries with low- to middle-income economies; and/or countries
with economies that are based on only a few industries. Eastern European
countries are considered to have less developed capital markets.
8
<PAGE>
ADRs are available through facilities which may be either "sponsored" or
"unsponsored." In a sponsored arrangement, the foreign issuer establishes the
facility, pays some or all of the depository's fees, and usually agrees to
provide shareholder communications. In an unsponsored arrangement, the
foreign issuer is not involved, and the ADR holders pay the fees of the
depository. Sponsored ADRs are generally more advantageous to the ADR holders
and the issuer than are unsponsored ADRs. More and higher fees are generally
charged in an unsponsored program compared to a sponsored facility. Only
sponsored ADRs may be listed on the New York or American Stock Exchanges.
Unsponsored ADRs may prove to be more risky due to (a) the additional costs
involved to a Fund; (b) the relative illiquidity of the issue in U.S.
markets; and (c) the possibility of higher trading costs in the
over-the-counter market as opposed to exchange based tradings. The Fund will
take these and other risk considerations into account before making an
investment in an unsponsored ADR.
The risks associated with investments in foreign securities include those
resulting from fluctuations in currency exchange rates, revaluation of
currencies, future political and economic developments, including the risks
of nationalization or expropriation, the possible imposition of currency
exchange blockages, higher operating expenses, foreign withholding and other
taxes which may reduce investment return, reduced availability of public
information concerning issuers, the difficulties in obtaining and enforcing a
judgment against a foreign issuer and the fact that foreign issuers are not
generally subject to uniform accounting, auditing and financial reporting
standards or to other regulatory practices and requirements comparable to
those applicable to domestic issuers. Moreover, securities of many foreign
issuers may be less liquid and their prices more volatile than those of
securities of comparable domestic issuers. Investments in foreign securities
also involve the additional cost of converting the foreign currency into U.S.
dollars.
Although the Fund may invest in securities denominated in foreign currencies,
the Fund values its securities and other assets in U.S. dollars. As a result,
the net asset value of the Fund's shares may fluctuate with U.S. dollar
exchange rates as well as with price changes of the Fund's securities in the
various local markets and currencies. Thus, an increase in the value of the
U.S. dollar compared to the currencies in which the Fund makes its
investments could reduce the effect of increases and magnify the effect of
decreases in the prices of the Fund's securities in their local markets.
Conversely, a decrease in the value of the U.S. dollar will have the opposite
effect of magnifying the effect of increases and reducing the effect of
decreases in the prices of the Fund's securities in the local markets.
Currency Transactions
In order to protect against the effects of uncertain future exchange rates on
securities denominated in foreign currencies, the Fund may engage in currency
exchange transactions either on a spot (i.e., cash) basis at the rate
prevailing in the currency exchange market, or by entering into forward
contracts to purchase or sell currencies. Although such contracts tend to
minimize the risk of loss resulting from a correctly predicted decline in
value of hedged currency, they tend to limit any potential gain that might
result should the value of such currency increase. In entering a forward
currency contract, the Fund is dependent upon the creditworthiness and good
faith of the counterparty. The Fund attempts to reduce the risks of
nonperformance by the counterparty by dealing only with established, large
institutions with which the Investment Manager has done substantial business
in the past. See the Statement of Additional Information.
Other Investment Policies
The Fund may, subject to certain limitations, buy and sell options, futures
contracts and options on futures contracts on securities, securities indices
and currencies. The Fund may not establish a position in a commodity futures
contract or purchase or sell a commodity option contract for other than bona
fide hedging purposes if immediately thereafter the sum of the amount of
initial margin deposits and premiums required to establish such positions for
such nonhedging purposes would exceed 5% of the market value of the Fund's
net assets; similar policies apply to options which are not commodities. The
Fund may enter various forms of swap arrangements, which have simultaneously
the characteristics of a security and a futures contract, although the
9
<PAGE>
Fund does not presently expect to invest more than 5% of its total assets in
such items. These swap arrangements include interest rate swaps, currency
swaps and index swaps. See the Statement of Additional Information.
The Fund may invest in restricted securities in accordance with Rule 144A
under the Securities Act of 1933, which allows for the resale of such
securities among certain qualified institutional buyers. Because the market
for such securities is still developing, such securities could possibly
become illiquid in particular circumstances. See the Statement of Additional
Information. The Fund may enter into repurchase agreements and purchase
when-issued securities.
The Fund may lend portfolio securities with a value of up to 33-1/3% 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 held in the form tendered,
although cash may be invested in securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities, irrevocable stand-by letters
of credit issued by a bank, or any combination thereof. The investing of cash
collateral received from loaning portfolio securities involves leverage which
magnifies the potential for gain or loss on monies invested and, therefore,
results in an increase in the volatility of the Fund's outstanding
securities. Such loans may be terminated at any time.
The Fund will retain most rights of ownership including rights to dividends,
interest or other distributions on the loaned securities. Voting rights pass
with the lending, although the Fund may call loans to vote proxies if
desired. Should the borrower of the securities fail financially, there is a
risk of delay in recovery of the securities or loss of rights in the
collateral. Loans are made only to borrowers which are deemed by the
Investment Manager to be of good financial standing.
Limiting Investment Risk
In seeking to lessen investment risk, the Fund operates under certain
fundamental investment restrictions. Under these restrictions the Fund may
not invest in a security if the transaction would result in: (i) the Fund
owning more than 10% of any class of voting securities of an issuer; or (ii)
more than 25% of the Fund's assets being invested in securities of issuers in
any one industry other than any energy industry (provided that the foregoing
restrictions do not apply to investments in securities issued or guaranteed
by the U.S. Government or its agencies or instrumentalities or backed by the
U.S. Government). The fundamental investment restrictions set forth in this
paragraph may not be changed except by vote of the holders of a majority of
the outstanding voting securities of the Fund.
The Fund may not purchase any security or enter into a repurchase agreement
if as a result more than 15% of its total assets would be invested in (a)
securities that are illiquid, provided that restricted securities, excluding
restricted securities eligible for resale pursuant to exemptive rules or
regulations under the Securities Act of 1933, shall be limited to 5% of total
assets, and (b) repurchase agreements not entitling the holder to payment of
principal and interest within seven days.
For further information on these and other investment restrictions, including
other nonfundamental investment restrictions which may be changed without a
shareholder vote, see the Statement of Additional Information. The investment
restrictions and limitations set forth apply as of the time of the relevant
investment.
The Fund may hold up to 100% of its assets in cash or short-term securities
for temporary defensive purposes when in the opinion of the Investment
Manager market conditions warrant. To the extent the Fund's assets are
invested for temporary defensive purposes, such assets will not be invested
in a manner designed to achieve the Fund's investment objective. The types of
short-term instruments in which the Fund may invest for temporary defensive
purposes are described in the Statement of Additional Information and include
short-term money market securities such as securities issued or guaranteed by
the U.S. Government or its agencies or instrumentalities, certificates of
deposit, time deposits and bankers' acceptances of certain qualified
financial institutions and
10
<PAGE>
corporate commercial paper rated at least "A" by S&P or "Prime" by Moody's
(or, if not rated, issued by companies having an outstanding long-term
unsecured debt issue rated at least "A" by S&P or Moody's). For further
information, see the Statement of Additional Information.
The Investment Manager also manages the assets of other clients that, in
seeking to achieve their investment objectives, may hold investments that are
similar to those held by the Fund and that trade in the same markets as the
Fund. It is also possible that a particular investment may be held by more
than one client when the Investment Manager determines that holding such
investment is in the best interests of each and the investment meets the
differing investment objectives of each.
Information on the Purchase of Shares, Redemption of Shares and Shareholder
Services is set forth on pages 12 to 24 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 Accounts ("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 a Fund.
Participants in 401(k) and other plans should first consult with the
appropriate person at their employer or refer to the plan materials before
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
Shares of the Fund are continuously offered through securities dealers who
have entered into sales agreements with the Distributor. Purchases through
dealers are confirmed at the offering price, which is the net asset value
plus the applicable sales charge, next determined after the order is duly
received by State Street Research Shareholder Services ("Shareholder
Services"), 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 Shareholder
Services in order to permit the investor to obtain the current price. See
"Purchase of Shares--Net Asset Value" herein.
By Mail
Initial investments in the Fund may be made by mailing or delivering to the
investor's securities 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 Shareholder Services 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.
Shareholder Services will deliver the purchase order to the transfer agent
and dividend paying agent, State Street Bank and Trust Company (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.
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 Shareholder Services at
1-800-521-6548 and obtain a control number and instructions. Following such
notification, Federal Funds should be wired through the Federal Reserve
System to:
11
<PAGE>
ABA #011000028
State Street Bank and Trust Company
Boston, MA
BNF = State Street Research Global Resources Fund and class of shares (A, B,
C or D)
AC = 99029761
OBI = Shareholder Name
Shareholder Account Number
Control #K (assigned by State Street Research Shareholder Services)
In order for a wire investment to be processed on
the same day (i) the investor must notify Shareholder Services 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 must be received by 4 P.M. Boston time that
same day.
An investor making an initial investment by wire must promptly complete the
Application accompanying this Prospectus and deliver it to his or her
securities 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 reject any purchase order, including orders in connection with
exchanges, for any reason which the Fund in its sole discretion deems
appropriate. The Fund reserves the right to suspend the sale of shares.
Minimum Investment
<TABLE>
<CAPTION>
Class of Shares
-------------------------------
A B C D
----- ----- -- -------
<S> <C> <C> <C> <C>
Minimum Initial
Investment
By Wire $5,000 $5,000 (a) $5,000
IRAs $2,000 $2,000 (a) $2,000
By Investamatic $1,000 $1,000 (a) $1,000
All Other $2,500 $2,500 (a) $2,500
Minimum Subsequent Investment
By Wire $5,000 $5,000 (a) $5,000
IRAs $ 50 $ 50 (a) $ 50
By Investamatic $ 50 $ 50 (a) $ 50
All Other $ 50 $ 50 (a) $ 50
(a) Special conditions apply; contact the Distributor.
</TABLE>
The Fund reserves the right to vary the minimums for initial or subsequent
investments from time to time 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 such as for reinvestment of dividends and
distributions or for periodic investments (e.g. Investamatic Check Program).
Alternative Purchase Program
General
Alternative classes of shares permit investors to select a purchase program
which they believe will be the most advantageous for them, given the amount
of their purchase, the length of time they anticipate holding Fund shares, or
the flexibility they desire in this regard, and other relevant circumstances.
Investors will be able to determine whether in their particular circumstances
it is more advantageous to incur an initial sales charge and not be subject
to certain ongoing charges or to have their entire initial purchase price
invested in the Fund with the investment being subject thereafter to ongoing
service fees and distribution fees.
As described in greater detail below, securities dealers are paid differing
amounts of commission and other compensation depending on which class of
shares they sell.
12
<PAGE>
The major differences among the various classes of shares are as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
----------------------- -------------------------- -------- -----------------------
<S> <C> <C> <C> <C>
Sales Charges Initial sales Contingent deferred None Contingent deferred
charge at time of sales charge of 5% sales charge of 1%
investment of up to 2% applies to any applies to any shares
to 4.5% depending shares redeemed within redeemed within one
on amount of first five years following year following
investment their purchase; no their purchase
contingent deferred
sales charge after
five years
On investments of $1
million or more, no
initial sales charge;
but contingent deferred
sales charge of 1%
applies to any shares
redeemed within one
year following their
purchase
Distribution Fee None 0.75% for first None 0.75% each year
eight years;
Class B shares
convert auto-
matically to
Class A shares
after eight years
Service Fee 0.25% each year 0.25% each year None 0.25% each year
Initial Above described 4% None 1%
Commission initial sales charge
Received less 0.25% to 0.50%
by Selling retained by
Securities Distributor
Dealer
On investments of $1
million or more,
0.25% to 1% paid
to dealer by
Distributor
</TABLE>
13
<PAGE>
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 A shares are sold at net asset value plus an initial sales charge of up
to 4.5% of the public offering price. Because of the sales charge, not all of
an investor's purchase amount is invested unless the purchase equals
$1,000,000 or more. 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 D 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 D shareholders, therefore, the entire purchase amount is immediately
invested in the Fund.
An investor who qualifies for a significantly reduced initial sales charge,
or a complete waiver of the sales charge on investments of $1,000,000 or
more, on the purchase of Class A shares might elect that option to take
advantage of the lower ongoing service and distribution fees that
characterize Class A shares compared with Class B or Class D shares.
Class A, Class B and Class D shares are assessed an annual service fee of
0.25% of average daily net assets. In addition, 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 A shares. Class D 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 initial or contingent deferred
sales charges in estimating the costs of investing in the various classes of
the Fund's shares.
Only certain employee benefit plans and large institutions may make
investments in Class C shares.
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 securities 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 incentives may include merchandise and
trips to and attendance at sales seminars at resorts.
Class A Shares - Initial Sales Charges
Sales Charges
The purchase price of a Class A 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, plus a sales charge which varies depending on the dollar
amount of the shares purchased as set forth in the table below. A major
portion of this sales charge is reallowed by the Distributor to the
securities dealer responsible for the sale.
<TABLE>
<CAPTION>
Sales Sales
Charge Charge
Paid by Paid by Dealer
Dollar Investor Investor Concession
Amount of As % of As % of As % of
Purchase Purchase Net Asset Purchase
Transaction Price Value Price
<S> <C> <C> <C>
Less than $100,000 4.50% 4.71% 4.00%
$100,000 or above but
less than $250,000 3.50% 3.63% 3.00%
$250,000 or above but
less than $500,000 2.50% 2.56% 2.00%
$500,000 or above but
less than
$1 million 2.00% 2.04% 1.75%
$1 million and above See
following
0% 0% discussion
</TABLE>
On any sale of Class A shares to a single investor in the amount of
$1,000,000 or more, the Distributor will pay the authorized securities dealer
a commission as follows:
14
<PAGE>
<TABLE>
<CAPTION>
Amount of Sale Commission
- ---------------------------- -----------
<S> <C>
(a) $1 million to $3 million 1.00%
(b) Next $2 million 0.50%
(c) Amount over $5 million 0.25%
</TABLE>
On such sales of $1,000,000 or more, the investor is subject to a 1%
contingent deferred sales charge on any portion of the purchase redeemed
within one year of the sale. However, such redeemed shares will not be
subject to the contingent deferred sales charge to the extent that their
value represents (1) capital appreciation 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" below (as otherwise applicable to
Class B shares).
Class A shares of the Fund that are purchased without a sales charge may be
exchanged for Class A shares of certain other Eligible Funds, as described
below, without the imposition of a contingent deferred sales charge, although
contingent deferred sales charges may apply upon a subsequent redemption
within one year of the Class A shares which are acquired through such
exchange. 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.
Reduced Sales Charges
The reduced sales charges set forth in the table above are applicable to
purchases made at any one time by any "person," as defined in the Statement
of Additional Information, of $100,000 or more of Class A shares of the Fund
or a combination of "Eligible Funds." "Eligible Funds" include the Fund and
other funds so designated by the Distributor from time to time. Class B,
Class C and Class D shares may also be included in the combination under
certain circumstances. Securities dealers should call Shareholder Services
for details concerning the other Eligible Funds and any persons who may
qualify for reduced sales charges and related information. See the Statement
of Additional Information.
Letter of Intent
Any investor who provides a Letter of Intent may qualify for a reduced sales
charge on purchases of no less than an aggregate of $100,000 of Class A
shares of the Fund and any other Eligible Funds within a 13-month period.
Class B, Class C and Class D shares may also be included in the combination
under certain circumstances. Additional information on a Letter of Intent is
available from dealers, or from the Distributor, and also appears in the
Statement of Additional Information.
Right of Accumulation
Investors may purchase Class A shares of the Fund or a combination of shares
of the Fund and other Eligible Funds at reduced sales charges pursuant to a
Right of Accumulation. Under the Right of Accumulation, the sales charge is
determined by combining the current purchase with the value of the Class A
shares of other Eligible Funds held at the time of purchase. Class B, Class C
and Class D shares may also be included in the combination under certain
circumstances. See the Statement of Additional Information and call
Shareholder Services for details concerning the Right of Accumulation.
Other Programs
Class A shares of the Fund may be sold or issued in an exchange at a reduced
sales charge or without a sales charge pursuant to certain sponsored
arrangements, which include programs under which a company, employee benefit
plan or other organization makes recommendations to, or permits group
solicitation of, its employees, members or participants, except any
organization created primarily for the purpose of obtaining shares of the
Fund at a reduced sales charge or without a sales charge. Sales without a
sales charge, or with a reduced sales charge, may also be made through
brokers, financial planners, institutions, and others, under managed
fee-based programs (e.g., "wrap fee" or similar programs) which meet certain
requirements established from time to time by the Distributor, in the event
the Distributor determines to implement such arrangements. Information on
such arrangements and further conditions and limitations is available from
the Distributor.
In addition, no sales charge is imposed in connection with the sale of Class
A shares of the Fund to the following entities and persons: (A) the
Investment Man-
15
<PAGE>
ager, the Distributor, or any affiliated entities, including any direct or
indirect parent companies and other subsidiaries of such parents
(collectively "Affiliated Companies"); (B) employees, officers, sales
representatives or current or retired directors or trustees of the Affiliated
Companies or any investment company managed by any of the Affiliated
Companies, any relatives of any such individuals whose relationship is
directly verified by such individuals to the Distributor, or any beneficial
account for such relatives or individuals; and (C) employees, officers, sales
representatives or directors of dealers and other entities with a selling
agreement with the Distributor to sell shares of any aforementioned
investment company, any spouse or child of such person, or any beneficial
account for any of them. The purchase must be made for investment and the
shares purchased may not be resold except through redemption. This purchase
program is subject to such administrative policies, regarding the
qualification of purchasers and any other matters, as may be adopted by the
Distributor from time to time.
Class B Shares - Contingent Deferred Sales Charges
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 securities dealers at the time of sale a 4%
commission for selling Class B 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
Net Asset Value
Redemption During At Redemption
- ------------------------------------------ ---------------------
<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 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. 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 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
16
<PAGE>
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 at any time; for example, the Fund may limit the
application of multiple waivers.
Conversion of Class B Shares to Class A 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 A shares of the Fund at the end of eight years following the issuance
of the 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 A 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 - Institutional; No Sales Charge
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 or
redemption. The Fund will receive the full amount of the investor's purchase
payment.
Class C shares are only available for new investments by certain employee
benefit plans and large institutions. See the Statement of Additional
Information. Information on the availability of Class C shares and further
conditions and limitations with respect thereto is available from the
Distributor.
Class C shares may be also issued in connection with mergers and acquisitions
involving the Fund, and under certain other circumstances as described in
this Prospectus (e.g., see "Shareholder Services--
Exchange Privilege").
Class C 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.
Class D Shares - Spread Sales Charges
The purchase price of a Class D 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 D 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 securities dealers a 1% commission for selling Class D 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 D shares without an initial sales charge.
Class D 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.
Net Asset Value
The Fund's per share net asset values are determined Monday through Friday as
of the close of the New York Stock Exchange (the "NYSE") exclusive of days on
which the NYSE is closed. The NYSE ordi-
17
<PAGE>
narily closes at 4 P.M. New York City time. Assets held by the Fund are
valued on the basis of the last reported sale price or quotations as of the
close of business on the valuation date, except that securities and assets
for which market quotations are not readily available are valued as
determined in good faith by or under the authority of the Trustees of the
Trust. In determining the value of certain assets for which market quotations
are not readily available, the Fund may use one or more pricing services. The
pricing services utilize information with respect to market transactions,
quotations from dealers and various relationships among securities in
determining value and may provide prices determined as of times prior to the
close of the NYSE. The Trustees have authorized the use of the amortized cost
method to value short-term debt instruments issued with a maturity of one
year or less and having a remaining maturity of 60 days or less when the
value obtained is fair value. Further information with respect to the
valuation of the Fund's assets is included 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>
A 0.25% None
B 0.25% 0.75%
C None None
D 0.25% 0.75%
</TABLE>
Some or all of the service fees are used to reimburse securities dealers
(including securities dealers that are affiliates of the Distributor) for
personal services and/or the maintenance of shareholder accounts. A portion
of any initial commission paid to dealers for the sale of shares of the Fund
represents payment for personal services and/or the maintenance of
shareholder accounts by such dealers. Dealers who have sold Class A shares
are eligible for further reimbursement commencing as of the time of such
sale. Dealers who have sold Class B and Class D 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 of shareholder
accounts.
The distribution fees are used primarily to offset initial and ongoing
commissions paid to securities 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 marketing
efforts, including special promotional fees and cash and noncash incentives
based upon sales by securities 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.
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<PAGE>
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 Shareholder Services and delivery of the
request by Shareholder Services 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 a potential 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 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 Shareholder Services, 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
Shareholder Services 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 for shares held in certificate form or if the address of
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.
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. To make the request, the shareholder should call
1-800-521-6548 prior to 4 P.M. Boston time. 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 $5,000.
Request to Dealer to Repurchase
For the convenience of shareholders, the Fund has authorized the Distributor
as its agent to accept orders from dealers by wire or telephone for the
repurchase of shares by the Distributor from the dealer. The Fund may revoke
or suspend this authorization at any time. The repurchase price is the net
asset value for the applicable shares next determined following the time at
which the shares are offered for repurchase by the dealer to the Distributor.
The dealer is responsible for promptly transmitting a shareholder's order to
the Distributor. Payment of the repurchase proceeds is made to the dealer who
placed the order promptly upon delivery
19
<PAGE>
of certificates for shares in proper form for transfer or, for Open Accounts,
upon the receipt of a stock power with signatures guaranteed as described
below, and, if required, any supporting documents. Neither the Fund nor the
Distributor imposes any charge upon such a repurchase. However, a dealer may
impose a charge as agent for a shareholder in the repurchase of his or her
shares.
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 shareholder 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 value; 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: (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; and (4) requests to transfer the registration of
shares to another owner. 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 Shareholder Services at 1-800-562- 0032 for specific requirements
relating to your account.
Shareholder Services
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. Certificates representing Class B or Class D shares will not be
issued, while certificates representing Class A or Class C shares will only
be issued if specifically requested in writing and, in any case, will only be
issued for full shares, with any fractional shares to be carried on the
shareholder's account. Shareholders will receive periodic statements of
transactions in their accounts.
20
<PAGE>
The Fund's Open Account System provides the following options:
1. Additional purchases of shares of the Fund may be made through dealers, by
wire or by mailing a check payable to the Fund to Shareholder Services 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 are available:
(a) All income dividends and capital gains distributions reinvested in
additional shares of the Fund.
(b) All income dividends in cash; all capital gains distributions reinvested
in additional shares of the Fund.
(c) All income dividends and capital gains distributions in cash.
(d) All income dividends and capital gains distributions invested in any one
available Eligible Fund designated by the shareholder as described below. 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
Shareholder Services. 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 basis of the relative net asset values of the respective shares to be
exchanged, subject to compliance with applicable securities laws.
Shareholders of any other Eligible Fund may similarly exchange their shares
for Fund shares with corresponding characteristics. Prior to making an
exchange, shareholders should obtain the Prospectus of the Eligible Fund into
which they are exchanging. Under the Direct Program, subject to certain
conditions, shareholders may make arrangements for regular exchanges from the
Fund into other Eligible Funds. To effect an exchange, Class A, Class B and
Class D shares may be redeemed without the payment of any contingent deferred
sales charge that might otherwise be due upon an ordinary redemption of such
shares. The State Street Research Money Market Fund issues Class E shares
which are sold without any sales charge. Exchanges of State Street Research
Money Market Fund Class E shares into Class A shares of the Fund or any other
Eligible Fund are subject to the initial sales charge or contingent deferred
sales charge applicable to an initial investment in such Class A shares,
unless a prior Class A sales charge has been paid directly or indirectly with
respect to the shares redeemed. For purposes of computing the contingent
deferred sales charge that may be payable upon disposition of any acquired
Class A, Class B and Class D 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.
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 1-800-521-6548. 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
21
<PAGE>
Telephone Privileges as the existing account, unless Shareholder Services 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.
The exchange privilege is not designed for use in connection with short-term
trading or market timing strategies. To protect the interests of
shareholders, the Fund reserves the right to temporarily or permanently
terminate the exchange privilege for any person who makes more than six
exchanges out of the Fund per calendar year. Accounts under common ownership
or control, including accounts with the same taxpayer identification number,
may be aggregated for purposes of the six exchange limit. Notwithstanding the
six exchange limit, the Fund reserves the right to refuse exchange purchases
by any person or group if, in the Investment Manager's judgment, the Fund
would be unable to invest effectively in accordance with its investment
objective and policies, or would otherwise potentially be adversely affected.
Exchanges may be restricted or refused if the Fund receives or anticipates
simultaneous orders affecting significant portions of the Fund's assets. In
particular, a pattern of exchanges that coincides with a "market timing"
strategy may be disruptive to the Fund. The Fund may impose these
restrictions at any time. The exchange limit may be modified for accounts in
certain institutional retirement plans to conform to plan exchange limits and
Department of Labor regulations. Subject to the foregoing, if an exchange
request in good order is received by Shareholder Services and delivered by
Shareholder Services to the Transfer Agent by 12 noon Boston time on any
business day, the exchange usually will occur that day. Consult Shareholder
Services before requesting an exchange or for further information.
Reinvestment Privilege
A shareholder of the Fund who has redeemed shares or had shares repurchased
at his or her request may reinvest all or any portion of the proceeds (plus
that amount necessary to acquire a fractional share to 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 Shareholder
Services of such shareholder's written purchase request and delivery of the
request by Shareholder Services 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 Fund offers Class A, Class B and Class D shareholders the Investamatic
Check Program. Under this Program, shareholders may make regular investments
by authorizing withdrawals from their bank accounts each month or quarter on
the Application available from Shareholder Services.
The Fund also offers tax-sheltered retirement plans, including prototype and
other employee benefit plans for employees, sole proprietors, partnerships
and corporations and IRAs. Details of these investment plans and their
availability may be obtained from securities dealers or from Shareholder
Services.
22
<PAGE>
Systematic Withdrawal Plan
A shareholder who owns noncertificated Class A or Class C shares with a value
of $5,000 or more, or Class B or Class D 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 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 participate
in the Investamatic Check Program and the Systematic Withdrawal Plan at the
same time.
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 investment
is made is initially funded with the requisite minimum amount. The number of
shares purchased will be determined as of the dividend payment date. The
Dividend Allocation Plan is subject to state securities law requirements, 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; and
(3) the privilege allowing the shareholder to make telephone redemptions for
amounts over $5,000, 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 1-800-521-6548. The Telephone Redemption-by-Wire
Form requires a signature guarantee.
23
<PAGE>
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
Shareholder Services 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 Shareholder Services 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; 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
1-800-521-6548. Although it is unlikely, during periods of extraordinary
market conditions, a shareholder may have difficulty in reaching Shareholder
Services at such telephone number. In that event, the shareholder should
contact Shareholder Services at 1-800-562-0032, 1-617-357-7805 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 Shareholder Services, 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 1-800-521-6548
Call this number for assistance in purchasing shares by wire and for
telephone redemptions or telephone exchange transactions. Shareholder
Services 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 1990 as an additional series of State Street
Research Equity Trust, a Massachusetts business trust. The Trustees have
authorized shares of the Fund to be issued in four classes: Class A, Class B,
Class C and Class D shares. The Trust is registered with the Securities and
Exchange Commission as an open-end management investment company. The fiscal
year end of the Fund is June 30.
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. In the future, certain classes may be
redesignated, for administrative purposes only, to conform to standard class
designations and common usage of terms which may develop in the mutual fund
industry. For example, Class C shares may be redesignated as Class Y shares
and Class D shares may be redesignated as Class C shares. Any redesignations
would not affect any substantive rights respecting the shares.
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 A, Class B and Class D shares
bear the expenses of the deferred sales arrange-
24
<PAGE>
ment 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. Under the Master Trust Agreement, the Trustees may
reorganize, merge or liquidate the Fund without prior shareholder approval.
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 Trust's 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 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.
Management of the Fund
Under the provisions of the Trust's 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, sector rotation and duration, among other factors.
The Investment Manager and the Distributor are indirect wholly-owned
subsidiaries of Metropolitan Life Insurance Company 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
25
<PAGE>
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 0.75% (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 will reduce its management fee payable by
the Fund up to the amount of any expenses (excluding permissible items, such
as brokerage commissions, Rule 12b-1 payments, interest, taxes and litigation
expenses) paid or incurred in any year in excess of the most restrictive
expense limitation imposed by any state in which the Fund sells shares, if
any. The Investment Manager compensates Trustees of the Trust if such persons
are employees or affiliates of the Investment Manager or its affiliates.
The Fund is managed by Daniel J. Rice III. Mr. Rice has managed the Fund
since its inception in March 1990. Mr. Rice's principal occupation currently
is Senior Vice President of State Street Research & Management Company.
During the past five years he has also served as Vice President of State
Street Research & Management Company.
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.
Dividends and Distributions; Taxes
The Fund 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 taxes 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 net investment income semiannually and pays
such dividends, if any, twice each year; distributions of long-term and
short-term capital gain net income will generally be made on an annual
basis, shortly after the end of the fiscal year in which such gains are
realized (or as otherwise required for compliance with applicable tax
regulations). Both dividends from net investment income and distributions of
capital gain net income will be declared and paid in additional shares of the
Fund at net asset value (except in the case of shareholders who elect a
different available distribution method). 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 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, and a portion may be eligible
for the 70% dividends-received deduction for corporations. The percentage of
the Fund's dividends eligible for such tax treatment may be less than 100% to
the extent that less than 100% of the Fund's gross income may be from
qualifying dividends of domestic corporations. Distributions of net capital
gains (the excess of net long-term capital gains over net short-term capital
losses) 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, and are not eligible for the
dividends-received deduction. If shares of the Fund which are sold at a
26
<PAGE>
loss have been held six months or less, the loss will be considered as a
long-term capital loss to the extent of any capital gains distributions
received.
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. Therefore,
prospective shareholders are urged to consult their own tax advisers
regarding tax matters, including state and local tax consequences.
Calculation of Performance Data
From time to time, in advertisements or in communications to shareholders or
prospective investors, the Fund may compare the performance of its Class A,
Class B, Class C or Class D 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 Natural Resource Funds Index compiled by Lipper
Analytical Services, Inc., Standard & Poor's 500 Index, Consumer Price Index
and Dow Jones Industrial Average and/or to appropriate rankings and averages
such as those compiled by Morningstar, Inc., Money Magazine, Business Week,
Forbes Magazine, The Wall Street Journal and Investor's Daily.
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 period that, if applied to a hypothetical $1,000 initial
investment (less the maximum initial or contingent deferred sales charge, if
applicable), would produce the redeemable value of that investment at the end
of the period, assuming reinvestment of all dividends and distributions and
with recognition of all recurring charges. 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 into account.
The standard total return results take sales charges into account, if
applicable, but 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 remittance of redemption proceeds by
wire. Where sales charges are not applicable and therefore not taken into
account in the calculation of standard total return, the results will be
increased. Any voluntary waiver of fees or assumption of expenses by the
Fund's affiliates will also increase performance results.
Performance information may be useful in evaluating the Fund and for
providing a basis for comparison with other financial alternatives. Since the
performance of the Fund changes in response to fluctuations in economic and
market conditions, interest rates and Fund expenses, among other things, no
performance quotation should be considered a representation as to the Fund's
performance for any future period. In evaluating the Fund's performance,
consideration should be given to changes in the Fund's investment strategy in
July, 1995. The investment strategy of the Fund was changed to include more
investments in the natural resources industries. Prior to the change, the
Fund invested at least 65% of its total assets in the equity securities of
companies in the energy industries. Under its current investment strategy,
the Fund invests at least 65% of its total assets in the equity securities of
companies in the energy and natural resources industries.
In addition, the net asset values of shares of the Fund will fluctuate, with
the result that shares of the Fund, when redeemed, may be worth more or less
than their original cost. Neither an investment in the Fund nor its
performance is insured or guaranteed; such lack of insurance or guarantees
should accordingly be given appropriate consideration when comparing the Fund
to financial alternatives which have such features.
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
27
<PAGE>
includes periods prior to the adoption of class designations. Performance
data for periods prior to June 1, 1993 will 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.
28
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[STATE STREET RESEARCH LOGO]
State Street Research
Global Resources Fund
STATE STREET RESEARCH
GLOBAL RESOURCES FUND
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
SHAREHOLDER SERVICES
State Street Research
Shareholder Services
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
Exchange Place
Boston, MA 02109
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
November 1, 1995
PROSPECTUS
EG-611D-1195IBS CONTROL NUMBER: XXXXXXXXXXXXXXXXXXXX
<PAGE>
State Street Research Capital Appreciation Fund
State Street Research Equity Investment Fund
State Street Research Equity Income Fund
Series of
State Street Research Equity Trust
STATEMENT OF ADDITIONAL INFORMATION
November 1, 1995
TABLE OF CONTENTS
Page
ADDITIONAL INVESTMENT POLICIES AND RESTRICTIONS ........................... 2
ADDITIONAL INFORMATION CONCERNING CERTAIN INVESTMENT TECHNIQUES ........... 5
DEBT INSTRUMENTS AND PERMITTED CASH INVESTMENTS ........................... 13
TRUSTEES AND OFFICERS ..................................................... 18
INVESTMENT ADVISORY SERVICES .............................................. 23
PURCHASE AND REDEMPTION OF SHARES ......................................... 25
NET ASSET VALUE ........................................................... 27
PORTFOLIO TRANSACTIONS .................................................... 29
CERTAIN TAX MATTERS ....................................................... 31
DISTRIBUTION OF SHARES OF THE FUNDS ....................................... 33
CALCULATION OF PERFORMANCE DATA ........................................... 40
CUSTODIAN ................................................................. 45
INDEPENDENT ACCOUNTANTS ................................................... 45
FINANCIAL STATEMENTS ...................................................... 46
The following Statement of Additional Information is not a Prospectus. It should
be read in conjunction with the Prospectus of State Street Research Capital
Appreciation Fund, State Street Research Equity Investment Fund and State Street
Research Equity Income Fund dated November 1, 1995, which may be obtained
without charge from the offices of State Street Research Equity Trust (the
"Trust") or State Street Research Investment Services, Inc. (the "Distributor"),
One Financial Center, Boston, Massachusetts 02111-2690.
CONTROL NUMBER: 1285B-941110(1195)SSR-LD ET-879D-1194
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ADDITIONAL INVESTMENT POLICIES AND RESTRICTIONS
As set forth under "The Funds' Investments" and "Limiting Investment
Risk" in the Funds' Prospectus, State Street Research Capital Appreciation Fund
(the "Capital Appreciation Fund" or the "Fund"), State Street Research Equity
Investment Fund (the "Equity Investment Fund" or the "Fund") and State Street
Research Equity Income Fund (the "Equity Income Fund" or the "Fund") have
adopted certain investment restrictions.
All of the Funds' fundamental investment restrictions are set forth below. These
fundamental restrictions may not be changed by a Fund except by the affirmative
vote of a majority of the outstanding voting securities of that Fund as defined
in the Investment Company Act of 1940, as amended (the "1940 Act"). (Under the
1940 Act, a "vote 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 each Fund's
policy:
(1) not to invest in a security if the transaction would result in
more than 5% of a Fund's total assets being invested in any
one issuer, except that this restriction does not apply to
investments in securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities;
(2) not to invest in a security if the transaction would result in
a Fund's owning more than 10% of the outstanding voting
securities of an issuer, except that this restriction does not
apply to investments in securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities;
(3) not to issue senior securities;
(4) not to underwrite or participate in the marketing of
securities of other issuers, although a Fund may, acting alone
or in syndicates or groups, if determined by the Trust's Board
of Trustees, purchase or otherwise acquire securities of other
issuers for investment, either from the issuers or from
persons in a control relationship with the issuers or from
underwriters of such securities;
(5) not to purchase or sell real estate in fee simple or real
estate mortgage loans;
(6) not to invest in physical commodities or physical commodity
contracts or options in excess of 10% of the Fund's total
assets, except that investments in essentially financial items
or arrangements such as, but not limited to, swap
arrangements, hybrids, currencies, currency and other forward
contracts, futures contracts and options on futures contracts
on securities, securities indices, interest rates and
2
<PAGE>
currencies shall not be deemed investments in commodities or
commodities contracts;
(7) not to lend money; however, a Fund may lend portfolio
securities and purchase bonds, debentures, notes and similar
obligations (and enter into repurchase agreements with
respect thereto);
(8) not to conduct arbitrage transactions (provided that
investments in futures and options for hedging purposes shall
not be deemed arbitrage transactions);
(9) not to invest in oil, gas or other mineral exploration or
development programs (provided that a Fund may invest in
securities issued by or which are based, directly or
indirectly, on the credit of companies which invest in or
sponsor such programs);
(10) not to make any investment which would cause more than 25% of
the value of a Fund's total assets to be invested in
securities of issuers principally engaged in any one industry
(for purposes of this restriction, (a) utilities will be
divided according to their services so that, for example, gas,
gas transmission, electric and telephone companies will each
be deemed in a separate industry, (b) oil and oil related
companies will be divided by type so that, for example, oil
production companies, oil service companies and refining and
marketing companies will each be deemed in a separate industry
and (c) securities issued or guaranteed by the U.S. Government
or its agencies or instrumentalities shall be excluded); and
(11) 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 a Fund's total
assets, and provided further that reverse repurchase
agreements shall not exceed 5% of a Fund's total assets.
Reverse repurchase agreements occur when a Fund sells money
market securities and agrees to repurchase such securities at
an agreed-upon price, date and interest payment. A 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.
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<PAGE>
The following investment restrictions may be changed with respect to
any Fund by a vote of a majority of the Trustees. Under these restrictions, it
is each Fund's policy:
(1) not to purchase any security or enter into a repurchase
agreement if as a result more than 15% of its net assets would
be invested in securities that are illiquid (including
repurchase agreements not entitling the holder to payment of
principal and interest within seven days);
(2) not to invest more than 15% of its net assets in restricted
securities of all types (including not more than 5% of its net
assets in restricted securities which are not eligible for
resale pursuant to Rule 144A, Regulation S or other exemptive
provisions under the Securities Act of 1933);
(3) not to invest more than 5% of its total assets in securities
of private companies including predecessors with less than
three years' continuous operations except (a) securities
guaranteed or backed by an affiliate of the issuer with three
years of continuous operations, (b) securities issued or
guaranteed as to principal or interest by the U.S. Government,
or its agencies or instrumentalities, or a mixed- ownership
Government corporation, (c) securities of issuers with debt
securities rated at least "BBB" by Standard & Poor's
Corporation or "Baa" by Moody's Investor's Service, Inc. (or
their equivalent by any other nationally recognized
statistical rating organization) or securities of issuers
considered by the Investment Manager to be equivalent, (d)
securities issued by a holding company with at least 50% of
its assets invested in companies with three years of
continuous operations including predecessors, and (e)
securities which generate income which is exempt from local,
state or federal taxes; provided that the Fund may invest up
to 15% in such issuers so long as such investments plus
investments in restricted securities (other than those which
are eligible for resale under Rule 144A, Regulation S or other
exemptive provisions) do not exceed 15% of the Fund's total
assets;
(4) 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, except in connection
with the purchase or writing of options, including options on
financial futures, and futures contracts to the extent set
forth in the Trust's Prospectus and Statement of Additional
Information;
(5) 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 such Fund's total
assets, taken at cost (for the purpose of this restriction
financial futures, options on financial futures and forward
currency exchange contracts are not deemed to involve a pledge
of assets);
4
<PAGE>
(6) not to acquire any security issued by any other investment
company (the "acquired company") if immediately after such
acquisition the Fund and all companies controlled by the Fund,
if any, would own in the aggregate (i) more than 3% of the
outstanding voting stock of the acquired company, (ii)
securities issued by the acquired company having an aggregate
value in excess of 5% of the Fund's total assets or (iii)
securities issued by the acquired company and all other
investment companies (other than treasury stock of the Fund)
having an aggregate value in excess of 10% of the Fund's total
assets, except to complete a merger, consolidation or other
acquisition of assets;
(7) not to purchase or retain any security of an issuer if, to the
knowledge of the Trust, those of its officers and Trustees and
officers and directors of its investment advisers who
individually own more than 1/2 of 1% of the securities of such
issuer, when combined, own more than 5% of the securities of
such issuer taken at market;
(8) not to invest in warrants more than 5% of the value of its
total assets, taken at the lower of cost or market value
(warrants initially attached to securities and acquired by the
Fund upon original issuance thereof shall be deemed to be
without value); and
(9) not to invest in companies for the purpose of exercising
control over their management, although the Trust may from
time to time present its views on various matters to the
management of issuers in which it holds investments.
At the present time, notwithstanding clause (8) above, the Capital Appreciation
Fund and the Equity Investment Fund may not invest in any warrants, as noted in
the Prospectus. Also, the Equity Income Fund has undertaken with a state
securities authority that, for so long as such Fund's shares are required to be
registered for sale in such state, the Fund's investment in warrants, valued at
the lower of cost or market, may not exceed 5% of its net assets and included
within that amount, but not to exceed 2% of the value of its net assets, may be
warrants which are not listed on the New York or American Stock Exchange.
ADDITIONAL INFORMATION CONCERNING
CERTAIN INVESTMENT TECHNIQUES
Among other investments described below, each Fund may buy and sell
options, futures contracts and options on futures contracts with respect to
securities, securities indices, and currencies, and may enter into closing
transactions with respect to each of the foregoing under circumstances in which
such instruments and techniques are expected by State Street Research &
Management Company (the "Investment Manager") to aid in achieving the investment
objectives of a Fund. Each Fund on occasion may also purchase instruments with
5
<PAGE>
characteristics of both futures and securities (e.g., debt instruments with
interest and principal payments determined by reference to the value of a
commodity or a currency at a future time) and which, therefore, possess the
risks of both futures and securities investments.
Futures Contracts
Futures contracts are publicly traded contracts to buy or sell
underlying assets, such as certain securities, currencies, or an index of
securities, at a future time at a specified price. A contract to buy establishes
a "long" position while a contract to sell establishes a "short" position.
The purchase of a futures contract on an equity security or an index of
equity securities normally enables a buyer to participate in the market movement
of the underlying asset or index after paying a transaction charge and posting
margin in an amount equal to a small percentage of the value of the underlying
asset or index. Each Fund will initially be required to deposit with the Trust's
custodian or the broker effecting the futures transaction an amount of "initial
margin" in cash or U.S. Treasury obligations.
Initial margin in futures transactions is different from margin in
securities transactions in that the former does not involve the borrowing of
funds by the customer to finance the transaction. Rather, the initial margin is
like a performance bond or good faith deposit on the contract. Subsequent
payments (called "maintenance margin") to and from the broker will be made on a
daily basis as the price of the underlying asset fluctuates. This process is
known as "marking to market." For example, when a Fund has taken a long position
in a futures contract and the value of the underlying asset has risen, that
position will have increased in value and the Fund will receive from the broker
a maintenance margin payment equal to the increase in value of the underlying
asset. Conversely, when the Fund has taken a long position in a futures contract
and the value of the underlying instrument has declined, the position would be
less valuable, and the Fund would be required to make a maintenance margin
payment to the broker.
At any time prior to expiration of the futures contract, a Fund may
elect to close the position by taking an opposite position which will terminate
the Fund's position in the futures contract. A final determination of
maintenance margin is then made, additional cash is required to be paid by or
released to the Fund, and the Fund realizes a loss or a gain. While futures
contracts with respect to securities do provide for the delivery and acceptance
of such securities, such delivery and acceptance are seldom made.
Futures contracts will be executed primarily (a) to establish a short
position, and thus protect a Fund from experiencing the full impact of an
expected decline in market value of portfolio holdings without requiring the
sale of holdings, or (b) to establish a long position, and thus to participate
in an expected rise in market value of securities which a Fund intends to
purchase. In transactions establishing a long position in a futures contract,
money market
6
<PAGE>
instruments equal to the face value of the futures contract will be identified
by the Fund to the Trust's custodian for maintenance in a separate account to
insure that the use of such futures contracts is unleveraged. Similarly, a
representative portfolio of securities having a value equal to the aggregate
face value of the futures contract will be identified with respect to each short
position. Each Fund will employ any other appropriate method of cover which is
consistent with applicable regulatory and exchange requirements.
Options on Securities
Each Fund may use options on equity securities to implement its
investment strategy. A call option on a security, for example, gives the
purchaser of the option the right to buy, and the writer the obligation to sell,
the underlying asset at the exercise price during the option period. Conversely,
a put option on a security gives the purchaser the right to sell, and the writer
the obligation to buy, the underlying asset at the exercise price during the
option period.
Purchased options have defined risk, i.e., the premium paid for the
option, no matter how adversely the price of the underlying asset moves, while
affording an opportunity for gain corresponding to the increase or decrease in
the value of the optioned asset.
Written options have varying degrees of risk. An uncovered written call
option theoretically carries unlimited risk, as the market price of the
underlying asset could rise far above the exercise price before its expiration.
This risk is tempered when the call option is covered, i.e., when the option
writer owns the underlying asset. In this case, the writer runs the risk of the
lost opportunity to participate in the appreciation in value of the asset rather
than the risk of an out-of-pocket loss. A written put option has defined risk,
i.e., the difference between the agreed-upon price that a Fund must pay to the
buyer upon exercise of the put and the value, which could be zero, of the asset
at the time of exercise.
The obligation of the writer of an option continues until the writer
effects a closing purchase transaction or until the option expires. To secure
his obligation to deliver the underlying asset in the case of a call option, or
to pay for the underlying asset in the case of a put option, a covered writer is
required to deposit in escrow the underlying security or other assets in
accordance with the rules of the applicable clearing corporation and exchanges.
Options on Securities Indices
Each Fund may engage in transactions in call and put options on
securities indices. For example, a Fund may purchase put options on indices of
securities in anticipation of or during a market decline to attempt to offset
the decrease in market value of its equity securities that might otherwise
result.
Put options on indices of securities are similar to put options on the
securities themselves except that the delivery requirements are different.
Instead of giving the right to
7
<PAGE>
make delivery of a security at a specified price, a put option on an index of
securities gives the holder the right to receive an amount of cash upon exercise
of the option if the value of the underlying index has fallen below the exercise
price. The amount of cash received will be equal to the difference between the
closing price of the index and the exercise price of the option expressed in
dollars times a specified multiple. As with options on equity securities or
futures contracts, a Fund may offset its position in index options prior to
expiration by entering into a closing transaction on an exchange or it may let
the option expire unexercised.
A securities index assigns relative values to the securities included
in the index and the index options are based on a broad market index. Although
there are at present few available options on indices of fixed income
securities, other than tax-exempt securities, or futures and related options
based on such indices, such instruments may become available in the future. In
connection with the use of such options, a Fund may cover its position by
identifying a representative portfolio of securities having a value equal to the
aggregate face value of the option position taken. However, a Fund may employ
any appropriate method to cover its positions that is consistent with applicable
regulatory and exchange requirements.
Options on Futures Contracts
An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the period of the option.
Options Strategy
A basic option strategy for protecting a Fund against a decline in
securities prices could involve (a) the purchase of a put -- thus "locking in"
the selling price of the underlying securities or securities indices -- or (b)
the writing of a call on securities or securities indices held by a Fund --
thereby generating income (the premium paid by the buyer) by giving the holder
of such call the option to buy the underlying asset at a fixed price. The
premium will offset, in whole or in part, a decline in portfolio value; however,
if prices of the relevant securities or securities indices rose instead of
falling, the call might be exercised, thereby resulting in a potential loss of
appreciation in the underlying securities or securities indices.
A basic option strategy when a rise in securities prices is anticipated
is the purchase of a call -- thus "locking in" the purchase price of the
underlying security or other asset. In transactions involving the purchase of
call options by a Fund, money market instruments equal to the aggregate exercise
price of the options will be identified by that Fund to the Trust's custodian to
insure that the use of such investments is unleveraged.
A Fund may write options in connection with buy-and-write transactions;
that is, a Fund may purchase a security and concurrently write a call option
against that security. If the call
8
<PAGE>
option is exercised in such a transaction, the Fund's maximum gain will be the
premium received by it for writing the option, adjusted upward or downward by
the difference between the Fund's purchase price of the security and the
exercise price of the option. If the option is not exercised and the price of
the underlying security declines, the amount of such decline will be offset in
part, or entirely, by the premium received.
The writing of covered put options is similar in terms of risk/return
characteristics to buy-and-write transactions. If the market price of the
underlying security rises or otherwise is above the exercise price, the put
option will expire worthless and the Fund's gain will be limited to the premium
received. If the market price of the underlying security declines or otherwise
is below the exercise price, the Fund's return will be the premium received from
writing the put option minus the amount by which the market price of the
security is below the exercise price.
Limitations and Risks of Options and Futures Activity
The Funds will engage in transactions in futures contracts or options
only as a hedge against changes resulting from market conditions which produce
changes in the values of their securities or the securities which they intend to
purchase (e.g., to replace portfolio securities which will mature in the near
future) and, subject to the limitations described below, to enhance return. No
Fund will purchase any futures contract or purchase any call option if,
immediately thereafter, more than one third of the Fund's net assets would be
represented by long futures contracts or call options. No Fund will write a
covered call or put option if, immediately thereafter, the aggregate value of
the assets (securities in the case of written calls and cash or cash equivalents
in the case of written puts) underlying all such options, determined as of the
dates such options were written, would exceed 25% of that Fund's net assets. In
addition, no Fund may establish a position in a commodity futures contract or
purchase or sell a commodity option contract for other than bona fide hedging
purposes if immediately thereafter the sum of the amount of initial margin
deposits and premiums required to establish such positions for such nonhedging
purposes would exceed 5% of the market value of the Fund's net assets.
Although effective hedging can generally capture the bulk of a desired
risk adjustment, no hedge is completely effective. Each Fund's ability to hedge
effectively through transactions in futures and options depends on the degree to
which price movements in its holdings correlate with price movements of the
futures and options.
Some positions in futures and options may be closed out only on an
exchange which provides a secondary market therefor. There can be no assurance
that a liquid secondary market will exist for any particular futures contract or
option at any specific time. Thus, it may not be possible to close such an
option or futures position prior to maturity. The inability to close options and
futures positions also could have an adverse impact on the Funds' ability to
effectively hedge their securities and might, in some cases, require a Fund to
deposit cash to
9
<PAGE>
meet applicable margin requirements. Each Fund will enter into an option or
futures position only if it appears to be a liquid investment.
Currency Transactions
The Funds may engage in currency exchange transactions in order to
protect against the effect of uncertain future exchange rates on securities
denominated in foreign currencies. Each Fund will conduct its currency exchange
transactions either on a spot (i.e., cash) basis at the rate prevailing in the
currency exchange market, or by entering into forward contracts to purchase or
sell currencies. Each Fund's dealings in forward currency exchange contracts
will be limited to hedging involving either specific transactions or aggregate
portfolio positions. A forward currency contract involves an obligation to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. These contracts are not commodities and
are entered into in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. In entering a
forward currency contract, a Fund is dependent upon the creditworthiness and
good faith of the counterparty. Each Fund attempts to reduce the risks of
nonperformance by the counterparty by dealing only with established, reputable
institutions. Although spot and forward contracts will be used primarily to
protect a Fund from adverse currency movements, they also involve the risk that
anticipated currency movements will not be accurately predicted, which may
result in losses to such Fund. This method of protecting the value of the Fund's
portfolio securities against a decline in the value of a currency does not
eliminate fluctuations in the underlying prices of the securities. It simply
establishes a rate of exchange that can be achieved at some future point in
time. Although such contracts tend to minimize the risk of loss due to a decline
in the value of hedged currency, they tend to limit any potential gain that
might result should the value of such currency increase.
Repurchase Agreements
The Funds may enter into repurchase agreements. Repurchase agreements
occur when a 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 Funds
will only enter into repurchase agreements involving U.S. Government securities.
Repurchase agreements could involve certain risks in the event of default or
insolvency of the other party, including possible delays or restrictions upon a
Fund's ability to dispose of the underlying securities. Repurchase agreements
will be limited to 30% of a Fund's total assets, except that
10
<PAGE>
repurchase agreements extending for more than seven days when combined with any
other illiquid securities held by a Fund will be limited to 10% of a Fund's
total assets.
When-Issued Securities
Each Fund may purchase "when-issued" securities, which are traded on a
price or yield basis prior to actual issuance. Such purchases will be made only
to achieve a Fund's investment objective and not for leverage. The when-issued
trading period generally lasts from a few days to up to a month or more; during
this period dividends or interest on the securities are not payable. A frequent
form of when-issued trading occurs when corporate securities to be created by a
merger of companies are traded prior to the actual consummation of the merger.
Such transactions may involve a risk of loss if the value of the securities
falls below the price committed to prior to actual issuance. The Trust's
custodian will establish a segregated account when a Fund purchases securities
on a when-issued basis consisting of cash or liquid securities equal to the
amount of the when-issued commitments.
Rule 144A Securities
Subject to the limitations on illiquid and restricted securities noted
above, a Fund may buy or sell restricted securities in accordance with Rule 144A
under the Securities Act of 1933 ("Rule 144A Securities"). Securities may be
resold pursuant to Rule 144A under certain circumstances only to qualified
institutional buyers as defined in the rule, and the markets and trading
practices for such securities are relatively new and still developing; depending
on the development of such markets, Rule 144A Securities may be deemed to be
liquid as determined by or in accordance with methods adopted by the Trustees.
Under such methods the following factors are considered, among others: the
frequency of trades and quotes for the security, the number of dealers and
potential purchasers in the market, market making activity, and the nature of
the security and marketplace trades. Investments in Rule 144A Securities could
have the effect of increasing the level of a Fund's illiquidity to the extent
that qualified institutional buyers become, for a time, uninterested in
purchasing such securities. Also, a Fund may be adversely impacted by the
subjective valuation of such securities in the absence of a market for them.
Swap Arrangements
Each Fund may enter into various forms of swap arrangements with
counterparties with respect to interest rates, currency rates or indices,
including purchase of caps, floors and collars as described below. In an
interest rate swap a Fund could agree for a specified period to pay a bank or
investment banker the floating rate of interest on a so-called notional
principal amount (i.e., an assumed figure selected by the parties for this
purpose) in exchange for agreement by the bank or investment banker to pay such
Fund a fixed rate of interest on the notional principal amount. In a currency
swap a Fund would agree with the other party to exchange cash flows based on the
relative differences in values of a notional amount of two (or
11
<PAGE>
more) currencies; in an index swap, a Fund would agree to exchange cash flows on
a notional amount based on changes in the values of the selected indices.
Purchase of a cap entitles the purchaser to receive payments from the seller on
a notional amount to the extent that the selected index exceeds an agreed upon
interest rate or amount whereas purchase of a floor entitles the purchaser to
receive such payments to the extent the selected index falls below an agreed
upon interest rate or amount. A collar combines a cap and a floor.
Most swaps entered into by a Fund will be on a net basis; for example,
in an interest rate swap, amounts generated by application of the fixed rate and
the floating rate to the notional principal amount would first offset one
another, with a Fund either receiving or paying the difference between such
amounts. In order to be in a position to meet any obligations resulting from
swaps, a Fund will set up a segregated custodial account to hold appropriate
liquid assets, including cash; for swaps entered into on a net basis, assets
will be segregated having a daily net asset value equal to any excess of a
Fund's accrued obligations over the accrued obligations of the other party,
while for swaps on other than a net basis assets will be segregated having a
value equal to the total amount of a Fund's obligations.
These arrangements will be made primarily for hedging purposes, to
preserve the return on an investment or on a portion of a Fund's portfolio.
However, a Fund may enter into such arrangements for income purposes to the
extent permitted by the Commodities Futures Trading Commission for entities
which are not commodity pool operators, such as the Fund. In entering a swap
arrangement, a Fund is dependent upon the creditworthiness and good faith of the
counterparty. Each Fund attempts to reduce the risks of nonperformance by the
counterparty by dealing only with established, reputable institutions. The swap
market is still relatively new and emerging; positions in swap arrangements may
become illiquid to the extent that nonstandard arrangements with one
counterparty are not readily transferable to another counterparty or if a market
for the transfer of swap positions does not develop. The use of interest rate
swaps is a highly specialized activity which involves investment techniques and
risks different from those associated with ordinary portfolio securities
transactions. If the Investment Manager is incorrect in its forecasts of market
values, interest rates and other applicable factors, the investment performance
of a Fund would diminish compared with what it would have been if these
investment techniques were not used. Moreover, even if the Investment Manager is
correct in its forecasts, there is a risk that the swap position may correlate
imperfectly with the price of the asset or liability being hedged.
Industry Classifications
In determining how much of a Fund's portfolio is invested in a given
industry, the following industry classifications, grouped by sectors, are
currently used:
12
<PAGE>
Basic Industries Consumer Staple Science & Technology
- ---------------- --------------- --------------------
Chemical Business Service Aerospace
Diversified Container Computer Software & Service
Electrical Equipment Drug Electronic Components
Forest Products Food & Beverage Electronic Equipment
Machinery Hospital Supply Office Equipment
Metal & Mining Personal Care
Railroad Printing & Publishing
Truckers Tobacco
Utility Energy Consumer Cyclical
- ------- ------ -----------------
Electric Oil Airline
Natural Gas Oil Service Automotive
Telephone Building
Hotel & Restaurant
Miscellaneous Finance Photography
- ------------- ------- Recreation
Bank Retail Trade
Financial Service Textile & Apparel
Insurance
Other Investment Limitations
Each Fund has undertaken with a state securities authority that, for so
long as a Fund's shares are required to be registered for sale in such state, a
Fund will not purchase real estate limited partnerships or make investments in
oil, gas or mineral leases.
DEBT INSTRUMENTS AND
PERMITTED CASH INVESTMENTS
As indicated in the Funds' Prospectus, the Funds may invest in
long-term and short-term debt securities. The Funds may invest in cash and
short-term securities for temporary defensive purposes when, in the opinion of
the Investment Manager, such a position is more likely to provide protection
against unfavorable market conditions than adherence to other investment
policies. Certain debt securities and money market instruments in which the
Funds may invest are described below.
13
<PAGE>
U.S. Government and Related Securities. U.S. Government securities are
securities which are issued or guaranteed as to principal or interest by the
U.S. Government, a U.S. Government agency or instrumentality, or certain
mixed-ownership Government corporations as described herein. The U.S. Government
securities in which the Fund invests include, among others:
o direct obligations of the U.S. Treasury, i.e., U.S. Treasury bills,
notes, certificates and bonds;
o obligations of U.S. Government agencies or instrumentalities such
as the Federal Home Loan Banks, the Farmers Home Administration,
the Federal Farm Credit Banks, the Federal National Mortgage
Association, the Government National Mortgage Association and the
Federal Home Loan Mortgage Corporation; and
o obligations of mixed-ownership Government corporations such as
Resolution Funding Corporation.
U.S. Government securities which a Fund may buy are backed in a variety
of ways by the U.S. Government, its agencies or instrumentalities. Some of these
obligations, such as Government National Mortgage Association mortgage-backed
securities and obligations of the Farmers Home Administration, are backed by the
full faith and credit of the U.S. Treasury. Other obligations, such as those of
the Federal National Mortgage Association, are backed by the discretionary
authority of the U.S. Government to purchase certain obligations of agencies or
instrumentalities, although the U.S. Government has no legal obligation to do
so. Obligations such as those of the Federal Home Loan Banks, the Farmers Home
Administration, the Federal Farm Credit Banks, the Federal National Mortgage
Association and the Federal Home Loan Mortgage Corporation are backed by the
credit of the agency or instrumentality issuing the obligations. Certain
obligations of Resolution Funding Corporation, a mixed-ownership Government
corporation, are backed with respect to interest payments by the U.S. Treasury,
and with respect to principal payments by U.S. Treasury obligations held in a
segregated account with a Federal Reserve Bank. Except for certain
mortgage-related securities, a Fund will only invest in obligations issued by
mixed-ownership Government corporations where such securities are guaranteed as
to payment of principal or interest by the U.S. Government or a U.S. Government
agency or instrumentality, and any unguaranteed principal or interest is
otherwise supported by U.S. Government obligations held in a segregated account.
U.S. Government securities may be acquired by a Fund in the form of
separately traded principal and interest components of securities issued or
guaranteed by the U.S. Treasury. The principal and interest components of
selected securities are traded independently under the Separate Trading of
Registered Interest and Principal of Securities ("STRIPS") program. Under the
STRIPS program, the principal and interest components are individually numbered
and separately issued by the U.S. Treasury at the request of depository
financial institutions,
14
<PAGE>
which then trade the component parts independently. Obligations of Resolution
Funding Corporation are similarly divided into principal and interest components
and maintained as such on the book entry records of the Federal Reserve Banks.
In addition, the Fund may invest in custodial receipts that evidence
ownership of future interest payments, principal payments or both on certain
U.S. Treasury notes or bonds in connection with programs sponsored by banks and
brokerage firms. Such notes and bonds are held in custody by a bank on behalf of
the owners of the receipts. These custodial receipts are known by various names,
including "Treasury Receipts" ("TRs"), "Treasury Investment Growth Receipts"
("TIGRs") and "Certificates of Accrual on Treasury Securities" ("CATS"), and may
not be deemed U.S. Government securities.
The Fund may also invest from time to time in collective investment
vehicles, the assets of which consist principally of U.S. Government securities
or other assets substantially collateralized or supported by such securities,
such as Government trust certificates.
Bank Money Investments. Bank money investments include but are not
limited to certificates of deposit, bankers' acceptances and time deposits.
Certificates of deposit are generally short-term (i.e., less than one year),
interest-bearing negotiable certificates issued by commercial banks or savings
and loan associations against funds deposited in the issuing institution. A
banker's acceptance is a time draft drawn on a commercial bank by a borrower,
usually in connection with an international commercial transaction (to finance
the import, export, transfer or storage of goods). A banker's acceptance may be
obtained from a domestic or foreign bank, including a U.S. branch or agency of a
foreign bank. The borrower is liable for payment as well as the bank, which
unconditionally guarantees to pay the draft at its face amount on the maturity
date. Most acceptances have maturities of six months or less and are traded in
secondary markets prior to maturity. Time deposits are nonnegotiable deposits
for a fixed period of time at a stated interest rate. A Fund will not invest in
any such bank money investment unless the investment is issued by a U.S. bank
that is a member of the Federal Deposit Insurance Corporation ("FDIC"),
including any foreign branch thereof, a U.S. branch or agency of a 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. A 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
15
<PAGE>
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.
Short-Term Corporate Debt Instruments. Short-term corporate debt
instruments include commercial paper to finance short-term credit needs (i.e.,
short-term, unsecured promissory notes) issued by corporations including but not
limited to (a) domestic or foreign bank holding companies or (b) their
subsidiaries or affiliates where the debt instrument is guaranteed by the bank
holding company or an affiliated bank or where the bank holding company or the
affiliated bank is unconditionally liable for the debt instrument. Commercial
paper is usually sold on a discounted basis and has a maturity at the time of
issuance not exceeding nine months.
Commercial Paper Ratings. Commercial paper investments at the time of
purchase will be rated A by S&P or Prime by Moody's, or, if not rated, issued by
companies having an outstanding long-term unsecured debt issue rated at least A
by S&P or by Moody's. The money market investments in corporate bonds and
debentures (which must have maturities at the date of settlement of one year or
less) must be rated at the time of purchase at least A by S&P or by Moody's.
Commercial paper rated A (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 BBB credits
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 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.
16
<PAGE>
In the event the lowering of ratings of debt instruments held by the
Equity Income Fund by applicable rating agencies results in a material decline
in the overall quality of such Fund's portfolio, the Trustees of the Trust will
review the situation and take such action as they deem in the best interests of
such Fund's shareholders, including, if necessary, changing the composition of
the portfolio.
17
<PAGE>
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust, their addresses, and their
principal occupations and positions with certain affiliates of the Investment
Manager are set forth below.
*+Peter C. Bennett, One Financial Center, Boston, MA 02111, serves as
Vice President of the Trust. He is 57. 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 and Vice
President of State Street Research & Management Company. Mr. Bennett's other
principal business affiliations include Director, State Street Research
Investment Services, Inc. and Gefinor Securities S.A.
*+Bartlett R. Geer, One Financial Center, Boston, MA 02111 serves as
Vice President of the Trust. He is 40. His principal occupation is Senior Vice
President of State Street Research & Management Company. During the past five
years he has also served as Vice President of State Street Research & Management
Company.
*+Frederick R. Kobrick, One Financial Center, Boston, MA 02111, serves
as Vice President of the Trust. He is 52. His principal occupation is currently,
and during the past five years has been, Senior Vice President of State Street
Research & Management Company.
+Edward M. Lamont, Box 1234, Moores Hill Road, Syosset, NY 11791,
serves as Trustee of the Trust. He is 68. He is engaged principally in private
investments and civic affairs and is an author of business history. Previously,
he was with Morgan Guaranty Trust Company of New York.
+Robert A. Lawrence, Saltonstall & Co., 50 Congress Street, Boston, MA
02109, serves as Trustee of the Trust. He is 69. His principal occupation during
the past five years has been Partner, Saltonstall & Co., a private investment
firm.
*+Gerard P. Maus, One Financial Center, Boston, MA 02111, serves as
Treasurer of the Trust. He is 44. His principal occupation is Executive Vice
President, Treasurer and Director of State Street Research & Management Company.
During the past five years he has also served as Executive Vice President and
Chief Financial Officer of New England Investment Companies and as Senior Vice
President and Vice President of New England Mutual Life Insurance 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.
*+Francis J. McNamara, III has served as Secretary and General Counsel
of the Trust since May, 1995. He is 40. His principal occupation is Senior Vice
President, Secretary and General Counsel of the Investment Manager. During the
past five years he has also served as Senior Vice President, General Counsel and
Assistant Secretary of The Boston Company, Inc.,
- -------------------------
* or +, see footnotes on page 20.
18
<PAGE>
Boston Safe Deposit and Trust Company and The Boston Company Advisors, Inc. Mr.
McNamara's other principal business affiliations include Senior Vice President,
Clerk and General Counsel of State Street Research Investment Services, Inc.
*+Thomas P. Moore, Jr., 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 Vice President of State Street Research &
Management Company.
+Dean O. Morton, 3200 Hillview Avenue, Palo Alto, CA 94304, serves as
Trustee of the Trust. He is 63. He is retired, having served during the past
five years, until October 1992, as Executive Vice President, Chief Operating
Officer and Director of Hewlett-Packard Company.
+Thomas L. Phillips, 141 Spring Street, Lexington, MA 02173 serves as
Trustee of the Trust. He is 71. He is retired and was formerly Chairman of the
Board and Chief Executive Officer of Raytheon Company, of which he remains a
Director.
*Daniel J. Rice III, One Financial Center, Boston, MA 02111, serves as
Vice President of the Trust. He is 43. His principal occupation is Senior Vice
President of State Street Research & Management Company. During the past five
years he has also served as Vice President of State Street Research & Management
Company.
*+Steven P. Somes, One Financial Center, Boston, MA 02111, serves as
Vice President of the Trust. He is 37. His principal occupation is Vice
President of State Street Research & Management Company. During the past five
years he has also served as Senior Vice President of Gardner & Preston Moss, a
Boston-based investment advisory firm, and, prior to that, Vice President and
Analyst of State Street Research & Management Company.
+Toby Rosenblatt, 3409 Pacific Avenue, San Francisco, CA 94118, serves
as Trustee of the Trust. He is 57. His principal occupations during the past
five years have been President of The Glen Ellen Company, a private investment
company, and Vice President of Founders Investments Ltd.
+Michael S. Scott Morton, Massachusetts Institute of Technology, 77
Massachusetts Avenue, Cambridge, MA 02139, serves as Trustee of the Trust. He is
58. His principal occupation during the past five years has been Jay W.
Forrester Professor of Management at Sloan School of Management, Massachusetts
Institute of Technology.
*+Ralph F. Verni, One Financial Center, Boston, MA 02111, serves as
Chairman of the Board, President, Chief Executive Officer and Trustee of the
Trust. He is 52. His principal occupation is Chairman of the Board, President,
Chief Executive Officer and Director of State Street Research & Management
Company. During the past five years he also served as
- -------------------------
* or +, see footnotes on page 20.
19
<PAGE>
President and Chief Executive Officer of New England Investment Companies and as
Chief Investment Officer and Director of New England Mutual Life Insurance
Company. Mr. Verni's other principal business affiliations include Chairman of
the Board, President, Chief Executive Officer and Director of State Street
Research Investment Services, Inc.
+Jeptha H. Wade, 251 Old Billerica Road, Bedford, MA 01730, serves as
Trustee of the Trust. He is 70. 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 Funds' investment adviser.
+ Serves as a Trustee and/or officer of one or more of the following
investment companies, each of which has an advisory or distribution
relationship with the Investment Manager or its affiliates: State
Street Research Equity Trust, MetLife - State Street 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.
20
<PAGE>
Record ownership of shares of the Funds as of July 31, 1995 was as
follows:
<TABLE>
<CAPTION>
Capital Appreciation Equity Investment Equity Income
-------------------- ----------------- -------------
% of % of % of
Class Holder Class Holder Class Holder Class
- ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
C United States Trust 96.9 United States Trust 89.3 United States Trust 82.2
Company Company Company
Bank of New York 11.7
D Metropolitan Life 15.7 Metropolitan Life 82.9 Metropolitan Life 42.2
Merrill Lynch 45.0 Merrill Lynch 6.3 Merrill Lynch 20.8
Donaldson Lufkin 5.6 Bear Stearns 14.3
</TABLE>
The full name and address of the above institutions are:
Metropolitan Life Insurance Company (a)
One Madison Avenue
New York, New York 10010
United States Trust Company (b)(c)
770 Broadway
New York, New York 10003
Merrill Lynch, Pierce, Fenner & Smith, Inc. (c)
One Liberty Plaza, 165 Broadway
New York, New York 10080
Donaldson Lufkin Jenrette (c)
Securities Corporation, Inc.
P.O. Box 2052
Jersey City, New Jersey 07303
Bear Stearns Securities Corp. (c)
1 Metrotech Center North
Brooklyn, NY 11201
Bank of New York (c)
52 William Street
New York, NY 10005
21
<PAGE>
- ---------------------------------
(a) 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.
(b) United States Trust Company holds such shares as trustee under certain
employee benefit plans serviced by Metropolitan.
(c) The respective Funds believe that each named recordholder does not have
beneficial ownership of such 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.
As of July 31, 1995, the Trustees and officers of the Trust as a group
owned the approximate amounts of the outstanding shares of each Fund as set
forth below:
Class A Class B Class C Class D
Capital Appreciation less than 1% None None None
Equity Investment None None None None
Equity Income 1.7% None None None
22
<PAGE>
During the fiscal year ended June 30, 1995, the Trustees were compensated as
follows:
Total
Compensation
Aggregate From Trust and
Compensation Complex Paid
Name of Trustee From Trust(a) to Trustees(b)
Edward M. Lamont $10,300 $58,446
Robert A. Lawrence $10,300 $86,110
Dean O. Morton $11,500 $95,360
Thomas L. Phillips $10,500 $65,560
Toby Rosenblatt $10,300 $58,446
Michael S. Scott Morton $12,300 $96,510
Ralph F.Verni $ 0 $ 0
Jeptha H. Wade $10,500 $65,860
(a) Includes compensation from multiple Series of the Trust. See
"Distribution of Shares" for a listing of series.
(b) Includes compensation from Metropolitan Series Fund, Inc., for
which the Investment Manager serves as sub-investment adviser,
State Street Research Portfolios, Inc., for which State Street
Research Investment Services, Inc. serves as distributor, and
all investment companies for which the Investment Manager
serves as primary investment adviser, comprising a total of 30
series. The Trust does not provide any pension or retirement
benefits for the Trustees.
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 each Fund. The Advisory
Agreement provides that the Investment Manager shall furnish each 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 each Fund to the Investment Manager
is computed as a percentage of the average of the value of the net assets of
such Fund 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 0.65% of the net
assets of the Equity Investment Fund and the Equity Income Fund and 0.75% of the
net assets of the Capital Appreciation Fund. The Funds
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have 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 each Fund.
The advisory fees paid by each Fund to the Investment Manager for the
last three fiscal years, prior to the assumption of fees or expenses, were as
follows:
Year ended June 30
1995 1994 1993
---- ---- ----
Capital Appreciation Fund $3,124,753 $2,338,561 $1,233,514
Equity Investment Fund $486,807 $385,472 $313,934
Equity Income Fund $521,730 $415,128 $317,738
The voluntary reduction of fees or assumption of expenses for the same
periods were as follows:
Year ended June 30
1995 1994 1993
---- ---- ----
Capital Appreciation Fund $1,056,327* $985,266 $271,934
Equity Investment Fund $362,010 $303,297 $50,640
Equity Income Fund $333,725 $328,184 $56,836
- ------------------
* For the period of July 1, 1994 through March 9, 1995; on March 10, 1995, the
Distributor eliminated the voluntary assumption of fees or expenses incurred by
the Capital Appreciation Fund.
Further, to the extent required under applicable state regulatory
requirements, the Investment Manager will reduce its management fee for a Fund
up to the amount of any expenses (excluding permissible items, such as Rule
12b-1 Distribution Plan payments, brokerage commissions, interest, taxes and
litigation expenses) paid or incurred by such Fund in any fiscal year which
exceed specified percentages of the average daily net assets of such Fund for
such fiscal year. The most restrictive of such percentage limitations is
currently 2.5% of the first $30 million of average net assets, 2.0% of the next
$70 million of average net assets and 1.5% of the remaining average net assets.
These commitments may be amended or rescinded in response to changes in the
requirements of the various states by the Trustees without shareholder approval.
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The Advisory Agreement provides that it shall continue in effect from
year to year with respect to each Fund as long as it is approved at least
annually both (i) by a vote of a majority of the outstanding voting securities
of such 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 Funds, and is entitled
to reimbursements of its costs for providing such services. Under 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 a Fund's shares may be purchased.
Under the Code of Ethics of the Investment Manager, its employees in
Boston, where investment management operations are conducted, are only permitted
to engage in personal securities transactions in accordance with certain
conditions relating to an employee'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 Funds are distributed by the Distributor. The Funds offer
four 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 C shares, a sales
charge which, at the election of the investor, may be imposed (i) at the time of
purchase (the Class A shares) or (ii) on a deferred basis (the Class B and Class
D shares). General information on how to buy shares of the Funds, as well as
sales charges involved, are set forth under "Purchase of Shares" in the
Prospectus. The following supplements that information.
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Public Offering Price. The public offering price for each class of
shares is based on their net asset value determined as of the close of the NYSE
on the day the purchase order is received by State Street Research Shareholder
Services provided that the order is received prior to the close of the NYSE on
that day; otherwise the net asset value used is that determined as of the close
of the NYSE on the next day it is open for unrestricted trading. When a purchase
order is placed through a dealer, that dealer is responsible for transmitting
the order promptly to State Street Research Shareholder Services in order to
permit the investor to obtain the current price. Any loss suffered by an
investor which results from a dealer's failure to transmit an order promptly is
a matter for settlement between the investor and the dealer.
Reduced Sales Charges - For purposes of determining whether a purchase
of Class A shares qualifies for reduced sales charges, the term "person"
includes: (i) an individual, or an individual combining with his or her spouse
and their children and purchasing for his, her or their own account; (ii) a
"company" as defined in Section 2(a)(8) of the 1940 Act; (iii) a trustee or
other fiduciary purchasing for a single trust estate or single fiduciary account
(including a pension, profit sharing or other employee benefit trust created
pursuant to a plan qualified under Section 401 of the Internal Revenue Code);
(iv) a tax-exempt organization under Section 501(c)(3) or (13) of the Internal
Revenue Code; and (v) an employee benefit plan of a single employer or of
affiliated employers.
Investors may purchase Class A shares of the Funds at reduced sales
charges by executing a Letter of Intent to purchase no less than an aggregate of
$100,000 of a Fund or any combination of Class A shares of "Eligible Funds" as
designated by the Distributor within a 13-month period. The sales charge
applicable to each purchase made pursuant to a Letter of Intent will be that
which would apply if the total dollar amount set forth in the Letter of Intent
were being bought in a single transaction. Purchases made within a 90-day period
prior to the execution of a Letter of Intent may be included therein; in such
case the date of the earliest of such purchases marks the commencement of the
13-month period.
An investor may include toward completion of a Letter of Intent the
value (at the current public offering price) of all of his or her Class A shares
of the Funds and of any of the other Class A shares of Eligible Funds held of
record as of the date of his or her Letter of Intent, plus the value (at the
current offering price) as of such date of all of such shares held by any
"person" described herein as eligible to join with the investor in a single
purchase. Class B, Class C and Class D shares may also be included in the
combination under certain circumstances.
A Letter of Intent does not bind the investor to purchase the specified
amount. Shares equivalent to 5% of the specified amount will, however, be taken
from the initial purchase (or, if necessary, subsequent purchases) and held in
escrow in the investor's account as collateral against the higher sales charge
which would apply if the total purchase is not completed within the allotted
time. The escrowed shares will be released when the Letter of Intent is
completed or, if it is not completed, when the balance of the higher sales
charge is, upon notice, remitted
26
<PAGE>
by the investor. All dividends and capital gains distributions with respect to
the escrowed shares will be credited to the investor's account.
Investors may purchase Class A shares of the Funds or a combination of
Eligible Funds at reduced sales charges pursuant to a Right of Accumulation. The
applicable sales charge under the right is determined on the amount arrived at
by combining the dollar amount of the purchase with the value (at the current
public offering price) of all Class A shares of the other Eligible Funds owned
as of the purchase date by the investor plus the value (at the current public
offering price) of all such shares owned as of such date by any "person"
described herein as eligible to join with the investor in a single purchase.
Class B, Class C and Class D shares may also be included in the combination
under certain circumstances. Investors must submit to the Distributor sufficient
information to show that they qualify for this Right of Accumulation.
Class C Shares - Class C shares are currently available to certain
benefit plans such as qualified retirement plans, other than individual
retirement accounts and self-employed retirement plans, which meet criteria
relating to level of assets, number of participants, service agreements, or
similar factors; banks and insurance companies; endowment funds of nonprofit
organizations with substantial minimum assets; and other similar institutional
investors.
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, a Fund may issue its shares at net asset
value (or more) to such entities or to their security holders.
Redemptions. The Funds reserve 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, a Fund may limit the amount of
redemption proceeds paid in cash. Although it has no present intention to do so,
a 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 such 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.
NET ASSET VALUE
The net asset value of the shares of each Fund is determined once daily
as of the close of the NYSE, ordinarily 4 P.M. New York City time, Monday
through Friday, on each day during which the NYSE is open for unrestricted
trading. The NYSE is currently closed on New Year's Day, Presidents Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
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The net asset value per share of a Fund is computed by dividing the sum
of the value of the securities held by the Fund plus any cash or other assets
minus all liabilities by the total number of outstanding shares of the Fund at
such time. Any expenses, except for extraordinary or nonrecurring expenses,
borne by a Fund, including the investment management fee payable to the
Investment Manager, are accrued daily.
In determining the values of portfolio assets as provided below, the
Trustees utilize one or more pricing services in lieu of market quotations for
certain securities which are not readily available on a daily basis. Such
services may provide prices determined as of times prior to the close of the
NYSE.
In general, securities are valued as follows. Securities which are
listed or traded on the New York or American Stock Exchange are valued at the
price of the last quoted sale on the respective exchange for that day.
Securities which are listed or traded on a national securities exchange or
exchanges, but not on the New York or American Stock Exchange, are valued at the
price of the last quoted sale on the exchange for that day prior to the close of
the NYSE. Securities not listed on any national securities exchange which are
traded "over the counter" and for which quotations are available on the National
Association of Securities Dealers' NASDAQ System are valued at the closing price
supplied through such system for that day at the close of the NYSE. Other
securities are, in general, valued at the mean of the bid and asked quotations
last quoted prior to the close of the NYSE if there are market quotations
readily available, or in the absence of such market quotations, then at the fair
value thereof as determined by or under authority of the Trustees of the Trust
utilizing such pricing services as may be deemed appropriate. Securities deemed
restricted as to resale are valued at the fair value thereof as determined by or
in accordance with methods adopted by the Trustees of the Trust.
Short-term debt instruments issued with a maturity of one year or less
which have a remaining maturity of 60 days or less are valued using the
amortized cost method, provided that during any period in which more than 25% of
a Fund's total assets is invested in short-term debt securities the current
market value of such securities will be used in calculating net asset value per
share in lieu of the amortized cost method. The amortized cost method is used
when the value obtained is fair value. Under the amortized cost method of
valuation, the security is initially valued at cost on the date of purchase (or
in the case of short-term debt instruments purchased with more than 60 days
remaining to maturity, the market value on the 61st day prior to maturity), and
thereafter a constant amortization to maturity of any discount or premium is
assumed regardless of the impact of fluctuating interest rates on the market
value of the security.
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PORTFOLIO TRANSACTIONS
Portfolio Turnover
A Fund's portfolio turnover rate is determined by dividing the lesser
of securities purchases or sales for a year by the monthly average value of
securities held by the Fund (excluding, for purposes of this determination,
securities the maturities of which as of the time of their acquisition were one
year or less). The Funds' portfolio turnover rates for the fiscal years ended
June 30, 1994 and 1995, respectively, were as follows: Capital Appreciation
Fund, 147.73% and 217.28%, Equity Investment Fund, 62.93% and 47.93%, and Equity
Income Fund, 73.96% and 67.50%.
The Investment Manager believes the portfolio turnover rate for the
fiscal year ended June 30, 1995, for the Capital Appreciation Fund was
significantly higher than that for the previous fiscal year because the unusual
market volatility during the period stimulated increased selling of portfolio
securities where it appeared that gains should be taken in a high market and
conversely, where it appeared that losses could be minimized in a down market.
The Investment Manager believes the portfolio turnover rate for the
fiscal year ended June 30, 1995, for the Equity Investment Fund was
significantly lower than that for the previous fiscal year because the Fund's
portfolio was relatively better positioned for the then market than in prior
years.
The Investment Manager believes the portfolio turnover rate for the
fiscal year ended June 30, 1994 for the Equity Investment Fund was significantly
lower than that for the previous fiscal year because during the year the Fund's
assets grew through net sales of new shares, thus allowing the Fund to
reposition its portfolio without selling portfolio securities.
Brokerage Allocation
The Funds and the Investment Manager seek the best overall execution of
purchase or sale orders and the most favorable net price in securities
transactions consistent with their judgment as to the business qualifications of
the various broker or dealer firms with which the Funds may do business.
Decisions with respect to the market where the transaction is to be completed,
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 the performance, integrity and financial
responsibility of the various firms as well as to their demonstrated execution
experience and capability generally and in regard to particular markets or
securities and, in agency transactions, to the competitiveness of the commission
rates (or in principal transactions of the net prices) they charge. The
Investment Manager keeps current as to the range of rates or prices charged by
various firms and against this background evaluates the reasonableness of a
commission or price charged with respect to a particular transaction by
considering such factors as difficulty of execution or security positioning by
the executing firm.
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<PAGE>
When it appears that a number of firms can satisfy the required
standards in respect of a particular transaction, consideration may also be
given to services other than execution services which such firms have provided
in the past or may provide in the future. Among such other services are the
supplying of supplemental investment research, general economic and political
information, analytical and statistical data, relevant market information and
daily market quotations for computation of net asset value. In this connection
it should be noted that a substantial portion of brokerage commissions paid, or
principal transactions entered, by the Funds may be with brokers and investment
banking firms which, in the normal course of business, publish statistical,
research and other material which is received by the Investment Manager and
which may or may not prove useful to the Investment Manager, the Funds or other
clients of the Investment Manager.
Neither the Funds nor the Investment Manager has any definite
agreements with any firm as to the amount of business which that firm may expect
to receive for services supplied 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 business. These understandings are honored to the extent
possible in accordance with the policy set forth above. Neither the Funds nor
the Investment Manager intends to pay a firm in excess of that which another
would charge for handling the same transaction in recognition of services (other
than execution services) provided. However, the Funds and the Investment Manager
are aware that this is an area where differences of opinion as to fact and
circumstances may exist, and in such circumstances, if any, rely on the
provisions of Section 28(e) of the Securities Exchange Act of 1934, to the
extent applicable. Brokerage commissions paid by the Funds for the last three
fiscal years were as follows:
Year ended June 30
1995 1994 1993
---- ---- ----
Capital Appreciation Fund $2,090,474 $1,119,166 $487,888
Equity Investment Fund $90,811 $95,640 $108,343
Equity Income Fund $175,736 $192,943 $115,242
During and at the end of its most recent fiscal year, no Fund held in
its portfolio securities of any entity that might be deemed to be a regular
broker-dealer of such Fund as defined under the 1940 Act.
Occasions may arise when the Investment Manager determines that an
investment in a particular security, or the disposition of a particular
security, is simultaneously a proper investment decision for one or more of the
Funds as well as for the portfolio of one or more of its other clients. In this
event, a purchase or sale, as the case may be, of any such security on any given
day will be normally averaged as to price and allocated as to amount among the
several clients in a manner deemed equitable to each client.
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<PAGE>
On occasions when the Investment Manager deems the purchase or sale of
a security to be in the best interests of a Fund, as well as other clients of
the Investment Manager, the Investment Manager, to the extent permitted by
applicable laws and regulations, may aggregate such securities to be sold or
purchased for the Fund with those to be sold or purchased for other customers in
order to obtain best execution and lower brokerage commissions, if any. In such
event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Investment Manager in
the manner it considers to be most equitable and consistent with its fiduciary
obligations to all such customers, including the Funds. In some instances, this
procedure may affect the price and size of the positions obtainable for the
Funds.
CERTAIN TAX MATTERS
Federal Income Taxation of the Funds -- in General
Each Fund intends to qualify and elect to be treated each taxable year
as a "regulated investment company" under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"), although they cannot give complete
assurance that they will do so. Accordingly, a 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) stock 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).
The 30% test will limit the extent to which a Fund may sell securities
held for less than three months; write options which expire in less than three
months; and effect closing transactions with respect to call or put options that
have been written or purchased within the preceding three months. (If a Fund
purchases a put option for the purpose of hedging an underlying portfolio
security, the acquisition of the option is treated as a short sale of the
underlying security unless, for purposes only of the 30% test, the option and
the security are acquired on the same date.) Finally, as discussed below, this
requirement may also limit investments by a Fund in options on stock indices,
listed options on nonconvertible debt
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securities, futures contracts, options on interest rate futures contracts and
certain foreign currency contracts.
If a 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 such 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 such
Fund to the extent thereof. Any distribution in excess of a shareholder's basis
in the shareholder's shares would be taxable as gain realized from the sale of
such shares.
A Fund will be liable for a nondeductible 4% excise tax on amounts not
distributed on a timely basis in accordance with a calendar year distribution
requirement. To avoid the tax, during each calendar year a Fund must distribute
an amount equal to at least 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. Each Fund
intends to make sufficient distributions to avoid this 4% excise tax.
Federal Income Taxation of the Funds' Investments
Original Issue Discount. For federal income tax purposes, debt
securities purchased by a Fund may be treated as having original issue discount.
Original issue discount represents interest for federal income tax purposes and
can generally be defined as the excess of the stated redemption price at
maturity of a debt obligation over the issue price. Original issue discount is
treated for federal income tax purposes as income earned by a Fund, whether or
not any income is actually received, and therefore is subject to the
distribution requirements of the Code. Generally, the amount of original issue
discount is determined on the basis of a constant yield to maturity which takes
into account the compounding of accrued interest. Under section 1286 of the
Code, an investment in a stripped bond or stripped coupon may result in original
issue discount.
Debt securities may be purchased by a Fund at a discount that exceeds
the original issue discount plus previously accrued original issue discount
remaining on the securities, if any, at the time a Fund purchases the
securities. This additional discount represents market discount for federal
income tax purposes. In the case of any debt security issued after July 18,
1984, having a fixed maturity date of more than one year from the date of issue
and having market discount, the gain realized on disposition will be treated as
interest to the extent it does not exceed the accrued market discount on the
security (unless a Fund elects to include such accrued market discount in income
in the tax year to which it is attributable). Generally, market discount is
accrued on a daily basis. A Fund may be required to capitalize, rather than
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deduct currently, part or all of any direct interest expense incurred or
continued to purchase or carry any debt security having market discount, unless
a Fund makes the election to include market discount currently. Because each
Fund must include original issue discount in income, it will be more difficult
for such Fund to make the distributions required for such Fund to maintain its
status as a regulated investment company under Subchapter M of the Code or to
avoid the 4% excise tax described above.
Options and Futures Transactions. Certain of a Fund's investments may
be subject to provisions of the Code that (i) require inclusion of unrealized
gains or losses in a Fund's income for purposes of the 90% test, the 30% test,
the excise tax and the distribution requirements applicable to regulated
investment companies; (ii) defer recognition of realized losses; and (iii)
characterize both realized and unrealized gain or loss as short-term or
long-term gain or loss. Such provisions generally apply to, among other
investments, options on debt securities, indices on securities and futures
contracts.
Federal Income Taxation of Shareholders
Dividends paid by a Fund may be eligible for the 70% dividends-received
deduction for corporations. The percentage of a Fund's dividends eligible for
such tax treatment may be less than 100% to the extent that less than 100% of a
Fund's gross income may be from qualifying dividends of domestic corporations.
Any dividend declared in October, November or December and made payable to
shareholders of record in any such month is treated as received by such
shareholder on December 31, provided that such Fund pays the dividend during
January of the following calendar year.
Distributions by a Fund can result in a reduction in the fair market
value of such Fund's shares. Should a distribution reduce the fair market value
below a shareholder's cost basis, such distribution nevertheless may be taxable
to the shareholder as ordinary income or long-term capital gain, even though,
from an investment standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax implications of
buying shares just prior to a taxable distribution. The price of shares
purchased at that time includes the amount of any forthcoming distribution.
Those investors purchasing shares just prior to a taxable distribution will then
receive a return of investment upon distribution which will nevertheless be
taxable to them.
DISTRIBUTION OF SHARES OF THE FUNDS
State Street Research Equity Trust (formerly, MetLife - State Street
Equity Trust) is currently comprised of the following series: State Street
Research Capital Appreciation Fund, State Street Research Equity Investment
Fund, State Street Research Equity Income Fund, and State Street Research Global
Resources Fund (formerly, MetLife - State Street Research Capital Appreciation
Fund, MetLife - State Street Research Equity Investment Fund, MetLife - State
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Street Research Equity Income Fund and State Street Research Global Energy Fund,
respectively). The Trustees have authorized shares of the Funds to be issued in
four classes: Class A, Class B, Class C and 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 Funds. Shares of the Funds are
sold through dealers who have entered into sales agreements with the
Distributor. The Distributor distributes shares of the Funds on a continuous
basis at an offering price which is based on the net asset value per share of
the applicable Fund plus (subject to certain exceptions) a sales charge which,
at the election of the investor, may be imposed (i) at the time of purchase (the
Class A shares) or (ii) on a deferred basis (Class B and Class D shares). The
Distributor may reallow all or portions of such sales charges as concessions to
dealers.
Total sales charges on Class A shares paid to the Distributor for the
last three fiscal years were as follows:
Year ended June 30
1995 1994 1993
---- ---- ----
Capital Appreciation Fund $1,130,659 $1,714,899 $1,929,032
Equity Investment Fund $76,485 $89,774 $218,460
Equity Income Fund $97,853 $239,481 $315,990
For the same periods, the Distributor retained the following amounts
after reallowance of concessions to dealers:
Year ended June 30
1995 1994 1993
---- ---- ----
Capital Appreciation Fund $129,102 $195,517 $237,099
Equity Investment Fund $9,124 $10,445 $26,507
Equity Income Fund $11,212 $28,320 $39,133
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The differences in the price at which the Funds' Class A shares are
offered due to scheduled variations in sales charges, as described in the Funds'
Prospectus, result from cost savings inherent in economies of scale. Management
believes that the cost of sales efforts of the Distributor and broker-dealers
tends to decrease as the size of purchases increases, or does not involve any
incremental sales expenses as in the case of, for example, exchanges,
reinvestments or dividend investments at net asset value. Similarly, no
significant sales effort is necessary for sales of shares at net asset value to
certain Directors, Trustees, officers, employees, their relatives and other
persons directly or indirectly related to the Funds or associated entities.
Where shares of the Funds are offered at a reduced sales charge or without a
sales charge pursuant to sponsored arrangements and managed fee-based programs,
the amount of the sales charge reduction will similarly reflect the anticipated
reduction in sales expenses associated with such arrangements. The reductions in
sales expenses, and therefore the reduction in sales charge, will vary depending
on factors such as the size and other characteristics of the organization or
program, and the nature of its membership or the participants. The Funds reserve
the right to make variations in, or eliminate, sales charges at any time or to
revise the terms of or to suspend or discontinue sales pursuant to sponsored
arrangements at any time.
On any sale of Class A shares to a single investor in the amount of
$1,000,000 or more, the Distributor will pay the authorized securities dealer
making such sale a commission on the shares sold. Such commission also is
payable to authorized securities dealers upon sales of Class A shares made
pursuant to a Letter of Intent to purchase shares having a net asset value of
$1,000,000 or more. Shares sold with such commissions payable are subject to a
one-year contingent deferred sales charge of 1.00% on any portion of such shares
redeemed within one year following their sale. After a particular purchase of
Class A shares is made under the Letter of Intent, the commission will be paid
only in respect of that particular purchase of shares. If the Letter of Intent
is not completed, the commission paid will be deducted from any discounts or
commissions otherwise payable to such dealer in respect of shares actually sold.
If an investor is eligible to purchase shares at net asset value on account of
the Right of Accumulation, the commission will be paid only in respect of the
incremental purchase at net asset value.
For the periods shown below, the Distributor received contingent
deferred sales charges upon redemption of Class A, Class B and Class D shares of
the Funds and paid initial commissions to securities dealers for sales of such
Class A, Class B and Class D shares as follows:
35
<PAGE>
<TABLE>
<CAPTION>
June 1, 1993
(Commencement of
Fiscal Year Ended Fiscal Year Ended share class designations
June 30, 1995 June 30, 1994 to June 30, 1993
Contingent Contingent Contingent
Deferred Commissions Deferred Commissions Deferred Commissions
Sales Charges Paid to Dealers Sales Charges Paid to Dealers Sales Charges Paid to Dealers
------------- --------------- ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Capital Appreciation Fund
Class A $ 2,653 $ 0 $ 0 $ 0 $0 $ 0
Class B $394,360 $1,033,301 $62,521 $1,424,770 $0 $80,570
Class D $ 305 $ 0 $ 148 $ 19,784 $0 $ 0
Equity Investment Fund
Class A $ 0 $ 0 $ 0 $ 0 $0 $ 0
Class B $ 18,766 $ 57,654 $ 3,372 $ 74,304 $0 $ 1,931
Class D $ 260 $ 0 $ 0 $ 586 $0 $ 0
Equity Income Fund
Class A $ 265 $ 0 $ 0 $ 0 $0 $ 0
Class B $ 50,949 $ 130,203 $ 7,538 $ 286,536 $0 $17,779
Class C $ 632 $ 0 $ 0 $ 7,655 $0 $ 0
</TABLE>
36
<PAGE>
Each Fund has adopted a "Plan of Distribution Pursuant to Rule 12b-1"
(the "Distribution Plan") under which the Funds may engage, directly or
indirectly, in financing any activities primarily intended to result in the sale
of Class A, Class B and Class D 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 Funds and reports for recipients other than
existing shareholders of the Funds, and obtaining such information, analyses and
reports with respect to marketing and promotional activities and investor
accounts as the Funds 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 service to investors and/or
the maintenance 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 (i) with respect to Class A shares, an annual rate of 0.50% of the
average daily value of net assets represented by such Class A shares, and (ii)
with respect to Class B and Class D shares, an annual rate of 0.75% of the
average daily value of the net assets represented by such Class B or Class D
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 D shares (as the case may be) to make payments for personal
services and/or the maintenance of shareholder accounts. Proceeds from the
service fee will be used by the Distributor to compensate securities dealers and
others selling shares of the Funds for rendering service to shareholders on an
ongoing basis. Such amounts are based on the net asset value of shares of the
Funds 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 Funds. 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.
37
<PAGE>
During the fiscal year ended June 30, 1995, the Funds paid the
Distributor fees under the Distribution Plan and the Distributor used all of
such payments for expenses incurred on behalf of the Funds as follows:
Capital Appreciation Fund
<TABLE>
<CAPTION>
Class A Class B Class D
<S> <C> <C> <C>
Advertising $ 0 $ 0 $ 1,748
Printing and mailing
of prospectuses to
other than current
shareholders 0 0 558
Compensation to dealers 1,092,589 693,983 18,400
Compensation to sales
personnel 0 0 5,163
Interest 0 0 0
Carrying or other
financing charges 0 0 0
Other expenses: marketing; general 0 0 4,064
---------- -------- -------
Total fees $1,092,589 $693,983 $29,933
========== ======== =======
</TABLE>
38
<PAGE>
Equity Investment Fund
<TABLE>
<CAPTION>
Class A Class B Class D
<S> <C> <C> <C>
Advertising $ 0 $ 0 $ 826
Printing and mailing
of prospectuses to
other than current
shareholders 0 0 264
Compensation to dealers 124,247 49,256 777
Compensation to sales
personnel 0 0 2,462
Interest 0 0 0
Carrying or other
financing charges 0 0 0
Other expenses: marketing; general 0 0 1,919
-------- ------- ------
Total fees $124,247 $49,256 $6,248
======== ======= ======
</TABLE>
Equity Income Fund
<TABLE>
<CAPTION>
Class A Class B Class D
<S> <C> <C> <C>
Advertising $ 0 $ 0 $ 1,564
Printing and mailing
of prospectuses to
other than current
shareholders 0 0 499
Compensation to dealers 169,569 134,121 3,331
Compensation to sales
personnel 0 0 4,663
Interest 0 0 0
Carrying or other
financing charges 0 0 0
Other expenses: marketing; general 0 0 3,635
-------- -------- -------
Total fees $169,569 $134,121 $13,692
======== ======== =======
</TABLE>
39
<PAGE>
The Distributor may have also used additional resources of its own for
further expenses on behalf of the Funds.
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 Funds will 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 A, Class B, Class C and Class D shares of the Funds will be calculated
as set forth below. Total return and yield are computed separately for each
class of shares of the Funds. Performance data for a specified class includes
periods prior to the adoption of class designations. Shares of the Funds 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 below reflects Rule 12b-1 fees and, where
applicable, sales charges as follows:
<TABLE>
<CAPTION>
Rule 12b-1 Fees Sales Charges
Class Amount Period
<S> <C> <C> <C>
A 0.25% 0.50% unitl March 10, 1995; Maximum 4.5% sales charge reflected
0.25 thereafter
B 1.00% 0.50% until June 1, 1993; 1.00% 1- and 5-year periods reflect a 5% and
June 1, 1993 to present; fee will reduce a 2% contingent deferred sales charge,
performance for periods after June 1, respectively
1993
C None 0.50% until June 1, 1993; None
0% thereafter
D 1.00% 0.50% until June 1, 1993; 1.00% 1-year period reflects a 1% contingent
June 1, 1993 to present; fee will reduce deferred sales charge
performance for periods after June 1,
1993
</TABLE>
All calculations of performance data in this section reflect the
voluntary measures by the Funds' affiliates to reduce fees or expenses relating
to the Funds; see "Accrued Expenses" later in this section.
40
<PAGE>
Total Return
The Funds' average annual total returns ("standard total return") of
each class of shares were as follows:
<TABLE>
<CAPTION>
Commencement of
Operations Five Years One Year
(August 25, 1986) Ended Ended
Fund to June 30, 1995 June 30, 1995 June 30, 1995
- ---- ----------------- ------------- -------------
with subsidy without subsidy with subsidy without subsidy with subsidy without subsidy
------------ --------------- ------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Capital Appreciation
Class A 15.76% 15.28% 16.44% 16.18% 26.59% 26.34%
Class B 16.21% 15.72% 17.03% 16.17% 26.86% 26.59%
Class C 16.48% 16.00% 17.73% 17.47% 33.06% 32.79%
Class D 16.23% 15.75% 17.28% 17.02% 30.79% 30.52%
Equity Investment
Class A 10.19% N/A 8.80% N/A 13.01% N/A
Class B 10.62% N/A 9.27% N/A 12.70% N/A
Class C 10.87% N/A 10.00% N/A 18.83% N/A
Class D 10.61% N/A 9.54% N/A 16.53% N/A
Equity Income
Class A 9.23% N/A 8.63% N/A 10.90% N/A
Class B 9.63% N/A 9.08% N/A 10.43% N/A
Class C 9.89% N/A 9.83% N/A 16.64% N/A
Class D 9.62% N/A 9.34% N/A 14.33% N/A
</TABLE>
Standard total return is computed separately for each class of shares
by determining the average annual compounded rates of return over the designated
periods that, if applied to the initial amount invested, would produce the
ending redeemable value in accordance with the following formula:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
41
<PAGE>
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 maximum
initial or contingent deferred sales charge applicable to the investment is
deducted, and that all dividends and distributions by a Fund are reinvested at
net asset value on the reinvestment dates during the periods. All accrued
expenses and recurring charges are also taken into account as described later
herein.
Yield
The annualized yield of each class of shares of the Equity Income Fund
based on the month of June 1995 was as follows:
Class A 2.43%
Class B 1.76%
Class C 2.81%
Class D 1.76%
Yield for the Equity Income Fund's Class A, Class B, Class C and Class
D shares is computed by dividing the net investment income per share earned
during a recent month or other specified 30-day period by the maximum offering
price per share on the last day of the period and annualizing the result in
accordance with the following formula:
YIELD = 2[(a-b + 1)6 -1]
cd
Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of
voluntary expense reductions by the Investment
Manager)
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends
d = the maximum offering price per share on the
last day of the period
To calculate interest earned (for the purpose of "a" above) on debt
obligations, the Equity Income Fund computes the yield to maturity of each
obligation held by such Fund based on the market value of the obligation
(including actual accrued interest) at the close of the last business day of the
preceding period, or, with respect to obligations purchased during the period,
the purchase price (plus actual accrued interest). The yield to maturity is then
divided
42
<PAGE>
by 360 and the quotient is multiplied by the market value of the obligation
(including actual accrued interest) to determine the interest income on the
obligation for each day of the period that the obligation is in the portfolio.
Dividend income is recognized daily based on published rates.
With respect to the treatment of discount and premium on mortgage or
other receivables-backed obligations which are expected to be subject to monthly
payments of principal and interest ("paydowns"), the Fund accounts for gain or
loss attributable to actual monthly paydowns as realized capital gain or loss
during the period. The Fund has elected not to amortize discount or premium on
such securities.
Undeclared earned income, computed in accordance with generally
accepted accounting principles, may be subtracted from the maximum offering
price. Undeclared earned income is the net investment income which, at the end
of the base period, has not been declared as a dividend, but is reasonably
expected to be declared as a dividend shortly thereafter. The maximum offering
price includes, as applicable, a maximum sales charge of 4.5%.
All accrued expenses are taken into account as described later herein.
Yield information is useful in reviewing the Equity Income Fund's
performance, but because yields fluctuate, such information cannot necessarily
be used to compare an investment in the Fund's shares with bank deposits,
savings accounts and similar investment alternatives which often are insured
and/or provide an agreed or guaranteed fixed yield for a stated period of time.
Shareholders should remember that yield is a function of the kind and quality of
the instruments in the Fund's portfolio, portfolio maturity and operating
expenses and market conditions.
Accrued Expenses
Accrued expenses include all recurring expenses that are charged to all
shareholder accounts in proportion to the length of the base period. The
standard total return and yield results take sales charges, if applicable, into
account, although the results 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 during the subject period. In the absence of such
subsidization, the performance of the Funds would have been lower.
Nonstandardized Total Return
A Fund may provide the above described standard total return results
for Class A, Class B, Class C and Class D shares for periods which end no
earlier than the most recent
43
<PAGE>
calendar quarter end and which begin twelve months before, five years before and
at the time of commencement of such Fund's operations. In addition, a Fund may
provide nonstandardized total return results for differing periods, such as for
the most recent six months, and/or without taking sales charges into account.
Such nonstandardized total return is computed as otherwise described under
"Total Return" except the result may or may not be annualized, and as noted any
applicable sales charge may not be taken into account and therefore not deducted
from the hypothetical initial payment of $1,000. For example, the Funds'
nonstandardized total returns for the six months ended June 30, 1995, without
taking sales charges into account, were as follows:
with subsidy without subsidy
------------ ---------------
Capital Appreciation Fund
Class A 20.63% 20.51%
Class B 20.30% 20.18%
Class C 20.77% 20.65%
Class D 20.13% 20.01%
Equity Investment Fund
Class A 17.85% N/A
Class B 17.51% N/A
Class C 18.08% N/A
Class D 17.52% N/A
Equity Income Fund
Class A 15.32% N/A
Class B 14.81% N/A
Class C 15.43% N/A
Class D 14.82% N/A
Distribution Rates
A Fund may also quote its distribution rate for each class of shares.
The distribution rate is calculated by annualizing the latest per-share
distribution from ordinary income and dividing the result by the maximum
offering price per share as of the end of the period to which the distribution
relates. A distribution can include gross investment income from debt
obligations purchased at a premium and in effect include a portion of the
premium paid. A distribution can also include nonrecurring, gross short-term
capital gains without recognition of any unrealized capital losses. Further, a
distribution can include income from the sale of options by a Fund even though
such option income is not considered investment income under generally accepted
accounting principles.
Because a distribution can include such premiums, capital gains and
option income, the amount of the distribution may be susceptible to control by
the Investment Manager through
44
<PAGE>
transactions designed to increase the amount of such items. Also, because the
distribution rate is calculated in part by dividing the latest distribution by
the offering price, which is based on net asset value plus any applicable sales
charge, the distribution rate will increase as the net asset value declines. A
distribution rate can be greater than the yield rate calculated as described
above.
The distribution rate of each class of the Equity Income Fund, based on
the quarter ended June 30, 1995, was as follows:
Class A 2.28%
Class B 2.05%
Class C 2.63%
Class D 2.09%
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 Funds' cash and securities, handling the receipt and delivery of
securities and collecting interest and dividends on the Funds' 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) audits of the Funds' 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 Funds.
45
<PAGE>
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 and holders of record may request a copy of a current supplementary report,
if any, by calling State Street Research Shareholder Services.
The following financial statements are for the Funds' fiscal year ended
June 30, 1995. On November 1, 1995, MetLife - State Street Research Capital
Appreciation Fund, MetLife - State Street Research Equity Investment Fund and
MetLife - State Street Research Equity Income Fund changed their names to "State
Street Research Capital Appreciation Fund," "State Street Research Equity
Investment Fund" and "State Street Research Equity Income Fund", respectively.
46
<PAGE>
METLIFE-STATE STREET RESEARCH CAPITAL APPRECIATION FUND
INVESTMENT PORTFOLIO
June 30, 1995
<TABLE>
<CAPTION>
Value
Shares (Note 1)
---------- -------------
<S> <C> <C>
COMMON STOCKS 98.0%
Basic Industries 2.7%
Chemical 0.5%
Potash Corp. of Saskatchewan, Inc. 43,100 $ 2,408,212
-------------
Diversified 0.4%
Thermedics, Inc.* 102,750 2,003,625
-------------
Electrical Equipment 0.8%
Trimble Navigation Ltd.* 138,000 3,915,750
-------------
Machinery 1.0%
AGCO Corp.* 134,600 5,047,500
-------------
Total Basic Industries 13,375,087
-------------
Consumer Cyclical 33.7%
Airline 9.8%
AMR Corp.* 232,400 17,342,850
Delta Air Lines, Inc. 104,000 7,670,000
Northwest Airlines Corp. Cl. A* 232,000 8,207,000
Southwest Airlines Co. 235,000 5,610,625
UAL Corp.* 74,800 10,490,700
-------------
49,321,175
-------------
Automotive 2.2%
Danaher Corp. 71,200 2,153,800
Exide Corp. 190,300 8,182,900
Team Rental Group, Inc. Cl. A* 87,500 634,375
-------------
10,971,075
-------------
Hotel & Restaurant 2.2%
Doubletree Corp.* 75,400 1,625,813
Hospitality Franchise System, Inc.* 109,700 3,798,363
La Quinta Inns, Inc. 166,887 4,505,949
Station Casinos, Inc.* 64,300 1,109,175
-------------
11,039,300
-------------
Recreation 2.3%
American Radio Systems Corp.* 30,600 696,150
Anthony Industries, Inc. 74,500 1,368,938
Time Warner, Inc. 136,900 5,630,013
Trump Hotels & Casino Resorts, Inc.* 303,100 4,053,963
-------------
11,749,064
-------------
Retail Trade 12.1%
Bed Bath & Beyond, Inc.* 45,100 1,068,329
Circuit City Stores, Inc. 330,900 10,464,713
Corporate Express, Inc.* 105,000 2,244,375
General Nutrition Centers, Inc.* 68,100 2,392,013
Home Depot Inc. 113,600 4,615,000
Industrie Natuzzi SPA ADR 97,000 3,213,125
Just For Feet, Inc.* 134,700 5,371,163
Kohl's Corp.* 73,100 3,335,188
Retail Trade (cont'd)
Nine West Group, Inc.* 152,600 $ 5,569,900
Petsmart, Inc.* 74,800 2,150,500
Pier 1 Imports, Inc. 233,730 2,162,003
Sunglass Hut International, Inc.* 354,000 12,390,000
Toys 'R Us, Inc.* 85,300 2,495,025
Viking Office Products, Inc.* 78,200 2,864,075
-------------
60,335,409
-------------
Textile & Apparel 5.1%
Fila Holdings SPA ADR* 131,000 3,258,625
Men's Wearhouse, Inc.* 216,100 5,942,750
Nautica Enterprises, Inc.* 96,000 3,480,000
Tommy Hilfiger Corp.* 314,100 8,794,800
Wolverine World Wide, Inc. 186,450 3,868,838
-------------
25,345,013
-------------
Total Consumer Cyclical 168,761,036
-------------
Consumer Staple 8.5%
Business Service 3.5%
Fritz Companies, Inc.* 42,500 2,494,219
HBO & Co. 53,100 2,893,950
Medaphis Corp.* 284,900 6,196,575
Tellabs, Inc.* 121,400 5,842,375
-------------
17,427,119
-------------
Drug 1.0%
Amerisource Health Corp.* 40,500 923,906
Cephalon, Inc.* 113,400 2,097,900
Vertex Pharmaceuticals, Inc.* 119,700 1,960,088
-------------
4,981,894
-------------
Food & Beverage 0.3%
Starbucks Corp.* 50,300 1,791,938
-------------
Hospital Supply 1.8%
Coram Healthcare Corp.* 130,400 1,841,900
Health Management Associates, Inc.* 160,350 4,690,238
Horizon Healthcare Corp.* 6,700 119,763
Patterson Dental Co.* 71,700 1,702,875
Theratx, Inc.* 43,000 575,125
-------------
8,929,901
-------------
Personal Care 1.0%
Colgate-Palmolive Co. 65,700 4,804,313
-------------
Printing & Publishing 0.9%
British Sky Broadcasting Group ADR* 29,600 773,300
News Corp. Ltd. ADR 106,700 2,414,088
Scholastic Corp.* 21,800 1,182,650
-------------
4,370,038
-------------
Total Consumer Staple 42,305,203
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
METLIFE-STATE STREET RESEARCH CAPITAL APPRECIATION FUND
<TABLE>
<CAPTION>
Value
Shares (Note 1)
---------- -------------
<S> <C> <C>
Finance 2.6%
Financial Service 2.6%
Countrywide Credit Industries, Inc. 120,000 $ 2,520,000
First USA, Inc. 132,800 5,893,000
Franklin Resources, Inc. 57,700 2,567,650
Charles Schwab Corp. 48,500 2,103,687
-------------
13,084,337
-------------
Total Finance 13,084,337
-------------
Science & Technology 44.9%
Aerospace 0.6%
Boeing Co. 45,800 2,868,225
-------------
Computer Software & Service 9.1%
ADFlex Solutions, Inc.* 41,000 1,004,500
Arcsys, Inc.* 23,200 788,800
Baan Co. NV* 49,000 1,512,875
Broderbund Software, Inc.* 95,700 6,100,875
CBT Group TLC ADR* 24,700 1,046,663
Cisco Systems, Inc.* 51,000 2,578,687
Computer Associates International, Inc. 62,600 4,241,150
Firefox Communications Inc. 11,400 293,550
General Motors Corp. Cl. E 106,000 4,611,000
Intuit, Inc.* 36,100 2,743,600
Maxis, Inc.* 14,600 388,725
Oracle Systems Corp.* 142,800 5,515,650
Plaintree Systems, Inc.* 63,300 664,650
SAP AG ADR*+ 90,600 3,793,875
3 Com Corp.* 36,800 2,465,600
Xilinx, Inc.* 83,300 7,830,200
-------------
45,580,400
-------------
Electronic 26.5%
Analog Devices, Inc.* 164,050 5,577,700
Applied Materials, Inc.* 101,300 8,775,113
ASM Lithography Holdings NV* 151,100 5,420,713
Brooks Automation, Inc.* 56,300 999,325
Cypress Semiconductor Corp.* 140,600 5,694,300
DSC Communications Corp.* 173,400 8,063,100
L.M. Ericsson Telephone Co. ADR Cl. B* 690,400 13,808,000
Exide Electronics Group, Inc.* 15,000 345,000
Intel Corp. 236,500 14,973,406
KLA Instruments Corp.* 68,400 5,283,900
LSI Logic Corp.* 270,600 10,587,225
Lam Research Corp.* 92,500 5,920,000
Micron Technology, Inc. 107,400 5,893,575
Novellus Systems, Inc.* 70,600 4,783,150
Oak Technology, Inc.* 76,300 2,804,025
S3, Inc.* 70,600 2,541,600
Sanmina Holdings, Inc.* 168,400 6,399,200
Electronic (cont'd)
Silicon Valley Group, Inc.* 145,100 $ 5,259,875
Teradyne, Inc.* 88,200 5,766,075
Texas Instruments, Inc. 100,600 13,467,825
-------------
132,363,107
-------------
Office Equipment 8.7%
Digital Equipment Corp.* 131,500 5,358,625
Hewlett-Packard Co. 163,200 12,158,400
International Business Machines Corp. 50,200 4,819,200
Silicon Graphics, Inc.* 157,300 6,272,338
Sun Microsystems, Inc.* 112,700 5,465,950
Telxon Corp. 238,900 5,196,075
U.S. Robotics Corp.* 40,000 4,360,000
-------------
43,630,588
-------------
Total Science & Technology 224,442,320
-------------
Utility 5.6%
Telephone 5.6%
ADC Telecommunications, Inc.* 65,600 2,345,200
Nera AS ADR* 22,500 632,813
Nokia Corp. ADR 330,100 19,682,212
Vodafone Group PLC ADR 144,800 5,484,300
-------------
28,144,525
-------------
Total Utility 28,144,525
-------------
Total Common Stocks (Cost $380,642,349) 490,112,508
-------------
</TABLE>
<TABLE>
<CAPTION>
Principal Maturity
Amount Date
- ---------------------------- --------- ------ ------------
<S> <C> <C> <C>
COMMERCIAL PAPER 3.4%
Associates Corp. of North
America, 6.00% $3,873,000 7/7/95 3,873,000
Commercial Credit Co., 5.92% 2,130,000 7/5/95 2,130,000
Commercial Credit Co., 5.85% 2,900,000 7/3/95 2,900,000
Ford Motor Credit Co., 5.92% 8,232,000 7/5/95 8,232,000
------------
Total Commercial Paper (Cost $17,135,000) 17,135,000
------------
Total Investments (Cost $397,777,349)--101.4% 507,247,508
Cash and Other Assets, Less Liabilities--(1.4%) (6,952,674)
------------
Net Assets--100.0% $500,294,834
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
METLIFE-STATE STREET RESEARCH CAPITAL APPRECIATION FUND
INVESTMENT PORTFOLIO (cont'd)
<TABLE>
<CAPTION>
<S> <C>
Federal Income Tax Information:
At June 30, 1995, the net unrealized appreciation of
investments based on cost for Federal income tax
purposes of $397,795,126 was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value over
tax cost $112,598,992
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value (3,146,610)
-------------
$109,452,382
=============
</TABLE>
* Nonincome-producing securities.
ADR stands for American Depositary Receipt, representing ownership of foreign
securities.
+ Security restricted in accordance with Rule 144A under the Securities Act
of 1933, which allows for the resale of such securities among certain
qualified institutional buyers. The total cost and market value of Rule 144A
securities owned at June 30, 1995 were $3,318,675 and $3,793,875 (0.76% of
net assets), respectively.
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995
<TABLE>
<CAPTION>
<S> <C>
Assets
Investments, at value (Cost $397,777,349) (Note 1) $507,247,508
Cash 886
Receivable for securities sold 7,958,250
Receivable for fund shares sold 682,906
Dividends and interest receivable 294,497
Other assets 31,089
-------------
516,215,136
Liabilities
Payable for securities purchased 14,342,379
Accrued transfer agent and shareholder services
(Note 2) 510,576
Payable for fund shares redeemed 438,300
Accrued management fee (Note 2) 319,334
Accrued distribution fee (Note 5) 149,621
Accrued trustees' fees (Note 2) 21,745
Other accrued expenses 138,347
-------------
15,920,302
-------------
Net Assets $500,294,834
=============
Net Assets consist of:
Unrealized appreciation of investments $109,470,159
Accumulated net realized gain 8,649,836
Shares of beneficial interest 382,174,839
-------------
$500,294,834
=============
Net Asset Value and redemption price per share of
Class A shares ($296,471,044 / 25,734,098 shares
of beneficial interest) $11.52
=============
Maximum Offering Price per share of Class A shares
($11.52 / .955) $12.06
=============
Net Asset Value and offering price per share of
Class B shares ($93,087,833 / 8,180,895 shares of
beneficial interest) $11.38
=============
Net Asset Value, offering price and redemption
price per share of Class C shares ($106,675,237 /
9,167,910 shares of beneficial interest) $11.64
=============
Net Asset Value and offering price per share of
Class D shares ($4,060,720 / 356,027 shares of
beneficial interest)* $11.41
=============
</TABLE>
* 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.
5
<PAGE>
METLIFE-STATE STREET RESEARCH CAPITAL APPRECIATION FUND
STATEMENT OF OPERATIONS
For the year ended June 30, 1995
<TABLE>
<S> <C>
Investment Income
Dividends, net of foreign taxes of $64,531 $ 2,434,824
Interest 401,245
------------
2,836,069
Expenses
Management fee (Note 2) 3,124,753
Transfer agent and shareholder services (Note 2) 2,154,152
Custodian fee 175,009
Reports to shareholders 171,924
Registration fees 88,245
Audit fee 35,029
Trustees' fees (Note 2) 33,919
Distribution fee--Class A (Note 5) 1,092,589
Distribution fee--Class B (Note 5) 693,983
Distribution fee--Class D (Note 5) 29,933
Miscellaneous 12,920
------------
7,612,456
Expenses borne by the Distributor (Note 3) (1,056,327)
------------
6,556,129
------------
Net investment loss (3,720,060)
------------
Realized and Unrealized Gain on Investments
Net realized gain on investments (Notes 1 and 4) 12,149,840
Net unrealized appreciation of investments 111,117,329
------------
Net gain on investments 123,267,169
------------
Net increase in net assets resulting from operations $119,547,109
============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended June 30
----------------------------
1995 1994
---------------------------------------------------------------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment loss $ (3,720,060) $ (2,387,241)
Net realized gain on investments* 12,149,840 28,477,884
Net unrealized appreciation
(depreciation) of investments 111,117,329 (37,837,902)
----------- -------------
Net increase (decrease) resulting from
operations 119,547,109 (11,747,259)
----------- -------------
Distributions from net realized gains:
Class A (11,280,742) (25,834,464)
Class B (2,571,808) (1,417,369)
Class C (3,080,510) (5,480,030)
Class D (112,508) (103,706)
----------- -------------
(17,045,568) (32,835,569)
----------- -------------
Net increase from fund share
transactions (Note 6) 52,338,022 164,913,020
----------- -------------
Total increase in net assets 154,839,563 120,330,192
Net Assets
Beginning of year 345,455,271 225,125,079
----------- -------------
End of year $500,294,834 $345,455,271
=========== =============
* Net realized gain for Federal income
tax purposes (Note 1) $ 12,055,176 $ 28,580,457
=========== =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
METLIFE-STATE STREET RESEARCH CAPITAL APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 1995
Note 1
MetLife-State Street Research Capital Appreciation Fund, formerly
MetLife-State Street Capital Appreciation Fund (the "Fund"), is a series of
MetLife-State Street Equity Trust (the "Trust"), which was organized as a
Massachusetts business trust in March, 1986 and is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company. The Trust commenced operations in August, 1986. The Trust
consists presently of four separate funds: MetLife-State Street Research
Capital Appreciation Fund, MetLife-State Street Research Equity Investment
Fund, MetLife-State Street Research Equity Income Fund and State Street
Research Global Resources Fund.
The Fund offers four classes of shares. Class A shares are subject to an
initial sales charge of up to 4.50% and an annual service fee of 0.25% of
average daily net assets. Prior to March 10, 1995, Class A shares paid annual
distribution and service fees of 0.50% of average daily net assets.
Investments of $1 million or more in Class A shares, which are not subject to
any initial sales charge, are subject to a 1.00% contingent deferred sales
charge if redeemed within one year of purchase. 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 A 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%. 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
Values for listed securities reflect final sales on national securities
exchanges quoted prior to the close of the New York Stock Exchange.
Over-the-counter securities quoted on the National Association of Securities
Dealers Automated Quotation ("NASDAQ") system are valued at closing prices
supplied through such system. In the absence of recorded sales and for those
over-the-counter securities not quoted on the NASDAQ system, valuations are
at the mean of the closing bid and asked quotations. Short- term securities
maturing within sixty days are valued at amortized cost. Other securities, if
any, are valued at their fair value as determined in accordance with
established methods consistently applied.
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 are reported on the basis
of identified cost of securities delivered.
C. Net Investment Income
Interest income is accrued daily as earned. Dividend income is accrued on the
ex-dividend date. The Fund is charged for expenses directly attributable to
it, while indirect expenses are allocated among all funds in the Trust.
D. Dividends
Dividends from net investment income, if any, are declared and paid or
reinvested quarterly. Net realized capital gains, if any, are distributed
annually, unless additional distributions are required for compliance with
applicable tax regulations.
Income dividends and capital gain distributions are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles.
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.
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 0.75% 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 June 30, 1995, the fees pursuant to such
agreement amounted to $3,124,753.
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. In addition, Metropolitan receives a fee for maintenance
of the accounts of certain shareholders who are participants in sponsored
arrangements, employee benefit plans and similar programs or plans, through
or under which shares of the Fund may be purchased. During the year ended
June 30, 1995, the amount of such shareholder servicing and account
maintenance expenses was $592,370.
The fees of the Trustees not currently affiliated with the Adviser amounted
to $33,919 during the year ended June 30, 1995.
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 period July 1, 1994 through March 9, 1995, the amount of
such expenses assumed by the Distributor and its affiliates was $1,056,327.
On March 10, 1995, the Distributor eliminated the voluntary assumption of
fees or expenses incurred by the Fund.
7
<PAGE>
METLIFE-STATE STREET RESEARCH CAPITAL APPRECIATION FUND
Note 4
For the year ended June 30, 1995, purchases and sales of securities,
exclusive of short-term obligations, aggregated $918,161,732 and
$882,753,961, 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, as amended. Under the Plan,
the Fund pays annual service fees to the Distributor at a rate of 0.25% of
average daily net assets for Class A, Class B and Class D shares. In
addition, the Fund pays annual distribution fees of 0.75% of average daily
net assets for Class B and Class D shares. Prior to March 10, 1995, the Fund
paid an annual distribution fee of 0.25% of average daily net assets for
Class A shares. The Distributor uses such payments for personal services
and/or the maintenance 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 June 30, 1995, fees pursuant to such
plan amounted to $1,092,589, $693,983 and $29,933 for Class A, Class B and
Class D, respectively.
The Fund has been informed that the Distributor and MetLife Securities, Inc.,
a wholly-owned subsidiary of Metropolitan, earned initial sales charges
aggregating $129,102 and $900,446, respectively on sales of Class A shares of
the Fund during the year ended June 30, 1995, and that MetLife Securities,
Inc. earned commissions aggregating $1,033,301 on sales of Class B shares,
and that the Distributor collected contingent deferred sales charges of
$2,653, $394,360 and $305 on redemptions of Class A, Class B and Class D
shares, respectively, during the same period.
Note 6
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share.
At June 30, 1995, Metropolitan owned 57,284 Class D shares of the Fund and
the Distributor owned 7,172 Class A shares of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
Year ended June 30
---------------------------------------------------------------------
1995 1994
-------------------------------- ---------------------------------
Class A Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 6,331,406 $ 61,983,784 18,207,897 $ 185,867,255
Issued upon reinvestment of distributions from
net realized gains 1,183,334 10,907,541 2,511,269 24,821,744
Shares repurchased (7,177,882) (70,964,079) (12,975,472) (132,950,619)
-------------- -------------- -------------- ----------------
Net increase 336,858 $ 1,927,246 7,743,694 $ 77,738,380
============== ============== ============== ================
Class B Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------------------
Shares sold 4,108,923 $ 40,145,257 5,820,801 $ 59,137,667
Issued upon reinvestment of distributions from
net realized gains 276,437 2,529,368 141,643 1,396,720
Shares repurchased (1,642,379) (16,155,301) (792,597) (8,043,910)
-------------- -------------- -------------- ----------------
Net increase 2,742,981 $ 26,519,324 5,169,847 $ 52,490,477
============== ============== ============== ================
Class C Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------------------
Shares sold 4,381,871 $ 43,450,467 3,959,768 $ 40,501,621
Issued upon reinvestment of distributions from
net realized gains 324,761 3,010,459 553,304 5,477,791
Shares repurchased (2,379,730) (23,674,364) (1,302,865) (13,173,546)
-------------- -------------- -------------- ----------------
Net increase 2,326,902 $ 22,786,562 3,210,207 $ 32,805,866
============== ============== ============== ================
Class D Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------------------
Shares sold 228,040 $ 2,226,133 210,497 $ 2,146,246
Issued upon reinvestment of distributions from
net realized gains 11,168 102,407 10,395 102,683
Shares repurchased (125,783) (1,223,650) (38,173) (370,632)
-------------- -------------- -------------- ----------------
Net increase 113,425 $ 1,104,890 182,719 $ 1,878,297
============== ============== ============== ================
</TABLE>
8
<PAGE>
METLIFE-STATE STREET RESEARCH CAPITAL APPRECIATION FUND
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each year.
<TABLE>
<CAPTION>
Class A Class B
-------------------------------------------------------- ----------------------------------
June 1, 1993
(Commencement of
Year ended June 30 Year ended June 30 of Share Class
-------------------------------------------------------- -------------------- Designations) to
1995** 1994 1993 1992 1991 1995** 1994 June 30, 1993
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of year $ 9.11 $10.42 $ 8.33 $6.55 $6.70 $ 9.05 $10.41 $10.44
Net investment loss* (.09) (.04) (.05) (.05) (.01) (.15) (.06) (.00)
Net realized and unrealized
gain (loss) on investments 2.95 .09 2.81 1.83 (.12) 2.93 .06 (.03)
Dividends from net investment
income -- -- -- -- (.01) -- -- --
Dividends in excess of net
investment income -- -- -- -- (.01) -- -- --
Distributions from net
realized gains (.45) (1.36) (.67) -- -- (.45) (1.36) --
-------- -------- -------- -------- -------- -------- -------- ----------
Net asset value, end of year $11.52 $ 9.11 $10.42 $8.33 $6.55 $11.38 $ 9.05 $10.41
======== ======== ======== ======== ======== ======== ======== ==========
Total return 32.56%+ (0.28)%+ 35.78%+ 27.03%+ (1.69)%+ 31.86%+ (0.83)%+ (0.29)%+
Net assets at end of year
(000s) $296,471 $231,356 $183,886 $116,687 $62,898 $93,088 $49,236 $2,790
Ratio of operating expenses to
average net assets* 1.55% 1.50% 1.50% 1.50% 1.50% 2.15% 2.00% 2.00%++
Ratio of net investment loss
to average net assets* (0.87)% (0.81)% (0.63)% (0.71)% (0.13)% (1.47)% (1.29)% (0.95)%++
Portfolio turnover rate 217.28% 147.73% 135.17% 128.10% 245.55% 217.28% 147.73% 135.17%
*Reflects voluntary assumption
of fees or expenses per share
in each year (Note 3). $.03 $.02 $.01 $.01 $.03 $.02 $.02 $.00
</TABLE>
<TABLE>
<CAPTION>
Class C Class D
-------------------------------------- ---------------------------------------
June 1, 1993 June 1, 1993
(Commencement (Commencement
Year ended June 30 of Share Class Year ended June 30 of Share Class
-------------------- Designations) to ------------------- Designations) to
1995** 1994 June 30, 1993 1995** 1994 June 30, 1993
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 9.16 $10.42 $10.44 $ 9.07 $10.41 $10.44
Net investment income (loss)* (.05) (.02) .00 (.15) (.07) (.01)
Net realized and unrealized gain (loss)
on investments 2.98 .12 (.02) 2.94 .09 (.02)
Distributions from net realized gains (.45) (1.36) -- (.45) (1.36) --
---------- ---------- ---------- ---------- ---------- ------------
Net asset value, end of year $11.64 $ 9.16 $10.42 $11.41 $ 9.07 $10.41
========== ========== ========== ========== ========== ============
Total return 33.06%+ 0.25%+ (0.19)%+++ 31.79%+ (0.61)%+ (0.29)%+++
Net assets at end of year (000s) $106,675 $62,662 $37,826 $4,061 $2,201 $623
Ratio of operating expenses to average
net assets* 1.15% 1.00% 1.00%++ 2.15% 2.00% 2.00%++
Ratio of net investment income (loss) to
average net assets* (0.46)% (0.30)% 0.50%++ (1.47)% (1.29)% (1.10)%++
Portfolio turnover rate 217.28% 147.73% 135.17% 217.28% 147.73% 135.17%
*Reflects voluntary assumption of fees or
expenses per share in each year (Note 3). $.02 $.02 $.00 $.02 $.02 $.00
</TABLE>
** Per-share figures have been calculated using the average shares method.
++ 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.
9
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of MetLife-State Street
Equity Trust and the Shareholders of
MetLife-State Street Research Capital Appreciation 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 MetLife-State Street
Research Capital Appreciation Fund (formerly MetLife-State Street Capital
Appreciation Fund) (a series of MetLife-State Street Equity Trust, hereafter
referred to as the "Trust") at June 30, 1995, 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 June 30, 1995 by correspondence
with the custodian and brokers and the application of alternative auditing
procedures where confirmations from brokers were not received, provide a
reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Boston, Massachusetts
August 4, 1995
10
<PAGE>
METLIFE-STATE STREET RESEARCH CAPITAL APPRECIATION FUND
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
Capital Appreciation Fund outperformed the average return for Lipper
Analytical Services' capital appreciation fund category for the 12 months
ended June 30, 1995 (does not reflect sales charge).
The Fund's strongest commitment was to technology stocks, with nearly 45% of
the portfolio divided among computer software, electronics and office
equipment stocks. Technology stocks benefited from strong earnings and
worldwide demand from consumers and industry.
The Fund added to its retail holdings late in 1994, after such stocks had
declined. Our focus is on retailers that specialize in particular market
segments.
We also sold many of our automotive holdings and built up the Fund's position
in airline stocks. We are value conscious in our stock selection, and
airlines offered excellent value after disappointing performance in 1994.
The Standard & Poor's Composite Index (S&P 500) includes 500 widely traded
common stocks and is a commonly used measure of U.S. stock market
performance. The index is unmanaged and does not take sales charges into
consideration. Direct investment in the index is not possible; results are
for illustrative purposes only. All returns represent past performance, which
is no guarantee of future results. The investment return and principal value
of an investment made in the Fund will fluctuate and shares, when redeemed,
may be worth more or less than their original cost. All returns assume
reinvestment of capital gain distributions and income dividends. Performance
for a class includes periods prior to the adoption of class designations in
1993. Performance reflects up to a maximum 4.5% front-end sales charge or 5%
contingent deferred sales charge. "C" shares, offered without a sales charge,
are available only to certain employee benefit plans and institutions.
Performance for "B" and "D" shares prior to class designations in 1993
reflects annual 12b-1 fees of .50% and subsequent performance reflects annual
12b-1 fees of 1%. Performance results for the fund are increased by the
Distributor's voluntary reduction of Fund fees and expenses. The first figure
reflects expense reduction; the second shows what results would have been
without subsidization.
Comparison Of Change In Value Of
A $10,000 Investment In Capital
Appreciation Fund and The S&P 500
[line chart] Class A Shares
Average Annual Total Return
1 Year 5 Years Life of Fund
+26.59%/+26.34% +16.44%/+16.18% +15.76%/+15.28%
Capital
Appreciation S&P
8/86 $ 9,550 $10,000
6/87 12,195 12,606
6/88 11,777 11,730
6/89 13,896 14,135
6/90 16,305 16,463
6/91 16,029 17,679
6/92 20,362 20,048
6/93 27,647 22,780
6/94 27,569 23,100
6/95 36,544 29,112
[line chart] Class B Shares
Average Annual Total Return
1 Year 5 Years Life of Fund
+26.86%/+26.59% +17.03%/+16.77% +16.21%/+15.72%
Capital
Appreciation S&P
8/86 $10,000 $10,000
6/87 12,770 12,606
6/88 12,332 11,730
6/89 14,562 14,135
6/90 17,073 16,463
6/91 16,784 17,679
6/92 21,321 20,048
6/93 28,922 22,780
6/94 28,683 23,100
6/95 37,822 29,112
[line chart] Class C Shares
Average Annual Total Return
1 Year 5 Years Life of Fund
+33.06%/+32.79% +17.73%/+17.47% +16.48%/+16.00%
Capital
Appreciation S&P
8/86 $10,000 $10,000
6/87 12,770 12,606
6/88 12,332 11,730
6/89 14,562 14,135
6/90 17,073 16,463
6/91 16,784 17,679
6/92 21,321 20,048
6/93 28,949 22,780
6/94 29,021 23,100
6/95 38,615 29,112
[line chart] Class D Shares
Average Annual Total Return
1 Year 5 Years Life of Fund
+30.79%/+30.52% +17.28%/+17.02% +16.23%/+15.75%
Capital
Appreciation S&P
8/86 $10,000 $10,000
6/87 12,770 12,606
6/88 12,332 11,730
6/89 14,562 14,135
6/90 17,073 16,463
6/91 16,784 17,679
6/92 21,321 20,048
6/93 28,922 22,780
6/94 28,745 23,100
6/95 37,883 29,112
[legend for line charts]
solid rule=Capital Appreciation Fund
broken rule=S&P 500
11
<PAGE>
MetLife-State Street Research Equity Investment Fund
Investment Portfolio
June 30, 1995
<TABLE>
<CAPTION>
Value
Shares (Note 1)
-------------------------------------------- ----- ------------
<S> <C> <C>
COMMON STOCKS 89.8%
Basic Industries 14.8%
Chemical 5.0%
E.I. du Pont de Nemours & Co. 27,000 $ 1,856,250
Monsanto Co. 19,800 1,784,475
Rohm & Haas Co. 14,300 784,713
------------
4,425,438
------------
Diversified 1.4%
Corning Inc. 39,200 1,283,800
------------
Electrical Equipment 2.4%
General Electric Co. 37,600 2,119,700
------------
Forest Product 0.7%
Champion International Corp. 9,600 500,400
Westvaco Corp. 3,000 132,750
------------
633,150
------------
Machinery 3.5%
Caterpillar, Inc. 14,400 925,200
Fluor Corp. 19,300 1,003,600
Pall Corp. 50,900 1,132,525
------------
3,061,325
------------
Metal & Mining 0.9%
Nucor Corp. 14,800 791,800
------------
Railroad 0.9%
CSX Corp. 10,400 781,300
------------
Total Basic Industries 13,096,513
------------
Consumer Cyclical 15.2%
Automotive 1.1%
Chrysler Corp. 10,000 478,750
Magna International, Inc. Cl. A 11,000 485,375
------------
964,125
------------
Hotel & Restaurant 3.1%
Circus Circus Enterprises, Inc.* 14,300 504,075
Mirage Resorts, Inc.* 41,800 1,280,125
Promus Companies, Inc.* 23,050 898,950
------------
2,683,150
------------
Recreation 3.9%
Comcast Corp. Cl. A 10,600 192,788
Comcast Corp. Cl. A Sp. 36,900 684,956
Walt Disney Co. 22,800 1,268,250
Mattel, Inc. 28,531 741,806
Tele-Communications, Inc. Cl. A* 23,900 560,156
------------
3,447,956
------------
Retail Trade 7.1%
Home Depot, Inc. 40,800 $ 1,657,500
J.C. Penney Company, Inc. 24,400 1,171,200
Office Depot, Inc.* 15,900 447,187
Tandy Corp. 8,800 456,500
Toys "R" Us, Inc.* 24,000 702,000
Wal-Mart Stores, Inc. 67,500 1,805,625
------------
6,240,012
------------
Total Consumer Cyclical 13,335,243
------------
Consumer Staple 19.5%
Business Service 1.5%
First Data Corp. 22,900 1,302,438
------------
Drug 5.1%
American Home Products Corp. 10,800 835,650
Eli Lilly & Co. 10,900 855,650
Merck & Co. 29,800 1,460,200
Pfizer, Inc. 14,600 1,348,675
------------
4,500,175
------------
Food & Beverage 2.3%
Coca-Cola Co. 11,500 733,125
Darden Restaurants, Inc.* 39,000 424,125
PepsiCo., Inc. 19,100 871,437
------------
2,028,687
------------
Hospital Supply 6.0%
Abbott Laboratories 50,000 2,025,000
Columbia/HCA Healthcare Corp.* 18,000 778,500
Healthsource, Inc.* 8,900 311,500
Johnson & Johnson 13,000 879,125
Medtronic, Inc. 4,200 323,925
United Healthcare Corp. 24,500 1,013,688
------------
5,331,738
------------
Personal Care 2.5%
Gillette Co. 10,800 481,950
Procter & Gamble Co. 24,500 1,760,937
------------
2,242,887
------------
Tobacco 2.1%
Philip Morris Companies, Inc. 24,600 1,829,625
------------
Total Consumer Staple 17,235,550
------------
Energy 6.6%
Oil 6.0%
Exxon Corp. 23,300 1,645,562
Louisiana Land & Exploration Co. 18,800 749,650
Phillips Petroleum Co. 30,000 1,001,250
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
Oil (cont'd)
Royal Dutch Petroleum Co. 10,600 $ 1,291,875
Total S.A. Cl. B ADR 21,800 659,450
------------
5,347,787
------------
Oil Service 0.6%
Rowan Companies, Inc.* 61,500 499,688
------------
Total Energy 5,847,475
------------
Finance 9.8%
Bank 3.4%
BankAmerica Corp. 18,200 957,775
Citicorp* 35,200 2,037,200
------------
2,994,975
------------
Financial Service 3.0%
Federal Home Loan Mortgage Corp. 17,200 1,182,500
Federal National Mortgage Association 15,400 1,453,375
------------
2,635,875
------------
Insurance 3.4%
Ace Ltd. 19,100 553,900
AMBAC Inc. 6,900 276,863
American International Group, Inc. 7,500 855,000
American Re Corp.* 20,100 748,725
Chubb Corp. 2,800 224,350
General Re Corp. 2,700 361,462
------------
3,020,300
------------
Total Finance 8,651,150
------------
Science & Technology 16.9%
Aerospace 2.8%
Boeing Co. 18,900 1,183,612
Raytheon Co. 16,500 1,280,813
------------
2,464,425
------------
Computer Software & Service 3.2%
General Motors Corp. Cl. E 20,300 883,050
Informix Corp.* 19,000 482,125
Microsoft Corp.* 11,400 1,030,275
Parametric Technology Corp.* 9,000 447,750
------------
2,843,200
------------
Electronic 4.9%
L.M. Ericsson Telephone Co. Cl. B ADR* 66,400 1,328,000
General Motors Corp. Cl. H 7,000 276,500
Intel Corp. 17,200 1,088,975
Motorola, Inc. 10,300 691,387
Perkin-Elmer Corp. 26,800 951,400
------------
4,336,262
------------
Office Equipment 6.0%
Diebold, Inc. 21,100 $ 917,850
Hewlett-Packard Co. 20,700 1,542,150
International Business Machines Corp. 12,800 1,228,800
Xerox Corp. 13,900 1,629,775
------------
5,318,575
------------
Total Science & Technology 14,962,462
------------
Utility 7.0%
Electric 1.0%
FPL Group, Inc. 21,800 842,025
------------
Telephone 6.0%
AirTouch Communications, Inc.* 42,800 1,219,800
AT&T Corp. 37,200 1,976,250
SBC Communications, Inc. 36,800 1,752,600
Tele Danmark Cl. B ADR* 12,700 355,600
------------
5,304,250
------------
Total Utility 6,146,275
------------
Total Common Stocks (Cost $64,671,426) 79,274,668
------------
</TABLE>
<TABLE>
<CAPTION>
Principal Maturity
Amount Date
- ------------------------------- --------- --------- -----------
<S> <C> <C> <C>
CONVERTIBLE BONDS 2.6%
Equitable Company, Inc. Cv.
Sub. Deb., 6.125% $1,191,000 12/15/2024 1,256,505
Price Co. Cv. Sub. Deb., 5.50% 80,000 2/28/2012 75,000
Time Warner, Inc. Cv. Sub.
Deb., 8.75% 910,000 1/10/2015 947,538
-----------
Total Convertible Bonds (Cost $2,213,060) 2,279,043
-----------
COMMERCIAL PAPER 7.0%
Associates Corp. of North
America, 6.00% 2,517,000 7/03/1995 2,517,000
Commercial Credit Co., 5.92% 3,142,000 7/05/1995 3,142,000
Ford Motor Credit Co., 5.92% 109,000 7/03/1995 109,000
Ford Motor Credit Co., 5.90% 305,000 7/03/1995 305,000
Norwest Financial Inc., 5.90% 160,000 7/03/1995 160,000
-----------
Total Commercial Paper (Cost $6,233,000) 6,233,000
-----------
Total Investments (Cost $73,117,486)--99.4% 87,786,711
Cash and Other Assets, Less Liabilities--0.6% 522,293
-----------
Net Assets--100.0% $88,309,004
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
MetLife-State Street Research Equity Investment Fund
Investment Portfolio (cont'd)
<TABLE>
<S> <C>
Federal Income Tax Information:
At June 30, 1995, the net unrealized
appreciation of investments based on cost for
Federal income tax purposes of $73,187,612 was
as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of
value over tax cost. $14,808,573
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax
cost over value. (209,474)
-------------
$14,599,099
=============
</TABLE>
* Nonincome-producing securities.
ADR stands for American Depositary Receipt, representing ownership of
foreign securities.
Statement of Assets and Liabilities
June 30, 1995
<TABLE>
<S> <C>
Assets
Investments, at value (Cost $73,117,486) (Note 1) $87,786,711
Cash 305
Receivable for fund shares sold 1,230,535
Dividends and interest receivable 178,010
Receivable for securities sold 92,648
Receivable from Distributor (Note 3) 33,210
Other assets 22,640
------------
89,344,059
Liabilities
Payable for securities purchased 773,909
Accrued transfer agent and shareholder services
(Note 2) 74,433
Accrued management fee (Note 2) 48,825
Payable for fund shares redeemed 43,559
Accrued distribution fee (Note 5) 12,000
Accrued trustees' fees (Note 2) 6,872
Dividends payable 2,290
Other accrued expenses 73,167
------------
1,035,055
------------
Net Assets $88,309,004
============
Net Assets consist of:
Undistributed net investment income $ 135,113
Unrealized appreciation of investments 14,669,225
Accumulated net realized gain 1,517,874
Shares of beneficial interest 71,986,792
------------
$88,309,004
============
Net Asset Value and redemption price per share of
Class A shares ($31,173,724 / 2,183,290 shares
of beneficial interest) $14.28
==========
Maximum Offering Price per share of Class A shares
($14.28 / .955) $14.95
==========
Net Asset Value and offering price per share of
Class B shares ($5,932,890 / 419,101 shares of
beneficial interest)* $14.16
==========
Net Asset Value, offering price and redemption
price per share of Class C shares ($50,503,260 /
3,540,302 shares of beneficial interest) $14.27
==========
Net Asset Value and offering price per share of
Class D shares ($699,130 / 49,409 shares of
beneficial interest)* $14.15
==========
</TABLE>
* 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.
5
<PAGE>
MetLife-State Street Research Equity Investment Fund
Statement of Operations
For the year ended June 30, 1995
<TABLE>
<S> <C>
Investment Income
Dividends, net of foreign taxes of $15,277 $ 1,278,500
Interest 277,147
-----------
1,555,647
Expenses
Management fee (Note 2) 486,807
Transfer agent and shareholder services (Note 2) 350,453
Custodian fee 108,497
Registration fees 62,925
Reports to shareholders 38,916
Audit fee 32,622
Trustees' fees (Note 2) 16,992
Distribution fee--Class A (Note 5) 124,247
Distribution fee--Class B (Note 5) 49,256
Distribution fee--Class D (Note 5) 6,248
Legal fees 3,935
Miscellaneous 10,251
-----------
1,291,149
Expenses borne by the Distributor (Note 3) (362,010)
-----------
929,139
-----------
Net investment income 626,508
-----------
Realized and Unrealized Gain on Investments
Net realized gain on investments (Notes 1 and 4) 1,524,460
Net unrealized appreciation of investments 11,229,657
-----------
Net gain on investments 12,754,117
-----------
Net increase in net assets resulting from operations $13,380,625
===========
</TABLE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year ended June 30
-----------------------------
1995 1994
---------------------------------------- ------------- -------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment income $ 626,508 $ 166,051
Net realized gain on investments* 1,524,460 2,585,284
Net unrealized appreciation
(depreciation) of investments 11,229,657 (3,189,634)
------------- -------------
Net increase (decrease) resulting from
operations 13,380,625 (438,299)
------------- -------------
Dividend from net
investment income:
Class A (111,024) --
Class C (535,596) --
------------- -------------
(646,620) --
------------- -------------
Distributions from net realized gains:
Class A (778,560) (4,304,262)
Class B (112,505) (134,949)
Class C (859,567) (3,132,084)
Class D (15,072) (78,088)
------------- -------------
(1,765,704) (7,649,383)
------------- -------------
Net increase from fund share
transactions (Note 6) 9,948,321 28,597,010
------------- -------------
Total increase in net assets 20,916,622 20,509,328
Net Assets
Beginning of year 67,392,382 46,883,054
------------- -------------
End of year (including undistributed net
investment income of $135,113 and
$155,225, respectively) $ 88,309,004 $ 67,392,382
============= =============
* Net realized gain for Federal income
tax purposes (Note 1) $ 1,567,315 $ 2,585,405
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
MetLife-State Street Research Equity Investment Fund
Notes to Financial Statements
June 30, 1995
Note 1
MetLife-State Street Research Equity Investment Fund, formerly MetLife-State
Street Equity Investment Fund (the "Fund") is a series of MetLife-State
Street Equity Trust (the "Trust"), which was organized as a Massachusetts
business trust in March, 1986 and is registered under the Investment Company
Act of 1940, as amended, as an open-end management investment company. The
Trust commenced operations in August, 1986. The Trust consists presently of
four separate funds: MetLife-State Street Research Equity Investment Fund,
MetLife-State Street Research Capital Appreciation Fund, MetLife-State Street
Research Equity Income Fund and State Street Research Global Resources Fund.
The Fund offers four classes of shares. Class A shares are subject to an
initial sales charge of up to 4.50% and an annual service fee of 0.25% of
average daily net assets. Prior to March 10, 1995, Class A shares paid annual
distribution and service fees of 0.50% of average daily net assets. 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 A
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%. 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 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
Values for listed securities reflect final sales on national securities
exchanges quoted prior to the close of the New York Stock Exchange.
Over-the-counter securities quoted on the National Association of Securities
Dealers Automated Quotation ("NASDAQ") system are valued at closing prices
supplied through such system. In the absence of recorded sales and for those
over-the-counter securities not quoted on the NASDAQ system, valuations are
at the mean of the closing bid and asked quotations. Short-term securities
maturing within sixty days are valued at amortized cost. Other securities, if
any, are valued at their fair value as determined in accordance with
established methods consistently applied.
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 are reported on the basis
of identified cost of securities delivered.
C. Net Investment Income
Interest income is accrued daily as earned. Dividend income is accrued on the
ex-dividend date. The Fund is charged for expenses directly attributable to
it, while indirect expenses are allocated among all funds in the Trust.
D. Dividends
Dividends from net investment income, if any, are declared and paid or
reinvested quarterly. Net realized capital gains, if any, are distributed
annually, unless additional distributions are required for compliance with
applicable tax regulations.
Income dividends and capital gain distributions are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles.
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.
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 0.65% 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 June 30, 1995, the fees pursuant to such
agreement amounted to $486,807.
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. In addition, Metropolitan receives a fee for maintenance
of the accounts of certain shareholders who are participants in sponsored
arrangements, employee benefit plans and similar programs or plans, through
or under which shares of the Fund may be purchased. During the year ended
June 30, 1995, the amount of such shareholder servicing and account
maintenance expenses was $154,664.
The fees of the Trustees not currently affiliated with the Adviser amounted
to $16,992 during the year ended June 30, 1995.
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 June 30, 1995, the amount of such expenses
assumed by the Distributor and its affiliates was $362,010.
7
<PAGE>
Note 4
For the year ended June 30, 1995, purchases and sales of securities,
exclusive of short-term obligations, aggregated $40,614,076 and $33,532,680,
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, as amended. Under the Plan,
the Fund pays annual service fees to the Distributor at a rate of 0.25% of
average daily net assets for Class A, Class B and Class D shares. In
addition, the Fund pays annual distribution fees of 0.75% of average daily
net assets for Class B and Class D shares. Prior to March 10, 1995, the Fund
paid an annual distribution fee of 0.25% of average daily net assets for
Class A shares. The Distributor uses such payments for personal services
and/or the maintenance 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 June 30, 1995, fees pursuant to such
plan amounted to $124,247, $49,256 and $6,248 for Class A, Class B and Class
D, respectively.
The Fund has been informed that the Distributor and MetLife Securities, Inc.,
a wholly-owned subsidiary of Metropolitan, earned initial sales charges
aggregating $9,124 and $61,338, respectively on sales of Class A shares of
the Fund during the year ended June 30, 1995, and that MetLife Securities,
Inc. earned commissions aggregating $57,654 on sales of Class B shares, and
that the Distributor collected contingent deferred sales charges of $18,766
and $260 on redemptions of Class B and Class D shares, respectively during
the same period.
Note 6
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share. At June 30, 1995,
Metropolitan owned 40,952 Class D shares of the Fund and the Distributor
owned 3,603 Class A shares of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
Year ended June 30
---------------------------------------------------
1995 1994
----------------------- ------------------------
<S> <C> <C> <C> <C>
Class A Shares Amount Shares Amount
- -------------------------------------- -------- ----------- -------- ------------
Shares sold 348,182 $ 4,474,313 701,787 $ 9,391,518
Issued upon reinvestment of:
Distributions from net realized gains 60,210 746,003 326,568 4,203,916
Dividend from net investment income 7,369 105,228 -- --
Shares repurchased (630,567) (8,019,412) (485,491) (6,490,962)
-------- ----------- -------- ------------
Net increase (decrease) (214,806) $ (2,693,868) 542,864 $ 7,104,472
======== =========== ======== ============
Class B Shares Amount Shares Amount
- -------------------------------------- -------- ----------- -------- ------------
Shares sold 147,104 $ 1,868,350 331,579 $ 4,391,724
Issued upon reinvestment of
distributions from net realized gains 9,061 111,547 10,458 134,629
Shares repurchased (63,119) (791,085) (61,636) (856,953)
-------- ----------- -------- ------------
Net increase 93,046 $ 1,188,812 280,401 $ 3,669,400
======== =========== ======== ============
Class C Shares Amount Shares Amount
- -------------------------------------- -------- ----------- -------- ------------
Shares sold 1,589,454 $ 20,294,474 1,535,586 $20,225,914
Issued upon reinvestment of:
Distributions from net realized gains 69,042 859,569 243,304 3,132,093
Dividend from net investment income 24,036 342,993 -- --
Shares repurchased (784,881) (10,102,310) (431,626) (5,675,170)
-------- ----------- -------- ------------
Net increase (decrease) 897,651 $ 11,394,726 1,347,264 $17,682,837
======== =========== ======== ============
Class D Shares Amount Shares Amount
- -------------------------------------- -------- ----------- -------- ------------
Shares sold 5,152 $ 64,522 4,702 $ 62,348
Issued upon reinvestment of
distributions from net realized gains 1,172 14,429 6,065 77,953
Shares repurchased (1,525) (20,300) -- --
-------- ----------- -------- ------------
Net increase 4,799 $ 58,651 10,767 $ 140,301
======== =========== ======== ============
</TABLE>
8
<PAGE>
Financial Highlights
For a share outstanding throughout each year.
<TABLE>
<CAPTION>
Class A Class B
----------------------------------------------- ---------------------------------
June 1, 1993
(Commencement
Year ended June 30 Year ended June 30 of Share Class
----------------------------------------------- ---------------- Designations) to
1995** 1994 1993 1992 1991 1995** 1994 June 30, 1993
- ---------------------------------------- ------ ------ ------ ------ ------- ------ ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 12.44 $ 14.52 $ 13.16 $ 11.19 $ 12.15 $12.36 $14.51 $14.78
Net investment income (loss)* .08 .01 .04 .05 .14 .01 (.02) .00
Net realized and unrealized gain (loss)
on investments 2.14 .18 2.48 1.99 (.89) 2.12 .14 (.26)
Distributions from net investment income (.05) -- (.04) (.07) (.19) -- -- (.01)
Distributions from net realized gains (.33) (2.27) (1.12) -- (.02) (.33) (2.27) --
------ ------ ------ ------ ------- ------ ------ -------------
Net asset value, end of year $14.28 $12.44 $14.52 $13.16 $11.19 $14.16 $12.36 $14.51
====== ====== ====== ====== ======= ====== ====== =============
Total return 18.34%+ 0.93%+ 20.37%+ 18.27%+ (6.10)%+ 17.70%+ 0.37%+ (1.77)%+++
Net assets at end of year (000s) $31,174 $29,821 $26,933 $48,473 $35,733 $5,933 $4,029 $663
Ratio of operating expenses to average
net assets* 1.42% 1.50% 1.50% 1.50% 1.50% 2.00% 2.00% 2.00%++
Ratio of net investment income (loss) to
average net assets* 0.64% 0.08% 0.23% 0.43% 1.29% 0.08% (0.39)% 0.03%++
Portfolio turnover rate 47.93% 62.93% 92.35% 81.89% 72.03% 47.93% 62.93% 92.35%
*Reflects voluntary assumption of fees
or expenses per share in each year
(Note 3). $.06 $.04 $.02 $.02 $.03 $.06 $.04 $.00
</TABLE>
<TABLE>
<CAPTION>
Class C Class D
--------------------------------------- ----------------------------------------
June 1, 1993 June 1, 1993
(Commencement (Commencement
Year ended June 30 of Share Class Year ended June 30 of Share Class
------------------ Designations) to ------------------ Designations) to
1995** 1994 June 30, 1993 1995** 1994 June 30, 1993
- ----------------------------------------- ------- ------- ----------------- ------- ------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $12.48 $14.51 $14.78 $12.36 $14.51 $14.78
Net investment income (loss)* .14 .07 (.00) .01 (.05) .00
Net realized and unrealized gain (loss)
on investments 2.15 .17 (.25) 2.11 .17 (.26)
Dividends from net investment income (.17) -- (.02) -- -- (.01)
Distributions from net realized gains (.33) (2.27) -- (.33) (2.27) --
------- ------- ----------------- ------- ------- ------------------
Net asset value, end of year $14.27 $12.48 $14.51 $14.15 $12.36 $14.51
======= ======= ================= ======= ======= ==================
Total return 18.83%+ 1.41%+ (1.69)%+++ 17.53%+ 0.45%+ (1.77)%+++
Net assets at end of year (000s) $50,503 $32,991 $18,796 $699 $551 $491
Ratio of operating expenses to
average net assets* 1.00% 1.00% 1.00%++ 2.00% 2.00% 2.00%++
Ratio of net investment income (loss) to
average net assets* 1.09% 0.59% (0.39)%++ 0.08% (0.41)% 0.12%++
Portfolio turnover rate 47.93% 62.93% 92.35% 47.93% 62.93% 92.35%
*Reflects voluntary assumption of fees or
expenses per share in each year (Note 3). $.06 $.06 $.00 $.06 $.06 $.00
</TABLE>
**Per-share figures have been calculated using the average shares method.
++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.
9
<PAGE>
Report of Independent Accountants
To the Trustees of MetLife-State Street
Equity Trust and the Shareholders of
MetLife-State Street Research Equity Investment 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 MetLife-State Street
Research Equity Investment Fund (formerly MetLife-State Street Equity
Investment Fund) (a series of MetLife-State Street Equity Trust, hereafter
referred to as the "Trust") at June 30, 1995, 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 June 30, 1995 by correspondence
with the custodian and brokers and the application of alternative auditing
procedures where confirmations from brokers were not received, provide a
reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Boston, Massachusetts
August 4, 1995
10
<PAGE>
MetLife-State Street Research Equity Investment Fund
Management's Discussion of Fund Performance
Equity Investment Fund trailed the average total return for Lipper Analytical
Services' growth and income fund category for the 12 months ended June 30,
1995 (does not reflect sales charge).
We have worked to improve the quality and consistency of the Fund's portfolio
over time. In many industries, we sold smaller or more volatile stocks and
replaced them with larger-company stocks. We also added more income to the
portfolio by adding larger, dividend-paying stocks and by investing in
convertible bonds.
In response to the slowing economy, we reduced the Fund's holdings in
cyclical stocks, particularly in automotive, recreation (TV and broadcasting)
and retail stocks. However, because of their attractive prospects, we added
to holdings in gaming and forest products stocks. We also targeted stocks we
believe offer potential even if the economy slows, such as drug stocks.
The decline in interest rates in 1995 benefited most finance stocks and we
sold some of our holdings. Bank stocks performed particularly well. Insurance
stocks did not perform as well.
The Standard & Poor's 500 Composite Index (S&P 500) includes 500
widely-traded common stocks and is a commonly used measure of U.S. stock
market performance. The index is unmanaged and does not take sales charges
into consideration. Direct investment in the index is not possible; results
are for illustrative purposes only.
All returns represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment made in
the Fund will fluctuate and shares, when redeemed, may be worth more or less
than their original cost. All returns assume reinvestment of capital gain
distributions and income dividends.
Performance for a class includes periods prior to the adoption of class
designations in 1993. Performance reflects up to a maximum 4.5% front-end
sales charge or 5% contingent deferred sales charge. "C" shares, offered
without a sales charge, are available only to certain employee benefit plans
and institutions. Performance for "B" and "D" shares prior to class
designations in 1993 reflects annual 12b-1 fees of .50% and subsequent
performance reflects annual 12b-1 fees of 1%.
Comparison Of Change In Value Of
A $10,000 Investment In Equity
Investment Fund and The S&P 500
Class A Shares
Average Annual Total Return
1 Year 5 Years Life of Fund
+13.01% +8.80% +10.19%
8/86 9550 10000
6/87 11760.1 12605.6
6/88 10952.5 11730.2
6/89 12690.4 14135.1
6/90 14789 16462.6
6/91 13887.3 17678.8
6/92 16423.8 20048.4
6/93 19769.4 22779.9
6/94 19953.5 23099.6
6/95 23612.3 29112.4
Class B
Average Annual Total Return
1 Year 5 Years Life of Fund
+12.70% +9.27% +10.62%
8/86 10000 10000
6/87 12314.2 12605.6
6/88 11468.5 11730.2
6/89 13288.4 14135.1
6/90 15485.9 16462.6
6/91 14541.7 17678.8
6/92 17197.7 20048.4
6/93 20685.3 22779.9
6/94 20761.2 23099.6
6/95 24436.3 29112.4
Class C
Average Annual Total Return
1 Year 5 Years Life of Fund
+18.83% +10.00% +10.87%
8/86 10000 10000
6/87 12314.2 12605.6
6/88 11468.5 11730.2
6/89 13288.4 14135.1
6/90 15485.9 16462.6
6/91 14541.7 17678.8
6/92 17197.7 20048.4
6/93 20700.9 22779.9
6/94 20991.8 23099.6
6/95 24945.1 29112.4
Class D
Average Annual Total Return
1 Year 5 Years Life of Fund
+16.53% +9.54% +10.61%
8/86 10000 10000
6/87 12314.2 12605.6
6/88 11468.5 11730.2
6/89 13288.4 14135.1
6/90 15485.9 16462.6
6/91 14541.7 17678.8
6/92 17197.7 20048.4
6/93 20683.8 22779.9
6/94 20776.6 23099.6
6/95 24417.9 29112.4
[Key to charts:
solid line = Equity Investment Fund
dashed line = S&P 500]
11
<PAGE>
MetLife-State Street Research Equity Income Fund
Investment Portfolio
June 30, 1995
<TABLE>
<CAPTION>
Value
Shares (Note 1)
- ---------------------------------------------- --------- ----------
<S> <C> <C>
Common Stocks 70.6%
Basic Industries 21.2%
Chemical 8.6%
Atlantic Richfield Co. 87,600 $ 2,277,600
E.I. du Pont de Nemours and Co. 3,500 240,625
FMC Corp.* 24,000 1,614,000
Monsanto Co. 8,400 757,050
Potash Corp. of Saskatchewan, Inc. 29,000 1,620,375
PPG Industries, Inc. 13,000 559,000
Rohm & Haas Co. 11,100 609,113
----------
7,677,763
----------
Diversified 2.6%
Coltec Industries, Inc.* 49,000 845,250
Corning, Inc. 25,000 818,750
Johnson Controls, Inc. 12,000 678,000
----------
2,342,000
----------
Forest Product 2.3%
Bowater, Inc. 11,200 502,600
Champion International Corp. 13,300 693,262
James River Corp. 10,000 276,250
Westvaco Corp. 14,000 619,500
----------
2,091,612
----------
Machinery 3.7%
CBI Industries, Inc. 63,100 1,585,388
Cincinnati Milacron, Inc. 9,000 243,000
Cooper Industries, Inc. 4,000 158,000
Harsco Corp. 4,000 211,000
Sundstrand Corp. 19,000 1,135,250
----------
3,332,638
----------
Metal & Mining 3.9%
Alumax, Inc.* 20,000 622,500
Cyprus Amax Minerals Co. 53,000 1,510,500
Quanex Corp.* 40,000 990,000
Timken Co. 9,000 415,125
----------
3,538,125
----------
Railroad 0.1%
Southern Pacific Rail Corp.* 3,000 47,250
----------
Total Basic Industries 19,029,388
----------
Consumer Cyclical 11.5%
Automotive 2.5%
Exide Corp. 20,000 860,000
Lear Seating Corp.* 60,000 1,372,500
----------
2,232,500
----------
Building 0.5%
Fleetwood Enterprises Inc. 23,000 454,250
----------
Hotel & Restaurant 0.1%
Motels of America, Inc.+* 500 $ 35,000
----------
Recreation 0.0%
Pyramid Communications, Inc. Cl. B+* 525 23,550
----------
Retail Trade 8.4%
Federated Department Stores 14,100 363,075
Finlay Enterprises, Inc. Cl. A* 667 9,421
May Department Stores Co. 10,000 416,250
Penn Traffic Co.* 23,800 841,925
J.C. Penney, Inc. 29,800 1,430,400
Stop & Shop Cos., Inc.* 39,600 1,014,750
Tandy Corp. 28,000 1,452,500
Vons Companies, Inc.* 2,500 50,313
Woolworth Corp. 130,800 1,978,350
----------
7,556,984
----------
Total Consumer Cyclical 10,302,284
----------
Consumer Staple 4.0%
Business Service 0.1%
Vestar/LPA Investment Corp.+* 3,125 46,875
----------
Container 0.7%
Ball Corp. 18,300 638,213
----------
Drug 0.5%
Merck & Company, Inc. 9,200 450,800
----------
Food & Beverage 1.6%
Coca-Cola Enterprises, Inc. 60,000 1,312,500
Darden Restaurants, Inc.* 7,000 76,125
----------
1,388,625
----------
Printing & Publishing 1.1%
American Greetings Corp. Cl. A 15,500 455,313
Deluxe Corp. 15,000 496,875
Dimac Corp.* 4,756 71,340
----------
1,023,528
----------
Total Consumer Staple 3,548,041
----------
Energy 5.8%
Oil 5.8%
Crystal Oil Corp.* 4,200 129,150
Louisiana Land & Exploration Co. 46,600 1,858,175
Mitchell Energy & Development Corp. Cl. B 18,000 321,750
Oryx Energy Co.* 9,100 125,125
Phillips Petroleum Co. 38,200 1,274,925
Tosco Corp. 45,000 1,434,375
Ultramar Corp. 3,600 90,900
----------
5,234,400
----------
Total Energy 5,234,400
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
MetLife-State Street Research Equity Income Fund
<TABLE>
<CAPTION>
Value
Shares (Note 1)
- ---------------------------------------------- --------- ----------
<S> <C> <C>
Finance 9.6%
Bank 0.6%
Chase Manhattan Corp. 5,000 $ 235,000
Mellon Bank Corp. 6,600 274,725
West One Bancorp 1,000 33,375
----------
543,100
----------
Financial Service 2.6%
Federal Home Loan Mortgage Corp. 25,000 1,718,750
Federal National Mortgage Association 7,000 660,625
----------
2,379,375
----------
Insurance 6.4%
Ace, Ltd. 38,100 1,104,900
AMBAC Industries, Inc. 21,900 878,738
American Re Corp.* 39,600 1,475,100
Mid Ocean Ltd.* 30,000 948,750
Progressive Corp. 7,000 268,625
Safeco Corp. 18,000 1,033,875
----------
5,709,988
----------
Total Finance 8,632,463
----------
Science & Technology 13.4%
Aerospace 3.9%
Boeing Co. 30,000 1,878,750
Honeywell, Inc. 18,100 780,563
Sequa Corp. Cl. A 30,000 877,500
----------
3,536,813
----------
Computer Software & Service 3.0%
Computervision Corp. 400,000 2,650,000
----------
Electronic 6.3%
AMP, Inc. 24,600 1,039,350
Perkin-Elmer Corp. 50,000 1,775,000
Tektronix, Inc. 42,000 2,068,500
Thomas & Betts Corp. 10,900 745,288
----------
5,628,138
----------
Office Equipment 0.2%
Diebold, Inc. 4,300 187,050
----------
Total Science & Technology 12,002,001
----------
Utility 5.1%
Natural Gas 3.6%
Coastal Corp. 13,000 394,875
ENSERCH Corp. 120,400 2,061,850
Trans Texas Gas Corp.* 49,100 742,638
----------
3,199,363
----------
Telephone 1.5%
Sprint Corp. 38,000 $ 1,320,500
----------
Total Utility 4,519,863
----------
Total Common Stocks (Cost $53,854,476) 63,268,440
----------
PREFERRED STOCKS & OTHER 13.4%
Anacomp, Inc. Wts.* 908,099 340,537
Ashland Oil Inc. Cum. Cv. Pfd. 18,000 1,037,250
Boomtown, Inc. Wts.* 250 125
Color Tile, Inc. Pfd.* 10,000 30,000
Crown Packaging Holdings Ltd. Wts.*+ 2,000 42,500
Food 4 Less Supermarkets, Inc. Wts.*++ 1,344 50,064
Ford Motor Co. Cum. Cv. Pfd. A 15,000 1,456,875
Lewis Galoob Toys, Inc. Cv. Exch. Pfd.* 62,000 1,085,000
Geneva Steel Co. Series B Exch. Pfd.* 4,000 368,000
Granite Broadcasting Corp. Cum. Cv. Exch. Pfd.* 68,000 2,890,000
Kaiser Aluminum Corp. Cv. Pfd. 37,500 506,250
Kaiser Aluminum Corp. Series A Pfd. 58,300 561,138
La Petite Holdings Co. Cum. Exch. Pfd.* 45,000 832,500
PageMart, Inc. Wts.*+ 3,450 13,800
Pyramid Communications, Inc. Pfd.+ 16,434 410,856
SDW Holdings Corp. Wts.*+ 27,000 162,000
S.D. Warren Co. Series B Sr. Exch. Pfd.[diamond] 27,000 756,000
Sheffield Steel Corp. Wts.* 2,500 7,500
Supermarkets General Holding Corp. Exch.
Pfd.[diamond] 55,000 1,485,000
----------
Total Preferred Stocks (Cost $11,604,478) 12,035,395
----------
</TABLE>
<TABLE>
<CAPTION>
Principal Maturity
Amount Date
- ---------------------------------- --------- --------- ----------
<S> <C> <C> <C>
CONVERTIBLE BONDS 3.0%
Anacomp International N.V. Cv.
Sub. Deb., 9.00% $650,000 1/15/1996 331,500
Rohr, Inc. Cv. Sub. Note, 7.75% 650,000 5/15/2004 949,000
West One Bancorp. Cv. Sub. Deb.,
7.75% 840,000 6/30/2006 1,428,000
----------
Total Convertible Bonds (Cost $2,122,649) 2,708,500
----------
NON-CONVERTIBLE BONDS 12.6%
Anacomp Inc. Sr. Sub. Note, 15.00% 250,000 11/01/2000 192,500
Bayou Steel Corp. First Mortgage
Note, 10.25% 150,000 3/01/2001 139,500
Belle Casinos, Inc. First Mortgage
Notes, 12.00%+[open box] 175,000 10/15/2000 52,500
Boomtown, Inc. First Mortgage
Note, 11.50% 250,000 11/01/2003 220,000
Celcaribe S.A. Units, 0.00% to
3/14/98, 13.50% from 3/15/98 to
maturity+ 43,000 3/15/2004 365,500
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
MetLife-State Street Research Equity Income Fund
Investment Portfolio (cont'd)
<TABLE>
<CAPTION>
Principal Maturity Value
Amount Date (Note 1)
- --------------------------------- --------- --------- ----------
<S> <C> <C> <C>
Non-Convertible Bonds (cont'd)
Computervision Corp. Sr. Sub.
Notes, 11.375% $ 250,000 8/15/1999 $ 230,000
Crown Packaging Holdings Ltd. Sr.
Sub. Notes, 0.00% to 10/31/2000,
12.25% from 11/1/2000 to maturity 2,000,000 11/01/2003 915,000
Dual Drilling Co. Sr. Sub. Notes,
9.875% 400,000 1/15/2004 374,500
Finlay Enterprises, Inc. Sr.
Disc. Deb., 0.00% to 4/30/98,
12.00% from 5/1/98 to maturity 250,000 5/01/2005 165,000
Granite Broadcasting Corp. Sr.
Sub. Deb., 12.75% 500,000 9/01/2002 537,500
Haynes International, Inc. Sr.
Sec. Notes, 11.25% 800,000 6/15/1998 759,200
Heartland Wireless
Communications, Inc. Units,
13.00%+ 250,000 4/15/2003 264,375
Horsehead Industries Sub. Note,
14.00% 250,000 6/01/1999 255,625
Marcus Cable Capital Co. Sr.
Disc. Note, 0.00% to 7/31/99,
13.50% from 8/1/99 to maturity 100,000 8/01/2004 63,250
Motels of America, Inc. Sr. Sub.
Notes, 12.00% 500,000 4/15/2004 502,500
PageMart, Inc. Sr. Disc. Notes,
0.00% to 10/31/98, 12.25% from
11/1/98 to maturity 750,000 11/01/2003 474,375
PageMart Nationwide, Inc. Units,
0.00% to 1/31/2000, 15.00% from
2/1/2000 to maturity+ 500,000 2/01/2005 301,250
Presidio Oil Co. Sr. Sub. Indexed
Notes, 14.05%[open box] 400,000 7/15/2002 360,000
Presidio Oil Co. Sr. Sec. Notes,
11.50%[open box] 650,000 9/15/2000 617,500
Ralphs Grocery Co. Sr. Note,
10.45% 1,000,000 6/15/2004 1,000,000
Seven-Up/RC Bottling Co. of
Southern California, Inc., 11.50% 250,000 8/01/1999 220,000
Sheffield Steel Corp. First
Mortgage Note, 12.00% 500,000 11/01/2001 470,000
Sullivan Graphics, Inc., 15.00% 650,000 2/01/2001 689,000
U.S.A. Mobile Communications,
Inc. Sr. Notes, 14.00% $ 750,000 11/01/2004 $ 832,500
Viatel, Inc. Sr. Disc. Units,
0.00% to 1/14/2000, 15.00% from
1/15/2000 to maturity+ 75,000 1/15/2005 487,500
Wilrig A.S. Sr. Sec. Notes,
11.25% 750,000 3/15/2004 772,500
----------
Total Non-Convertible Bonds (Cost $11,496,505) 11,261,575
----------
COMMERCIAL PAPER 1.1%
American Express Credit Corp.,
5.85% 458,000 7/05/1995 458,000
American Express Credit Corp.,
5.80% 440,000 7/06/1995 440,000
Household Finance Corp., 5.95% 102,000 7/10/1995 102,000
----------
Total Commercial Paper (Cost $1,000,000) 1,000,000
----------
Total Investments (Cost $80,078,108)--100.7% 90,273,910
Cash and Other Assets, Less Liabilities--(0.7)% (623,896)
----------
Net Assets--100.0% $89,650,014
==========
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Federal Income Tax Information:
At June 30, 1995, the net unrealized appreciation of
investments based on cost for Federal income tax purposes
of $80,130,888 was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value over tax
cost $13,543,345
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost over
value (3,400,323)
----------
$10,143,022
==========
</TABLE>
* Nonincome-producing securities.
[diamond] Payments of income may be made in cash or in the form of additional
securities.
++ Security valued under consistently applied procedures established by the
Trustees. Security restricted as to public resale. At June 30, 1995, there
were no outstanding unrestricted securities of the same class as those held.
The total cost and market value of restricted securities owned at June 30,
1995 was $0 and $50,064 (0.1% of net assets), respectively.
+ Security restricted in accordance with Rule 144A under the Securities Act
of 1933, which allows for the resale of such securities among certain
qualified institutional buyers. The total cost and market value of Rule 144A
securities owned at June 30, 1995 was $2,124,525 and $2,205,706 (2.5% of net
assets), respectively.
[open box] Security is in default.
The accompanying note are an integral part of the financial statements.
5
<PAGE>
MetLife-State Street Research Equity Income Fund
Statement of Assets and Liabilities
June 30, 1995
<TABLE>
<CAPTION>
<S> <C>
Assets
Investments, at value (Cost $80,078,108) (Note 1) $90,273,910
Cash 3,367
Receivable for securities sold 1,786,405
Dividends and interest receivable 407,754
Receivable for fund shares sold 43,467
Receivable from Distributor (Note 3) 38,622
Other assets 943
------------
92,554,468
Liabilities
Payable for securities purchased 2,548,321
Accrued transfer agent and shareholder services
(Note 2) 86,325
Payable for fund shares redeemed 59,723
Accrued management fee (Note 2) 50,234
Dividends payable 34,823
Accrued distribution fee (Note 5) 24,012
Accrued trustees' fees (Note 2) 6,730
Other accrued expenses 94,286
------------
2,904,454
------------
Net Assets $89,650,014
============
Net Assets consist of:
Undistributed net investment income $ 322,548
Unrealized appreciation of investments 10,195,802
Accumulated net realized gain 1,165,002
Shares of beneficial interest 77,966,662
------------
$89,650,014
============
Net Asset Value and redemption price per share of
Class A shares ($37,327,119 / 3,189,399 shares of
beneficial interest) $11.70
============
Maximum Offering Price per share of Class A shares
($11.70 / .955) $12.25
============
Net Asset Value and offering price per share of
Class B shares ($16,130,232 / 1,381,341 shares of
beneficial interest)* $11.68
============
Net Asset Value, offering price and redemption
price per share of Class C shares ($34,827,097 /
2,977,684 shares of beneficial interest) $11.70
============
Net Asset Value and offering price per share of
Class D shares ($1,365,566 / 116,997 shares of
beneficial interest)* $11.67
============
</TABLE>
* Redemption price per share for Class B and Class D is equal to net asset
value less any applicable contingent deferred sales charge.
Statement of Operations
For the year ended June 30, 1995
<TABLE>
<CAPTION>
<S> <C>
Investment Income
Dividends, net of foreign taxes of $13,689 $ 1,446,184
Interest 1,731,840
------------
3,178,024
Expenses
Management fee (Note 2) 521,730
Transfer agent and shareholder services (Note 2) 347,078
Custodian fee 120,859
Registration fees 48,026
Reports to shareholders 39,974
Audit fee 32,294
Trustees' fees (Note 2) 15,303
Distribution fee--Class A (Note 5) 169,569
Distribution fee--Class B (Note 5) 134,121
Distribution fee--Class D (Note 5) 13,692
Legal fees 4,299
Miscellaneous 9,867
------------
1,456,812
Expenses borne by the Distributor (Note 3) (333,725)
------------
1,123,087
------------
Net investment income 2,054,937
------------
Realized and Unrealized Gain on Investments
Net realized gain on investments (Notes 1 and 4) 1,155,735
Net unrealized appreciation of investments 9,032,370
------------
Net gain on investments 10,188,105
------------
Net increase in net assets resulting from operations $12,243,042
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
MetLife-State Street Research Equity Income Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year ended June 30
---------------------------
<S> <C> <C>
1995 1994
- ------------------------------------- ----------- ------------
Increase (Decrease) in Net Assets
Operations:
Net investment income $ 2,054,937 $ 1,597,466
Net realized gain on investments* 1,155,735 4,575,566
Net unrealized appreciation
(depreciation) of investments 9,032,370 (4,848,144)
----------- ------------
Net increase resulting from
operations 12,243,042 1,324,888
----------- ------------
Dividend from net investment income:
Class A (984,856) (879,098)
Class B (285,324) (103,663)
Class C (808,655) (513,407)
Class D (28,201) (16,964)
----------- ------------
(2,107,036) (1,513,132)
----------- ------------
Distributions from net realized gains:
Class A (2,006,103) (508,404)
Class B (563,723) (61,922)
Class C (1,043,962) (225,556)
Class D (63,626) (11,728)
----------- ------------
(3,677,414) (807,610)
----------- ------------
Net increase from fund share
transactions (Note 6) 10,409,654 27,105,811
----------- ------------
Total increase in net assets 16,868,246 26,109,957
Net Assets
Beginning of year 72,781,768 46,671,811
----------- ------------
End of year (including undistributed
net investment income of $322,548
and $374,647, respectively) $ 89,650,014 $ 72,781,768
=========== ============
* Net realized gain for Federal
income tax purposes (Note 1) $ 1,208,383 $ 4,553,748
=========== ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
Notes to Financial Statements
June 30, 1995
Note 1
MetLife-State Street Research Equity Income Fund, formerly MetLife-State
Street Equity Income Fund (the "Fund") is a series of MetLife-State Street
Equity Trust (the "Trust"), which was organized as a Massachusetts business
trust in March, 1986 and is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company. The Trust
commenced operations in August, 1986. The Trust consists presently of four
separate funds: MetLife-State Street Research Equity Income Fund,
MetLife-State Street Research Capital Appreciation Fund, MetLife-State Street
Research Equity Investment Fund and State Street Research Global Resources
Fund.
The Fund offers four classes of shares. Class A shares are subject to an
initial sales charge of up to 4.50% and an annual service fee of 0.25% of
average daily net assets. Prior to March 10, 1995, Class A shares paid annual
distribution and service fees of 0.50% of average daily net assets.
Investments of $1 million or more in Class A shares, which are not subject to
any initial sales charge, are subject to a 1.00% contingent deferred sales
charge if redeemed within one year of purchase. 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 A 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%. 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
Values for listed securities reflect final sales on national securities
exchanges quoted prior to the close of the New York Stock Exchange.
Over-the-counter securities quoted on the National Association of Securities
Dealers Automated Quotation ("NASDAQ") system are valued at closing prices
supplied through such system. In the absence of recorded sales and for those
over-the-counter securities not quoted on the NASDAQ system, valuations are
at the mean of the closing bid and asked quotations. Fixed income securities
are valued by a pricing service, approved by the Trustees, which utilizes
market transactions, quotations from dealers, and various relationships among
securities in determining value. Short-term securities maturing within sixty
days are valued at amortized cost. Other securities, if any, are valued at
their fair value as determined in accordance with established methods
consistently applied.
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
MetLife-State Street Research Equity Income Fund
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 are reported on the basis
of identified cost of securities delivered.
C. Net Investment Income
Interest income is accrued daily as earned. Dividend income is accrued on the
ex-dividend date. Discount on debt obligations is amortized under the effective
yield method. Certain preferred securities held by the Fund pay dividends in the
form of additional securities (payment-in-kind securities). Dividend income on
payment-in-kind preferred securities is recorded at the market value of
securities received. Differences between the market value of securities received
and the corresponding amounts of income accrued are recorded as adjustments to
income. The Fund is charged for expenses directly attributable to it, while
indirect expenses are allocated among all funds in the Trust.
D. Dividends
Dividends from net investment income are declared and paid or reinvested
quarterly. Net realized capital gains, if any, are distributed annually,
unless additional distributions are required for compliance with applicable
tax regulations.
Income dividends and capital gain distributions are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles.
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.
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 0.65% 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 June 30, 1995, the fees pursuant to such
agreement amounted to $521,730.
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. In addition, Metropolitan receives a fee for maintenance of
the accounts of certain shareholders who are participants in sponsored
arrangements, employee benefit plans and similar programs or plans, through or
under which shares of the Fund may be purchased. During the year ended June 30,
1995, the amount of such shareholder servicing and account maintenance expenses
was $152,719.
The fees of the Trustees not currently affiliated with the Adviser amounted
to $15,303 during the year ended June 30, 1995.
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 June 30, 1995, the amount of such expenses
assumed by the Distributor and its affiliates was $333,725.
Note 4
For the year ended June 30, 1995, purchases and sales of securities,
exclusive of short-term obligations, aggregated $60,348,734 and $52,696,221,
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, as amended. Under the Plan,
the Fund pays annual service fees to the Distributor at a rate of 0.25% of
average daily net assets for Class A, Class B and Class D shares. In
addition, the Fund pays annual distribution fees of 0.75% of average daily
net assets for Class B and Class D shares. Prior to March 10, 1995, the Fund
paid an annual distribution fee of 0.25% of average daily net assets for
Class A shares. The Distributor uses such payments for personal services
and/or the maintenance 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 June 30, 1995, fees pursuant to such
plan amounted to $169,569, $134,121 and $13,692 for Class A, Class B and
Class D, respectively.
The Fund has been informed that the Distributor and MetLife Securities, Inc.,
a wholly-owned subsidiary of Metropolitan, earned initial sales charges
aggregating $11,212 and $72,165, respectively, on sales of shares of Class A
shares of the Fund during the year ended June 30, 1995, and that MetLife
Securities, Inc. earned commissions aggregating $130,203 on sales of Class B
shares, and that the Distributor collected contingent deferred sales charges
of $265, $50,949 and $632 on redemptions of Class A, Class B and Class D
shares, respectively during the same period.
8
<PAGE>
MetLife-State Street Research Equity Income Fund
Notes (cont'd)
Note 6
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share. At June 30, 1995,
Metropolitan owned 49,237 Class D shares of the Fund and the Distributor
owned 3,614 Class A shares of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
Year ended June 30
---------------------------------------------------------------
1995 1994
----------------------------- ------------------------------
Class A Shares Amount Shares Amount
- -------------------------------------------- ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
Shares sold 398,649 $ 4,285,947 1,584,700 $18,024,978
Issued upon reinvestment of:
Distributions from net realized gains 179,249 1,907,857 40,997 476,381
Dividends from net investment income 82,151 897,184 71,938 812,948
Shares repurchased (1,195,595) (12,867,093) (659,533) (7,545,419)
------------ ------------ ------------ --------------
Net increase (decrease) (535,546) $ (5,776,105) 1,038,102 $11,768,888
============ ============ ============ ==============
Class B Shares Amount Shares Amount
- -------------------------------------------- ------------ ------------ ------------ --------------
Shares sold 532,548 $ 5,717,454 988,855 $11,262,723
Issued upon reinvestment of:
Distributions from net realized gains 48,954 520,771 5,001 58,066
Dividends from net investment income 23,498 257,756 8,247 91,949
Shares repurchased (213,874) (2,294,678) (110,124) (1,236,154)
------------ ------------ ------------ --------------
Net increase 391,126 $ 4,201,303 891,979 $10,176,584
============ ============ ============ ==============
</TABLE>
<TABLE>
<CAPTION>
Class C Shares Amount Shares Amount
- -------------------------------------------- ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
Shares sold 1,452,407 $15,677,247 817,270 $ 9,352,116
Issued upon reinvestment of:
Distributions from net realized gains 98,117 1,043,974 19,415 225,406
Dividends from net investment income 73,413 806,458 45,182 509,180
Shares repurchased (512,040) (5,526,511) (498,017) (5,610,959)
------------ ------------ ------------ --------------
Net increase 1,111,897 $12,001,168 383,850 $ 4,475,743
============ ============ ============ ==============
</TABLE>
<TABLE>
<CAPTION>
Class D Shares Amount Shares Amount
- -------------------------------------------- ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
Shares sold 24,855 $ 265,512 71,712 $ 819,093
Issued upon reinvestment of:
Distributions from net realized gains 5,541 58,959 857 9,945
Dividends from net investment income 1,154 12,472 540 6,076
Shares repurchased (32,405) (353,655) (13,472) (150,518)
------------ ------------ ------------ --------------
Net increase (decrease) (855) $ (16,712) 59,637 $ 684,596
============ ============ ============ ==============
</TABLE>
9
<PAGE>
Financial Highlights
For a share outstanding throughout each year.
<TABLE>
<CAPTION>
Class A Class B
----------------------------------------------- ---------------------------------
June 1, 1993
(Commencement of
Year ended June 30 Year ended June 30 Share Class
----------------------------------------------- ---------------- Designations) to
1995** 1994 1993 1992 1991 1995** 1994 June 30, 1993
- ---------------------------------------- ------ ------ ------ ------ ------- ------ ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $10.87 $10.79 $9.19 $8.33 $9.83 $10.86 $10.79 $10.81
Net investment income* .28 .24 .44 .39 .45 .21 .21 .02
Net realized and unrealized gain
(loss) on investments 1.37 .25 1.52 .83 (1.08) 1.38 .21 (.02)
Dividends from net investment income (.28) (.26) (.36) (.36) (.48) (.23) (.20) (.02)
Distributions from net realized gains (.54) (.15) -- -- (.39) (.54) (.15) --
------ ------ ------ ------ ------- ------ ------ -------------
Net asset value, end of year $11.70 $10.87 $10.79 $9.19 $8.33 $11.68 $10.86 $10.79
====== ====== ====== ====== ======= ====== ====== =============
Total return 16.12%+ 4.30%+ 21.64%+ 14.81%+ (6.51)%+ 15.43%+ 3.79%+ 0.05%+++
Net assets at end of year (000s) $37,327 $40,484 $28,995 $51,585 $45,233 $16,130 $10,752 $1,060
Ratio of operating expenses to average
net assets* 1.42% 1.50% 1.50% 1.50% 1.50% 2.00% 2.00% 2.00%++
Ratio of net investment income to
average net assets* 2.55% 2.42% 3.76% 4.27% 5.30% 1.95% 1.80% 1.53%++
Portfolio turnover rate 67.50% 73.96% 80.42% 102.39% 131.43% 67.50% 73.96% 80.42%
*Reflects voluntary assumption of fees or
expenses per share in each year (Note 3). $.05 $.05 $.01 $.01 $.01 $.05 $.07 $.00
</TABLE>
<TABLE>
<CAPTION>
Class C Class D
------------------------------- --------------------------------
June 1, 1993 June 1, 1993
(Commencement of (Commencement of
Year ended June 30 Share Class Year ended June 30 Share Class
---------------- Designations) to ------------------ Designations) to
1995** 1994 1993 1995** 1994 June 30, 1993
- -------------------------------------------- ------ ------ ----------- ------ ----- -------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $10.86 $10.79 $10.81 $10.86 $10.79 $10.81
Net investment income* .32 .33 .03 .22 .21 .02
Net realized and unrealized gain (loss) on
investments 1.39 .21 (.02) 1.36 .21 (.02)
Dividends from net investment income (.33) (.32) (.03) (.23) (.20) (.02)
Distributions from net realized gains (.54) (.15) -- (.54) (.15) --
------ ------ ----------- ------ ----- -------------
Net asset value, end of year $11.70 $10.86 $10.79 $11.67 $10.86 $10.79
====== ====== =========== ====== ===== =============
Total return 16.64%+ 4.84%+ 0.14%+++ 15.33%+ 3.78%+ 0.04%+++
Net assets at end of year (000s) $34,827 $20,266 $15,988 $1,366 $1,280 $628
Ratio of operating expenses to average net
assets* 1.00% 1.00% 1.00%++ 2.00% 2.00% 2.00%++
Ratio of net investment income to average
net assets* 2.93% 2.92% 1.65%++ 1.96% 1.88% 1.49%++
Portfolio turnover rate 67.50% 73.96% 80.42% 67.50% 73.96% 80.42%
*Reflects voluntary assumption of fees or
expenses per share in each year (Note 3). $.05 $.06 $.00 $.05 $.06 $.00
</TABLE>
**Per-share figures have been calculated using the average shares method.
++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.
10
<PAGE>
Report of Independent Accountants
To the Trustees of MetLife-State Street
Equity Trust and the Shareholders of
MetLife-State Street Research Equity Income 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 MetLife-State Street
Research Equity Income Fund, (formerly MetLife-State Street Equity Income
Fund) (a series of MetLife-State Street Equity Trust, hereafter referred to
as the "Trust") at June 30, 1995, 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 June 30, 1995 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable
basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Boston, Massachusetts
August 4, 1995
11
<PAGE>
Management's Discussion of Fund Performance
Equity Income Fund outperformed the average for Lipper Analytical Services'
equity income fund category for the 12 months ended June 30, 1995 (does not
reflect sales charge).
The Fund's portfolio is diversified into corporate and convertible bonds,
which provide more income and tend to offer less price fluctuation than
stocks. Stocks are selected on a value basis.
One of our largest industry positions was in retail stocks, which we began to
emphasize late in 1994 after retail stocks declined sharply. Even though the
economy appears to be slowing down, the Fund has targeted certain cyclical
stocks that could benefit from rising chemical and paper prices.
Equity Income Fund also participated in the two strongest sectors of the
market: technology and finance. In technology, our focus was on aerospace and
electronics stocks. Financial stocks performed poorly last year when interest
rates rose, but recovered in 1995 as rates declined. Our financial holdings
were concentrated in insurance stocks.
The Standard & Poor's 500 Composite Index (S&P 500) includes 500 widely
traded common stocks and is a commonly used measure of U.S. stock market
performance. The index is unmanaged and does not take sales charges into
consideration. Direct investment in the index is not possible; results are
for illustrative purposes only. All returns represent past performance, which
is no guarantee of future results. The investment return and principal value
of an investment made in the Fund will fluctuate and shares, when redeemed,
may be worth more or less than their original cost. All returns assume
reinvestment of capital gain distributions and income dividends. Performance
for a class includes periods prior to the adoption of class designations in
1993. Performance reflects up to a maximum 4.5% front-end sales charge or 5%
contingent deferred sales charge. "C" shares, offered without a sales charge,
are available only to certain employee benefit plans and institutions.
Performance for "B" and "D" shares prior to class designations in 1993
reflects annual 12b-1 fees of .50% and subsequent performance reflects annual
12b-1 fees of 1%.
Comparison Of Change In Value Of
A $10,000 Investment In Equity
Income Fund and The S&P 500
Class A Shares
Average Annual Total Return
1 Year 5 Year Life of Fund
+10.90% +8.63% +9.23%
"86" 9550 10000
"87" 10832 12605
"88" 10569 11730
"89" 12351 14135
"90" 13768 16462
"91" 12903 17678
"92" 14814 20048
"93" 18037 22779
"94" 18815 23099
"95" 21850 29112
Class B Shares
Average Annual Total Return
1 Year 5 Year Life of Fund
+10.43% +9.08% +9.63%
"86" 10000 10000
"87" 11342 12605.6
"88" 11074 11730.2
"89" 12954 14135.1
"90" 14443 16462
"91" 13528 17678
"92" 15533 20048
"93" 18896 22779
"94" 19611 23099
"95" 22637 29112
Class C Shares
Average Annual Total Return
1 Year 5 Year Life of Fund
+16.64% +9.83% +9.89%
"86" 10000 10000
"87" 11342 12605.6
"88" 11074 11730.2
"89" 12954 14135.1
"90" 14443 16462
"91" 13528 17678
"92" 15533 20048
"93" 18913 22779
"94" 19827 23099
"95" 23126 29112
Class D Shares
Average Annual Total Return
1 Year 5 Year Life of Fund
+14.33% +9.34% +9.62%
"86" 10000 10000
"87" 11342 12605.6
"88" 11074 11730.2
"89" 12954 14135.1
"90" 14443 16462
"91" 13528 17678
"92" 15533 20048
"93" 18895 22779
"94" 19609 23099
"95" 22615 29112
12
<PAGE>
State Street Research Global Resources Fund
a series of
State Street Research Equity Trust
STATEMENT OF ADDITIONAL INFORMATION
November 1, 1995
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ADDITIONAL INVESTMENT POLICIES AND RESTRICTIONS..........................................................2
ADDITIONAL INFORMATION CONCERNING
CERTAIN INVESTMENT TECHNIQUES............................................................................5
DEBT INSTRUMENTS AND PERMITTED CASH INVESTMENTS.........................................................15
RATING CATEGORIES OF DEBT SECURITIES....................................................................18
TRUSTEES AND OFFICERS...................................................................................21
INVESTMENT ADVISORY SERVICES............................................................................27
PURCHASE AND REDEMPTION OF SHARES.......................................................................28
NET ASSET VALUE.........................................................................................30
PORTFOLIO TRANSACTIONS..................................................................................31
CERTAIN TAX MATTERS.....................................................................................33
DISTRIBUTION OF SHARES OF THE FUND......................................................................35
CALCULATION OF PERFORMANCE DATA.........................................................................39
CUSTODIAN...............................................................................................42
INDEPENDENT ACCOUNTANTS.................................................................................42
FINANCIAL STATEMENTS....................................................................................42
</TABLE>
The following Statement of Additional Information is not a Prospectus.
It should be read in conjunction with the Prospectus of State Street Research
Global Resources Fund (the "Fund") dated November 1, 1995, which may be obtained
without charge from the offices of State Street Research Equity Trust (the
"Trust") or State Street Research Investment Services, Inc. (the "Distributor"),
One Financial Center, Boston, Massachusetts 02111-2690.
CONTROL NUMBER: 1285S-950717(0896) SSR-LD EG-879D-795
<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 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 "vote 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 a
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 invest in a security if the transaction would result in
the Fund owning more than 10% of any class of voting
securities of an issuer, except that this restriction does not
apply to investments in securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities or backed
by the U.S. Government;
(2) not to issue senior securities;
(3) not to underwrite or participate in the marketing of
securities of other issuers, except (a) the Fund may purchase
or otherwise acquire securities of other issuers for
investment, either from the issuers or from persons in a
control relationship with the issuers or from underwriters of
such securities; and (b) to the extent that, in connection
with the disposition of the Fund's securities, the Fund may be
deemed to be an underwriter under certain federal securities
laws;
(4) not to purchase or sell fee simple interests in real estate or
illiquid interests in limited partnerships that invest in real
estate, although the Fund may purchase and sell other
interests in real estate including readily marketable
interests in real estate investment trusts or companies which
own or invest or deal in real estate;
(5) not to invest in physical commodities or physical commodity
contracts or options in excess of 10% of the Fund's total
assets, except that investments in essentially financial items
or arrangements such as, but not limited to, swap
arrangements, hybrids, currencies, currency and other forward
contracts, futures contracts and options on futures contracts
on securities, securities indices, interest rates and
currencies shall not be deemed investments in commodities or
commodities contracts;
2
<PAGE>
(6) not to make loans, except that the Fund may lend portfolio
securities and purchase bonds, debentures, notes and similar
obligations (including repurchase agreements with respect
thereto);
(7) not to conduct arbitrage transactions (provided that
investments in futures and options shall not be deemed
arbitrage transactions);
(8) not to invest directly as a joint venturer or general partner
in oil, gas or other mineral exploration or development joint
ventures or general partnerships (provided that the Fund may
invest in securities issued by companies which invest in or
sponsor such programs and in securities indexed to the price
of oil, gas or other minerals);
(9) not to borrow money except for borrowings from banks for
extraordinary and emergency purposes, such as permitting
redemption requests to be honored, and then not in an amount
in excess of 25% of the value of its total assets, and except
insofar as reverse repurchase agreements may be regarded as
borrowing. The Fund will not purchase additional portfolio
securities at any time when it has outstanding money
borrowings in excess of 5% of the Fund's total assets (taken
at current value); and
(10) not to make any investment which would cause more than 25% of
the value of the Fund's total assets to be invested in
securities of issuers principally engaged in any one industry
other than any energy industry [for purposes of this
restriction, (a) energy and nonenergy industries will be
divided according to their services, so that, for example, in
the case of (i) utilities, gas, gas transmission, electric and
telephone companies each will be deemed to be in a separate
industry, and (ii) oil and oil related companies will be
divided by types, with oil production companies, oil service
companies and marketing companies each deemed to be in a
separate industry, (b) finance companies will be classified
according to the industries of their parent companies and (c)
securities issued or guaranteed by the U.S. Government, or its
agencies or instrumentalities (including repurchase agreements
involving such U.S. Government securities to the extent
excludable under relevant regulatory interpretations) shall be
excluded].
The following investment restrictions may be changed by a vote of a
majority of the Trustees. Under these restrictions, it is the Fund's policy:
(1) not to invest more than 5% of its total assets in securities
of private companies including predecessors with less than
three years' continuous operations except (a) securities
guaranteed or backed by an affiliate of the issuer with three
years of continuous operations, (b) securities issued or
guaranteed as to principal or interest by the U.S. Government,
or its agencies or instrumentalities, or a
3
<PAGE>
mixed-ownership Government corporation, (c) securities of
issuers with debt securities rated at least "BBB" by Standard
& Poor's Corporation or "Baa" by Moody's Investor's Service,
Inc. (or their equivalent by any other nationally recognized
statistical rating organization) or securities of issuers
considered by the Investment Manager to be equivalent, (d)
securities issued by a holding company with at least 50% of
its assets invested in companies with three years of
continuous operations including predecessors, and (e)
securities which generate income which is exempt from local,
state or federal taxes; provided that the Fund may invest up
to 15% in such issuers so long as such investments plus
investments in restricted securities (other than those which
are eligible for resale under Rule 144A, Regulation S or other
exemptive provisions) do not exceed 15% of the Fund's total
assets;
(2) not to engage in transactions in options except in connection
with options on securities, securities indices and currencies,
and options on futures contracts on securities, securities
indices and currencies;
(3) not to purchase securities on margin or make short sales of
securities or maintain a short position except for short sales
"against the box" (the Fund will not make short sales or
maintain a short position unless not more than 5% of the
Fund's net assets (taken at current value) is held as
collateral for such sales at any time);
(4) not to hypothecate, mortgage or pledge any of its assets
except as may be necessary in connection with permitted
borrowings (for the purpose of this restriction, futures and
options, and related escrow or custodian receipts or letters,
margin or safekeeping accounts, or similar arrangements used
in the industry in connection with the trading of futures and
options, are not deemed to involve a hypothecation, mortgage
or pledge of assets);
(5) not to purchase a security issued by another investment
company if, immediately after such purchase, the Fund would
own, in the aggregate, (i) more than 3% of the total
outstanding voting stock of such other investment company;
(ii) securities issued by such other investment company having
an aggregate value in excess of 5% of the value of the Fund's
total assets; or (iii) securities issued by such other
investment company and all other investment companies (other
than treasury stock of the Fund) having an aggregate value in
excess of 10% of the value of the Fund's total assets;
provided, however, that the Fund may purchase investment
company securities without limit for the purpose of completing
a merger, consolidation or other acquisition of assets;
(6) not to purchase or retain any security of an issuer if, to the
knowledge of the Trust, those of its officers and Trustees and
officers and directors of its investment advisers who
individually own more than 1/2 of 1% of the securities
4
<PAGE>
of such issuer, when combined, own more than 5% of the
securities of such issuer taken at market;
(7) not to invest in warrants more than 5% of the value of its
total assets and not to invest in warrants that are not listed
on the New York or American Stock Exchange more than 2% of its
total assets, in each case taken at the lower of cost or
market value (warrants initially attached to securities and
acquired by the Fund upon original issuance thereof shall be
deemed to be without value);
(8) not to invest in companies for the purpose of exercising
control over their management, although the Fund may from time
to time present its views on various matters to the management
of issuers in which it holds investments; and
(9) not to purchase any security or enter into a repurchase
agreement if as a result more than 15% of its total assets
would be invested in (a) securities that are illiquid because
of the absence of a readily available market or because such
securities are restricted securities (i.e., subject to legal
or contractual restrictions on resale), provided that such
restricted securities, excluding restricted securities
eligible for resale pursuant to exemptive rules or regulations
under the Securities Act of 1933, shall be limited to 5% of
total assets, and (b) repurchase agreements not entitling the
holder to payment of principal and interest within seven days.
The Fund has undertaken with a state securities authority that,
pursuant to clause (7) above, for so long as the Fund's shares are required to
be registered in that state, the Fund's investment in warrants, valued at the
lower of cost or market, may not exceed 5% of its net assets and included within
that amount, but not to exceed 2% of the value of its net assets, may be
warrants which are not listed on the New York or American Stock Exchange.
ADDITIONAL INFORMATION CONCERNING
CERTAIN INVESTMENT TECHNIQUES
Among other investments described below, the Fund may buy and sell
options, futures contracts and options on futures contracts with respect to
securities, securities indices, and currencies, and may enter into closing
transactions with respect to each of the foregoing under circumstances in which
such instruments and techniques are expected by State Street Research &
Management Company (the "Investment Manager") to aid in achieving the investment
objective of the Fund. The Fund on occasion may also purchase instruments with
characteristics of both futures and securities (e.g., debt instruments with
interest and principal payments determined by reference to the value of a
commodity or currency at a future time) and which, therefore, possess the risks
of both futures and securities investments.
5
<PAGE>
Futures Contracts
Futures contracts are publicly traded contracts to buy or sell
underlying assets, such as certain securities, currencies, or an index of
securities, at a future time at a specified price. A contract to buy establishes
a "long" position while a contract to sell establishes a "short" position.
The purchase of a futures contract on securities or an index of
securities normally enables a buyer to participate in the market movement of the
underlying asset or index after paying a transaction charge and posting margin
in an amount equal to a small percentage of the value of the underlying asset or
index. The Fund will initially be required to deposit with the Trust's custodian
or the broker effecting the futures transaction an amount of "initial margin" in
cash or U.S. Treasury obligations.
Initial margin in futures transactions is different from margin in
securities transactions in that the former does not involve the borrowing of
funds by the customer to finance the transaction. Rather, the initial margin is
like a performance bond or good faith deposit on the contract. Subsequent
payments (called "maintenance margin") to and from the broker will be made on a
daily basis as the price of the underlying asset fluctuates. This process is
known as "marking to market." For example, when the Fund has taken a long
position in a futures contract and the value of the underlying asset has risen,
that position will have increased in value and the Fund will receive from the
broker a maintenance margin payment equal to the increase in value of the
underlying asset. Conversely, when the Fund has taken a long position in a
futures contract and the value of the underlying instrument has declined, the
position would be less valuable, and the Fund would be required to make a
maintenance margin payment to the broker.
At any time prior to expiration of the futures contract, the Fund may
elect to close the position by taking an opposite position which will terminate
its position in the futures contract. A final determination of maintenance
margin is then made, additional cash is required to be paid by or released to
the Fund, and the Fund realizes a loss or a gain. While futures contracts with
respect to securities do provide for the delivery and acceptance of securities,
such delivery and acceptance are seldom made.
Futures contracts will be executed primarily (a) to establish a short
position, and thus protect the Fund from experiencing the full impact of an
expected decline in market value of portfolio holdings without requiring the
sale of holdings, or (b) to establish a long position, and thus to participate
in an expected rise in market value of securities which the Fund intends to
purchase. In transactions establishing a long position in a futures contract,
money market instruments equal to the face value of the futures contract will be
identified by the Fund to the Trust's custodian for maintenance in a separate
account to insure that the use of such futures contracts is unleveraged.
Similarly, a representative portfolio of securities having a value equal to the
aggregate face value of the futures contract will be identified with respect to
each
6
<PAGE>
short position. The Fund will employ any other appropriate method of cover which
is consistent with applicable regulatory and exchange requirements.
Options on Securities
The Fund may use options on securities to implement its investment
strategy. A call option on a security, for example, gives the purchaser of the
option the right to buy, and the writer the obligation to sell, the underlying
asset at the exercise price during the option period. Conversely, a put option
on a security gives the purchaser the right to sell, and the writer the
obligation to buy, the underlying asset at the exercise price during the option
period.
Purchased options have defined risk, i.e., the premium paid for the
option, no matter how adversely the price of the underlying asset moves, while
affording an opportunity for gain corresponding to the increase or decrease in
the value of the optioned asset.
Written options have varying degrees of risk. An uncovered written call
option theoretically carries unlimited risk, as the market price of the
underlying asset could rise far above the exercise price before its expiration.
This risk is tempered when the call option is covered, i.e., when the option
writer owns the underlying asset. In this case, the writer runs the risk of the
lost opportunity to participate in the appreciation in value of the asset rather
than the risk of an out-of-pocket loss. A written put option has defined risk,
i.e., the difference between the agreed-upon price that the Fund must pay to the
buyer upon exercise of the put and the value, which could be zero of the asset
at the time of exercise.
The obligation of the writer of an option continues until the writer
effects a closing purchase transaction or until the option expires. To secure
his obligation to deliver the underlying asset in the case of a call option, or
to pay for the underlying asset in the case of a put option, a covered writer is
required to deposit in escrow the underlying security or other assets in
accordance with the rules of the applicable clearing corporation and exchanges.
Options on Securities Indices
The Fund may engage in transactions in call and put options on
securities indices. For example, the Fund may purchase put options on indices of
fixed income securities in anticipation of or during a market decline to attempt
to offset the decrease in market value of its securities that might otherwise
result.
Put options on indices of securities are similar to put options on the
securities themselves except that the delivery requirements are different.
Instead of giving the right to make delivery of a security at a specified price,
a put option on an index of securities gives the holder the right to receive an
amount of cash upon exercise of the option if the value of the underlying index
has fallen below the exercise price. The amount of cash received will be equal
to the difference between the closing price of the index and the exercise price
of the option expressed in dollars times a specified multiple. As with options
on equity or fixed
7
<PAGE>
income securities, futures contracts or commodities, the Fund may offset its
position in index options prior to expiration by entering into a closing
transaction on an exchange or it may let the option expire unexercised.
A securities index assigns relative values to the securities included
in the index and the index options are based on a broad market index. Although
there are at present few available options on indices of fixed income
securities, other than tax-exempt securities, or futures and related options
based on such indices, such instruments may become available in the future. In
connection with the use of such options, the Fund may cover its position by
identifying a representative portfolio of securities having a value equal to the
aggregate face value of the option position taken. However, the Fund may employ
any appropriate method to cover its positions that is consistent with applicable
regulatory and exchange requirements.
Options on Futures Contracts
An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the period of the option.
Options Strategy
A basic option strategy for protecting the Fund against a decline in
securities prices could involve (a) the purchase of a put -- thus "locking in"
the selling price of the underlying securities or securities indices -- or (b)
the writing of a call on securities or securities indices held by the Fund --
thereby generating income (the premium paid by the buyer) by giving the holder
of such call the option to buy the underlying asset at a fixed price. The
premium will offset, in whole or in part, a decline in portfolio value; however,
if prices of the relevant securities or securities indices rose instead of
falling, the call might be exercised, thereby resulting in a potential loss of
appreciation in the underlying securities or securities indices.
A basic option strategy when a rise in securities prices is anticipated
is the purchase of a call -- thus "locking in" the purchase price of the
underlying security or other asset. In transactions involving the purchase of
call options by the Fund, money market instruments equal to the aggregate
exercise price of the options will be identified by the Fund to the Trust's
custodian to insure that the use of such investments is unleveraged.
The Fund may write options in connection with buy-and-write
transactions; that is, the Fund may purchase a security and concurrently write a
call option against that security or other asset. If the call option is
exercised in such a transaction, the Fund's maximum gain will be the premium
received by it for writing the option, adjusted upward or downward by the
difference between the Fund's purchase price of the security and the exercise
price of the option. If the option is not exercised and the price of the
underlying security declines, the amount of such decline will be offset in part,
or entirely, by the premium received.
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<PAGE>
The writing of covered put options is similar in terms of risk/return
characteristics to buy-and-write transactions. If the market price of the
underlying security or other asset rises or otherwise is above the exercise
price, the put option will expire worthless and the Fund's gain will be limited
to the premium received. If the market price of the underlying security declines
or otherwise is below the exercise price, the Fund's return will be the premium
received from writing the put option minus the amount by which the market price
of the security is below the exercise price.
Limitations and Risks of Options and Futures Activity
The Fund will engage in transactions in futures contracts or options
only as a hedge against changes resulting from market conditions which produce
changes in the values of its investments or the investments which it intends to
purchase (e.g., to replace portfolio securities which will mature in the near
future) and, subject to the limitations described below, to enhance return. The
Fund will not purchase any futures contract or purchase any call option if,
immediately thereafter, more than one third of the Fund's net assets would be
represented by long futures contracts or call options. The Fund will not write a
covered call or put option if, immediately thereafter, the aggregate value of
the assets (securities in the case of written calls and cash or cash equivalents
in the case of written puts) underlying all such options, determined as of the
dates such options were written, would exceed 25% of the Fund's net assets. In
addition, the Fund may not establish a position in a commodity futures contract
or purchase or sell a commodity option contract for other than bona fide hedging
purposes if immediately thereafter the sum of the amount of initial margin
deposits and premiums required to establish such positions for such nonhedging
purposes would exceed 5% of the market value of the Fund's net assets.
Although effective hedging can generally capture the bulk of a desired
risk adjustment, no hedge is completely effective. The Fund's ability to hedge
effectively through transactions in futures and options depends on the degree to
which price movements in its holdings correlate with price movements of the
futures and options.
Some positions in futures and options may be closed out only on an
exchange which provides a secondary market therefor. There can be no assurance
that a liquid secondary market will exist for any particular futures contract or
option at any specific time. Thus, it may not be possible to close such an
option or futures position prior to maturity. The inability to close options and
futures positions also could have an adverse impact on the Fund's ability to
effectively hedge its securities and might, in some cases, require the Fund to
deposit cash to meet applicable margin requirements. The Fund will enter into an
option or futures position only if it appears to be a liquid investment.
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.
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<PAGE>
Government securities or (ii) an FDIC-insured bank having gross assets in excess
of $500 million, simultaneously commits to repurchase it at an agreed-upon price
on an agreed-upon date within a specified number of days (usually not more than
seven) from the date of purchase. The repurchase price reflects the purchase
price plus an agreed-upon market rate of interest which is unrelated to the
coupon rate or maturity of the acquired security. The Fund will only enter into
repurchase agreements involving U.S. Government securities. Repurchase
agreements could involve certain risks in the event of default or insolvency of
the other party, including possible delays or restrictions upon the Fund's
ability to dispose of the underlying securities. Repurchase agreements will be
limited to 30% of the Fund's total assets, except that repurchase agreements
extending for more than seven days when combined with any other illiquid
securities held by the Fund will be limited to 10% of the Fund's total assets.
Reverse Repurchase Agreements
The Fund may enter into reverse repurchase agreements. In a reverse
repurchase agreement the Fund transfers possession of a portfolio instrument to
another person, such as a financial institution, broker or dealer, in return for
a percentage of the instrument's market value in cash, and agrees that on a
stipulated date in the future the Fund will repurchase the portfolio instrument
by remitting the original consideration plus interest at an agreed-upon rate.
The ability to use reverse repurchase agreements may enable, but does not ensure
the ability of, the Fund to avoid selling portfolio instruments at a time when a
sale may be deemed to be disadvantageous.
When effecting reverse repurchase agreements, assets of the Fund in a
dollar amount sufficient to make payment of the obligations to be purchased are
segregated on the Fund's records at the trade date and maintained until the
transaction is settled.
When-Issued Securities
The Fund may purchase "when-issued" securities, which are traded on a
price or yield basis prior to actual issuance. Such purchases will be made only
to achieve 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 dividends or interest on the securities are not payable. A frequent
form of when-issued trading occurs when corporate securities to be created by a
merger of companies are traded prior to the actual consummation of the merger.
Such transactions may involve a risk of loss if the value of the securities
falls below the price committed to prior to actual issuance. The Trust's
custodian will establish a segregated account when the Fund purchases securities
on a when-issued basis consisting of cash or liquid securities equal to the
amount of the when-issued commitments.
Securities Lending
The Fund may lend portfolio securities with a value of up to 33-1/3% of
its total assets. The Fund will receive cash or cash equivalents (e.g., U.S.
Government obligations) as
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<PAGE>
collateral in an amount equal to at least 100% of the current market value of
the loaned security plus accrued interest. Collateral received by the Fund will
generally be held in the form tendered, although cash may be invested in
securities in which the Fund is authorized to invest. The collateral will be
reflected as an asset, with an offsetting liability to the counterparty, on the
records of the Fund. Such loans may be terminated at any time. The Fund will
retain most rights of ownership including rights to dividends, interest or other
distributions on the loaned securities. Voting rights pass with the lending,
although the Fund may call loans to vote proxies if desired. Should the borrower
of 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.
Short Sales Against the Box
The Fund may effect short sales, but only if such transactions are
short sale transactions known as short sales "against the box." A short sale is
a transaction in which the Fund sells a security it does not own by borrowing it
from a broker, and consequently becomes obligated to replace that security. A
short sale against the box is a short sale where the Fund owns the security sold
short or has an immediate and unconditional right to acquire that security
without additional cash consideration upon conversion, exercise or exchange of
options with respect to securities held in its portfolio. The effect of selling
a security short against the box is to insulate that security against any future
gain or loss.
Rule 144A Securities
The Fund may buy or sell restricted securities in accordance with Rule
144A under the Securities Act of 1933 ("Rule 144A Securities"). Securities may
be resold pursuant to Rule 144A under certain circumstances only to qualified
institutional buyers as defined in the rule, and the markets and trading
practices for such securities are relatively new and still developing; depending
on the development of such markets, Rule 144A Securities may be deemed to be
liquid as determined by or in accordance with methods adopted by the Trustees.
Under such methods the following factors are considered, among others: the
frequency of trades and quotes for the security, the number of dealers and
potential purchasers in the market, marketmaking activity, and the nature of the
security and marketplace trades. Investments in Rule 144A Securities could have
the effect of increasing the level of the Fund's illiquidity to the extent that
qualified institutional buyers become, for a time, uninterested in purchasing
such securities. Also, the Fund may be adversely impacted by the possible
illiquidity and subjective valuation of such securities in the absence of a
market for them.
Swap Arrangements
The Fund may enter into various forms of swap arrangements with
counterparties with respect to interest rates, currency rates or indices,
including purchase of caps, floors and collars as described below. In an
interest rate swap, the Fund could agree for a specified
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<PAGE>
period to pay a bank or investment banker the floating rate of interest on a
so-called notional principal amount (i.e., an assumed figure selected by the
parties for this purpose) in exchange for agreement by the bank or investment
banker to pay the Fund a fixed rate of interest on the notional principal
amount. In a currency swap, the Fund would agree with the other party to
exchange cash flows based on the relative differences in values of a notional
amount of two (or more) currencies; in an index swap, the Fund would agree to
exchange cash flows on a notional amount based on changes in the values of the
selected indices. Purchase of a cap entitles the purchaser to receive payments
from the seller on a notional amount to the extent that the selected index
exceeds an agreed upon interest rate or amount whereas purchase of a floor
entitles the purchaser to receive such payments to the extent the selected index
falls below an agreed-upon interest rate or amount. A collar combines a cap and
a floor.
Most swaps entered into by the Fund will be on a net basis; for
example, in an interest rate swap, amounts generated by application of the fixed
rate and the floating rate to the notional principal amount would first offset
one another, with the Fund either receiving or paying the difference between
such amounts. In order to be in a position to meet any obligations resulting
from swaps, the Fund will set up a segregated custodial account to hold
appropriate liquid assets, including cash; for swaps entered into on a net
basis, assets will be segregated having a daily net asset value equal to any
excess of the Fund's accrued obligations over the accrued obligations of the
other party, while for swaps on other than a net basis assets will be segregated
having a value equal to the total amount of the Fund's obligations.
These arrangements will be made primarily for hedging purposes, to
preserve the return on an investment or on a part of the Fund's portfolio.
However, the Fund may enter into such arrangements for income purposes to the
extent permitted by the CFTC for entities which are not commodity pool
operators, such as the Fund. In entering a swap arrangement, the Fund is
dependent upon the creditworthiness and good faith of the counterparty. The Fund
attempts to reduce the risks of nonperformance by the counterparty by dealing
only with established, reputable institutions. The swap market is still
relatively new and emerging; positions in swap arrangements may become illiquid
to the extent that nonstandard arrangements with one counterparty are not
readily transferable to another counterparty or if a market for the transfer of
swap positions does not develop. The use of interest rate swaps is a highly
specialized activity which involves investment techniques and risks different
from those associated with ordinary portfolio securities transactions. If the
Investment Manager is incorrect in its forecasts of market values, interest
rates and other applicable factors, the investment performance of the Fund would
diminish compared with what it would have been if these investment techniques
were not used. Moreover, even if the Investment Manager is correct in its
forecasts, there is a risk that the swap position may correlate imperfectly with
the price of the asset or liability being hedged.
Currency Transactions
The Fund may engage in currency exchange transactions in order to
protect against the effect of uncertain future exchange rates on securities
denominated in foreign currencies. The
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<PAGE>
Fund will conduct its currency exchange transactions either on a spot (i.e.,
cash) basis at the rate prevailing in the currency exchange market, or by
entering into forward contracts to purchase or sell currencies. The Fund's
dealings in forward currency exchange contracts will be limited to hedging
involving either specific transactions or aggregate portfolio positions. A
forward currency contract involves an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the time of the
contract. These contracts are not commodities and are entered into in the
interbank market conducted directly between currency traders (usually large
commercial banks) and their customers. In entering a forward currency contract,
the Fund is dependent upon the creditworthiness and good faith of the
counterparty. The Fund attempts to reduce the risks of nonperformance by the
counterparty by dealing only with established, reputable institutions. Although
spot and forward contracts will be used primarily to protect the Fund from
adverse currency movements, they also involve the risk that anticipated currency
movements will not be accurately predicted, which may result in losses to the
Fund. This method of protecting the value of the Fund's portfolio securities
against a decline in the value of a currency does not eliminate fluctuations in
the underlying prices of the securities. It simply establishes a rate of
exchange that can be achieved at some future point in time. Although such
contracts tend to minimize the risk of loss due to a decline in the value of
hedged currency, they tend to limit any potential gain that might result should
the value of such currency increase.
Industry Classifications
In determining how much of the Fund's portfolio is invested in a given
industry, the following industry classifications, grouped by sectors, are
currently used:
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<TABLE>
<CAPTION>
Basic Industries Consumer Staple Science & Technology
- ---------------- --------------- --------------------
<S> <C> <C>
Chemical Business Service Aerospace
Diversified Container Computer Software & Service
Electrical Equipment Drug Electronic Equipment
Forest Products Food & Beverage Office Equipment
Machinery Hospital Supply
Metal & Mining Personal Care
Railroad Printing & Publishing
Truckers Tobacco
Utility Energy Consumer Cyclical
- ------- ------ -----------------
Electric Oil Airline
Natural Gas Oil Service Automotive
Telephone Building
Hotel & Restaurant
Photography
Recreation
Retail Trade
Textile & Apparel
Miscellaneous Finance
- ------------- -------
Bank
Financial Service
Insurance
</TABLE>
Other Investment Limitations
The Fund may invest up to 10% of its total assets in shares of other
investment companies as described herein under "Additional Investment Policies
and Restrictions." Such investments may involve the payment of duplicative
management or other fees. To mitigate such duplication, however, the Investment
Manager has agreed to waive up to the full amount of its investment advisory fee
with respect to investments, if any, in other open-end investment companies; the
amount of such waived fee will be deemed to be a reduction in management fees or
an assumption of expenses relating to the Fund as described under "Table of
Expenses" in the Prospectus.
The Fund has undertaken with a state securities authority that, for so
long as the Fund's shares are required to be registered for sale in such state,
the Fund will not purchase real estate limited partnerships or make investments
in oil, gas or mineral leases.
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<PAGE>
DEBT INSTRUMENTS AND PERMITTED CASH INVESTMENTS
Debt securities and short term investments acquired by the Fund may
include the following:
U.S. Government and Related Securities. U.S. Government securities are
securities which are issued or guaranteed as to principal or interest by the
U.S. Government, a U.S. Government agency or instrumentality, or certain
mixed-ownership Government corporations as described herein. The U.S. Government
securities in which the Fund invests include, among others:
* direct obligations of the U.S. Treasury, i.e., U.S. Treasury bills,
notes, certificates and bonds;
* obligations of U.S. Government agencies or instrumentalities such as
the Federal Home Loan Banks, the Farmers Home Administration, the
Federal Farm Credit Banks, the Federal National Mortgage
Association, the Government National Mortgage Association and the
Federal Home Loan Mortgage Corporation; and
* obligations of mixed-ownership Government corporations such as
Resolution Funding Corporation.
U.S. Government securities which the Fund may buy are backed in a
variety of ways by the U.S. Government, its agencies or instrumentalities. Some
of these obligations, such as Government National Mortgage Association
mortgage-backed securities and obligations of the Farmers Home Administration,
are backed by the full faith and credit of the U.S. Treasury. Other obligations,
such as those of the Federal National Mortgage Association, are backed by the
discretionary authority of the U.S. Government to purchase certain obligations
of agencies or instrumentalities, although the U.S. Government has no legal
obligation to do so. Obligations such as those of the Federal Home Loan Banks,
the Farmers Home Administration, the Federal Farm Credit Bank, the Federal
National Mortgage Association and the Federal Home Loan Mortgage Corporation are
backed by the credit of the agency or instrumentality issuing the obligations.
Certain obligations of Resolution Funding Corporation, a mixed-ownership
Government corporation, are backed with respect to interest payments by the U.S.
Treasury, and with respect to principal payments by U.S. Treasury obligations
held in a 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.
U.S. Government securities 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 traded
15
<PAGE>
independently under the Separate Trading of Registered Interest and Principal of
Securities ("STRIPS") program. Under the STRIPS program, the principal and
interest components are individually numbered and separately issued by the U.S.
Treasury at the request of depository financial institutions, which then trade
the component parts independently. Obligations of Resolution Funding Corporation
are similarly divided into principal and interest components and maintained as
such on the book entry records of the Federal Reserve Banks.
In addition, the Fund may invest in custodial receipts that evidence
ownership of future interest payments, principal payments or both on certain
U.S. Treasury notes or bonds in connection with programs sponsored by banks and
brokerage firms. Such notes and bonds are held in custody by a bank on behalf of
the owners of the receipts. These custodial receipts are known by various names,
including "Treasury Receipts" ("TRs"), "Treasury Investment Growth Receipts"
("TIGRs") and "Certificates of Accrual on Treasury Securities" ("CATS"), and may
not be deemed U.S. Government securities.
The Fund may also invest from time to time in collective investment
vehicles, the assets of which consist principally of U.S. Government securities
or other assets substantially collateralized or supported by such securities,
such as Government trust certificates.
Bank Money Investments. Bank money investments include but are not
limited to certificates of deposit, bankers' acceptances and time deposits.
Certificates of deposit are generally short-term (i.e., less than one year),
interest-bearing negotiable certificates issued by commercial banks or savings
and loan associations against funds deposited in the issuing institution. A
banker's acceptance is a time draft drawn on a commercial bank by a borrower,
usually in connection with an international commercial transaction (to finance
the import, export, transfer or storage of goods). A banker's acceptance may be
obtained from a domestic or foreign bank, including a U.S. branch or agency of a
foreign bank. The borrower is liable for payment as well as the bank, which
unconditionally guarantees to pay the draft at its face amount on the maturity
date. Most acceptances have maturities of six months or less and are traded in
secondary markets prior to maturity. Time deposits are nonnegotiable deposits
for a fixed period of time at a stated interest rate. The Fund will not invest
in any such bank money investment unless the investment is issued by a U.S. bank
that is a member of the Federal Deposit Insurance Corporation ("FDIC"),
including any foreign branch thereof, a U.S. branch or agency of a 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
16
<PAGE>
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.
Short-Term Corporate Debt Instruments. Short-term corporate debt
instruments include commercial paper (i.e., short-term, unsecured promissory
notes) to finance short-term credit needs issued by corporations including but
not limited to (a) domestic or foreign bank holding companies or (b) their
subsidiaries or affiliates where the debt instrument is guaranteed by the bank
holding company or an affiliated bank or where the bank holding company or the
affiliated bank is unconditionally liable for the debt instrument. Commercial
paper is usually sold on a discounted basis and has a maturity at the time of
issuance not exceeding nine months.
Commercial Paper Ratings. Commercial paper investments at the time of
purchase will be rated A by S&P or Prime by Moody's, or, if not rated, issued by
companies having an outstanding long-term unsecured debt issue rated at least A
by S&P or Prime by Moody's. The money market investments in corporate bonds and
debentures (which must have maturities at the date of settlement of one year or
less) must be rated at the time of purchase at least A by S&P or by Moody's.
Commercial paper rated A (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 BBB credits
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 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.
In the event the lowering of ratings of debt instruments held by the
Fund by applicable rating agencies results in a material decline in the overall
quality of such Fund's
17
<PAGE>
portfolio, the Trustees of the Trust will review the situation and take such
action as they deem in the best interests of such Fund's shareholders,
including, if necessary, changing the composition of the portfolio.
RATING CATEGORIES OF DEBT SECURITIES
Set forth below is a description of corporate bond and debenture
ratings of Standard & Poor's Corporation ("S&P"):
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay
principal, although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
Debt rated BB, B, CCC, CC and C is regarded as having speculative
characteristics with respect to capacity to pay interest and repay principal. BB
indicates the least degree of speculation and C the highest. While such debt
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major exposures to adverse conditions.
BB: Debt rated BB has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB rating.
B: Debt rated B has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB- rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial
18
<PAGE>
or economic conditions, it is not likely to have the capacity to pay interest
and repay principal. The CCC rating category is also used for debt subordinated
to senior debt that is assigned an actual or implied B or B- rating.
CC: The rating CC is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC debt rating.
C: The rating C is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.
CI: The rating CI is reserved for income bonds on which no interest is
being paid.
D: Debt rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
Plus (+) or Minus (-): The ratings from AA to CCC may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
S&P may attach the "r" symbol to derivative, hybrid, and certain other
obligations that S&P believes may experience high volatility or high variability
in expected returns due to noncredit risks created by the terms of the
obligation, such as securities whose principal or interest return is indexed to
equities, commodities, or currencies, certain swaps and options, and interest
only (IO) and principal only (PO) mortgage securities.
Set forth below is a description of corporate bond and debenture
ratings of Moody's Investors Service, Inc. ("Moody's"):
Aaa: Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt-edge." Interest payments are protected by a large or by an
exceptionally stable margin, and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
19
<PAGE>
A: Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present, but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during other good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
Ca: Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
1, 2 or 3: The ratings from Aa through B may be modified by the
addition of a numeral indicating a bond's rank within its rating category.
20
<PAGE>
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust, their addresses, and their
principal occupations and positions with certain affiliates of the Investment
Manager are set forth below.
*+Peter C. Bennett, One Financial Center, Boston, MA 02111, serves as
Vice President of the Trust. He is 57. 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 and Vice
President of State Street Research & Management Company. Mr. Bennett's other
principal business affiliations include Director, State Street Research
Investment Services, Inc. and Gefinor Securities S.A.
*+Bartlett R. Geer, One Financial Center, Boston, MA 02111 serves as
Vice President of the Trust. He is 40. His principal occupation is Senior Vice
President of State Street Research & Management Company. During the past five
years he has also served as Vice President of State Street Research & Management
Company.
*+Frederick R. Kobrick, One Financial Center, Boston, MA 02111, serves
as Vice President of the Trust. He is 52. His principal occupation is currently,
and during the past five years has been, Senior Vice President of State Street
Research & Management Company.
+Edward M. Lamont, Box 1234, Moores Hill Road, Syosset, NY 11791,
serves as Trustee of the Trust. He is 68. He is engaged principally in private
investments and civic affairs, and is an author of business history. Previously,
he was with Morgan Guaranty Trust Company of New York.
+Robert A. Lawrence, Saltonstall & Co., 50 Congress Street, Boston, MA
02109, serves as Trustee of the Trust. He is 69. His principal occupation during
the past five years has been Partner, Saltonstall & Co., a private investment
firm.
*+Gerard P. Maus, One Financial Center, Boston, MA 02111, serves as
Treasurer of the Trust. He is 44. His principal occupation is Executive Vice
President, Treasurer and Director of State Street Research & Management Company.
During the past five years he has also served as Executive Vice President and
Chief Financial Officer of New England Investment Companies and as Senior Vice
President and Vice President of New England Mutual Life Insurance 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.
*+Francis J. McNamara, III has served as Secretary and General Counsel
of the Trust since May, 1995. He is 40. His principal occupation is Senior Vice
President, Secretary and General Counsel of the Investment Manager. During the
past five years he has also served as Senior Vice President, General Counsel and
Assistant Secretary of The Boston Company, Inc., Boston Safe Deposit and Trust
Company and The Boston Company
- ------------------
* or + see footnotes on page 23
21
<PAGE>
Advisors, Inc. Mr. McNamara's other principal business affiliations include
Senior Vice President, Clerk and General Counsel of State Street Research
Investment Services, Inc.
*+Thomas P. Moore, Jr., 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 Vice President of State Street Research &
Management Company.
+Dean O. Morton, 3200 Hillview Avenue, Palo Alto, CA 94304, serves as
Trustee of the Trust. He is 63. He is retired, having served during the past
five years, until October 1992, as Executive Vice President, Chief Operating
Officer and Director of Hewlett-Packard Company.
+Thomas L. Phillips, 141 Spring Street, Lexington, MA 02173 serves as
Trustee of the Trust. He is 71. He is retired and was formerly Chairman of the
Board and Chief Executive Officer of Raytheon Company, of which he remains a
Director.
*Daniel J. Rice III, One Financial Center, Boston, MA 02111, serves as
Vice President of the Trust. He is 43. His principal occupation is Senior Vice
President of State Street Research & Management Company. During the past five
years he has also served as Vice President of State Street Research & Management
Company.
*+Steven P. Somes, One Financial Center, Boston, MA 02111, serves as
Vice President of the Trust. He is 37. His principal occupation is Vice
President of State Street Research & Management Company. During the past five
years he has also served as Senior Vice President of Gardner & Preston Moss, a
Boston-based investment advisory firm, and, prior to that, Vice President and
Analyst of State Street Research & Management Company.
+Toby Rosenblatt, 3409 Pacific Avenue, San Francisco, CA 94118, serves
as Trustee of the Trust. He is 57. His principal occupations during the past
five years have been President of The Glen Ellen Company, a private investment
company, and Vice President of Founders Investments Ltd.
+Michael S. Scott Morton, Massachusetts Institute of Technology, 77
Massachusetts Avenue, Cambridge, MA 02139, serves as Trustee of the Trust. He is
58. His principal occupation during the past five years has been Jay W.
Forrester Professor of Management at Sloan School of Management, Massachusetts
Institute of Technology.
*+Ralph F. Verni, One Financial Center, Boston, MA 02111, serves as
Chairman of the Board, President, Chief Executive Officer and Trustee of the
Trust. He is 52. His principal occupation is Chairman of the Board, President,
Chief Executive Officer and Director of State Street Research & Management
Company. During the past five years he also served as President and Chief
Executive Officer of New England Investment Companies and as Chief Investment
Officer and Director of New England Mutual Life Insurance Company. Mr. Verni's
other principal business affiliations include Chairman of the Board,
- ------------------
* or + see footnotes on page 23
22
<PAGE>
President, Chief Executive Officer and Director of State Street
Research Investment Services, Inc.
+Jeptha H. Wade, 251 Old Billerica Road, Bedford, MA 01730, serves as
Trustee of the Trust. He is 70. 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.
- ------------------
+Serves as a Trustee and/or officer of one or more of the following
investment companies, each of which has an advisory or distribution relationship
with the Investment Manager or its affiliates: State Street Research Equity
Trust, MetLife - 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.
*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.
23
<PAGE>
As of July 31, 1995, the Trustees and officers of the Trust as a group
owned approximately 1.2% of the Fund's outstanding Class A shares and owned no
shares of the Fund's outstanding Class B, Class C or Class D shares.
Also as of July 31, 1995, 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:
<TABLE>
<CAPTION>
Shareholder %
----------- ---
<S> <C> <C>
Class A Merrill Lynch 22.6
Class B Merrill Lynch 11.5
Class C United States Trust Company 86.0
Class D Metropolitan Life 19.7
Merrill Lynch 7.4
P.A. Spitalieri 5.5
PaineWebber 13.8
</TABLE>
The full name and address of each of the above persons or entities are
as follows:
Merrill Lynch, Pierce, Fenner & Smith, Inc. (a)
One Liberty Plaza
165 Broadway
New York, New York 10080
United States Trust Company (b)
770 Broadway
New York, New York 10003
Metropolitan Life Insurance Company (c)
One Madison Avenue
New York, New York 10010
P.A. Spitalieri
c/o State Street Research Shareholder Services
One Financial Center
Boston, Massachusetts 02111
PaineWebber, Incorporated (a)
1285 Avenue of the Americas
New York, New York 10019
24
<PAGE>
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.
- ------------------
(a) The Fund believes that such entity does not have beneficial ownership of
such shares.
(b) United States Trust Company holds such shares as a 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.
25
<PAGE>
During the fiscal year ended June 30, 1995, the Trustees were
compensated as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Total
Compensation
Aggregate From Trust and
Name of Compensation Complex Paid
Trustee From Trust(a) to Trustees(b)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Edward M. Lamont $ 10,300 $ 58,446
Robert A. Lawrence $ 10,300 $ 86,110
Dean O. Morton $ 11,500 $ 95,360
Thomas L. Phillips $ 10,500 $ 65,560
Toby Rosenblatt $ 10,300 $ 58,446
Michael S. Scott Morton $ 12,300 $ 96,510
Ralph F. Verni $ 0 $ 0
Jeptha H. Wade $ 10,500 $ 65,860
</TABLE>
(a) Includes compensation from multiple series of the Trust. See
"Distribution of Shares" for a listing of series.
(b) Includes compensation from Metropolitan Series Fund, Inc., for which
the Investment Manager serves as sub-investment adviser, State Street
Research Portfolios, Inc., for which State Street Research Investment
Services, Inc. serves as distributor, and all investment companies for
which the Investment Manager serves as primary investment adviser,
comprising a total of 30 series. The Trust does not provide any pension
or retirement benefits for the Trustees.
26
<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 net assets of the
Fund 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 0.75% of the net
assets of the Fund. 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 years ended
June 30, 1993, 1994 and 1995, the Fund's investment advisory fee prior to the
assumption of fees or expenses was $177,220, $281,318 and $284,926,
respectively. For the same periods, the voluntary reduction of fees or
assumption of expenses amounted to $80,236, $360,878 and $307,559, respectively.
Further, to the extent required under applicable state regulatory
requirements, the Investment Manager will reduce its management fee up to the
amount of any expenses (excluding permissible items, such as Rule 12b-1
Distribution Plan payments, brokerage commissions, interest, taxes and
litigation expenses) paid or incurred by the Fund in any fiscal year which
exceed specified percentages of the average daily net assets of the Fund for
such fiscal year. The most restrictive of such percentage limitations is
currently 2.5% of the first $30 million of average net assets, 2.0% of the next
$70 million of average net assets and 1.5% of the remaining average net assets.
These commitments may be amended or rescinded in response to changes in the
requirements of the various states by the Trustees without shareholder approval.
The Advisory Agreement provides that it shall continue in effect with
respect to the Fund for a period of two years after its initial effectiveness
and will continue from year to year thereafter as long as it is approved at
least annually both (i) by a vote of a majority of the outstanding voting
securities of the Fund (as defined in the 1940 Act) or by the Trustees of the
Trust, and (ii) in either event by a vote of a majority of the Trustees who are
not parties to the Advisory Agreement or "interested persons" of any party
thereto, cast in person at a meeting called for the purpose of voting on such
approval. The Advisory Agreement may be terminated on 60 days' written notice by
either party and will terminate automatically in the event of its assignment, as
defined under the 1940 Act and regulations thereunder. Such regulations provide
that a transaction which does not result in a change of actual control or
management of an adviser is not deemed an assignment.
27
<PAGE>
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 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, where investment management operations are conducted, are only permitted
to engage in personal securities transactions in accordance with certain
conditions relating to an employee'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
four 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 C shares, a sales
charge which, at the election of the investor, may be imposed (i) at the time of
purchase (the Class A shares) or (ii) on a deferred basis (the Class B and Class
D shares). General information on how to buy shares of the Fund, as well as
sales charges involved, is set forth under "Purchase of Shares" in the
Prospectus. The following supplements that information.
Public Offering Price - The public offering price for each class of
shares of the Fund is based on their net asset value determined as of the close
of the NYSE on the day the purchase order is received by State Street Research
Shareholder Services provided that the order is received prior to the close of
the NYSE on that day; otherwise the net asset value used is that determined as
of the close of the NYSE on the next day it is open for unrestricted trading.
When a purchase order is placed through a dealer, that dealer is responsible for
transmitting the order promptly to State Street Research Shareholder Services in
order to permit the investor to obtain the current price. Any loss suffered by
an investor which results from a dealer's failure to transmit an order promptly
is a matter for settlement between the investor and the dealer.
Reduced Sales Charges - For purposes of determining whether a purchase
of Class A shares qualifies for reduced sales charges, the term "person"
includes: (i) an individual, or
28
<PAGE>
an individual combining with his or her spouse and their children and purchasing
for his, her or their own account; (ii) a "company" as defined in Section
2(a)(8) of the 1940 Act; (iii) a trustee or other fiduciary purchasing for a
single trust estate or single fiduciary account (including a pension, profit
sharing or other employee benefit trust created pursuant to a plan qualified
under Section 401 of the Internal Revenue Code); (iv) a tax-exempt organization
under Section 501(c)(3) or (13) of the Internal Revenue Code; and (v) an
employee benefit plan of a single employer or of affiliated employers.
Investors may purchase Class A shares of the Fund at reduced sales
charges by executing a Letter of Intent to purchase no less than an aggregate of
$100,000 of the Fund or any combination of Class A shares of "Eligible Funds" as
designated by the Distributor within a 13-month period. The sales charge
applicable to each purchase made pursuant to a Letter of Intent will be that
which would apply if the total dollar amount set forth in the Letter of Intent
were being bought in a single transaction. Purchases made within a 90-day period
prior to the execution of a Letter of Intent may be included therein; in such
case the date of the earliest of such purchases marks the commencement of the
13-month period.
An investor may include toward completion of a Letter of Intent the
value (at the current public offering price) of all of his or her Class A shares
of the Fund and of any of the other Class A shares of Eligible Funds held of
record as of the date of his or her Letter of Intent, plus the value (at the
current offering price) as of such date of all of such shares held by any
"person" described herein as eligible to join with the investor in a single
purchase. Class B, Class C and Class D shares may also be included in the
combination under certain circumstances.
A Letter of Intent does not bind the investor to purchase the specified
amount. Shares equivalent to 5% of the specified amount will, however, be taken
from the initial purchase (or, if necessary, subsequent purchases) and held in
escrow in the investor's account as collateral against the higher sales charge
which would apply if the total purchase is not completed within the allotted
time. The escrowed shares will be released when the Letter of Intent is
completed or, if it is not completed, when the balance of the higher sales
charge is, upon notice, remitted by the investor. All dividends and capital
gains distributions with respect to the escrowed shares will be credited to the
investor's account.
Investors may purchase Class A shares of the Fund or a combination of
Eligible Funds at reduced sales charges pursuant to a Right of Accumulation. The
applicable sales charge under the right is determined on the amount arrived at
by combining the dollar amount of the purchase with the value (at the current
public offering price) of all Class A shares of the other Eligible Funds owned
as of the purchase date by the investor plus the value (at the current public
offering price) of all such shares owned as of such date by any "person"
described herein as eligible to join with the investor in a single purchase.
Class B, Class C and Class D shares may also be included in the combination
under certain circumstances. Investors must submit to the Distributor sufficient
information to show that they qualify for this Right of Accumulation.
29
<PAGE>
Class C Shares - Class C shares are currently available to certain
benefit plans such as qualified retirement plans, other than individual
retirement accounts and self-employed retirement plans, which meet criteria
relating to level of assets, number of participants, service agreements, or
similar factors; banks and insurance companies; endowment funds of nonprofit
organizations with substantial minimum assets; and other similar institutional
investors.
Reorganizations - In the event of mergers or reorganizations with other
public or private collective investment entities, including investment companies
as defined 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.
NET ASSET VALUE
The net asset value of the shares of the Fund is determined once daily
as of the close of the NYSE, ordinarily 4 P.M. New York City time, Monday
through Friday, on each day during which the NYSE is open for unrestricted
trading. The NYSE is currently closed on New Year's Day, Presidents Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
The net asset value per share of the Fund is computed by dividing the
sum of the value of the securities held by the Fund plus any cash or other
assets minus all liabilities by the total number of outstanding shares of the
Fund at such time. Any expenses, except for extraordinary or nonrecurring
expenses, borne by the Fund, including the investment management fee payable to
the Investment Manager, are accrued daily.
In determining the values of portfolio assets as provided below, the
Trustees may utilize one or more pricing services in lieu of market quotations
for certain securities which are not readily available on a daily basis. Such
services may provide prices determined as of times prior to the close of the
NYSE.
In general, securities are valued as follows. Securities which are
listed or traded on the New York or American Stock Exchange are valued at the
price of the last quoted sale on the respective exchange for that day.
Securities which are listed or traded on a national securities exchange or
exchanges, but not on the New York or American Stock Exchange,
30
<PAGE>
are valued at the price of the last quoted sale on the exchange for that day
prior to the close of the NYSE. Securities not listed on any national securities
exchange which are traded "over the counter" and for which quotations are
available on the National Association of Securities Dealers' NASDAQ System, or
other system, are valued at the closing price supplied through such system for
that day at the close of the NYSE. Other securities are, in general, valued at
the mean of the bid and asked quotations last quoted prior to the close of the
NYSE if there are market quotations readily available, or in the absence of such
market quotations, then at the fair value thereof as determined by or under
authority of the Trustees of the Trust utilizing such pricing services as may be
deemed appropriate as described above. Securities deemed restricted as to resale
are valued at the fair value thereof as determined by or in accordance with
methods adopted by the Trustees of the Trust.
Short-term debt instruments issued with a maturity of one year or less
which have a remaining maturity of 60 days or less are valued using the
amortized cost method, provided that during any period in which more than 25% of
the Fund's total assets is invested in short-term debt securities the current
market value of such securities will be used in calculating net asset value per
share in lieu of the amortized cost method. The amortized cost method is used
when the value obtained is fair value. Under the amortized cost method of
valuation, the security is initially valued at cost on the date of purchase (or
in the case of short-term debt instruments purchased with more than 60 days
remaining to maturity, the market value on the 61st day prior to maturity), and
thereafter a constant amortization to maturity of any discount or premium is
assumed regardless of the impact of fluctuating interest rates on the market
value of the security.
PORTFOLIO TRANSACTIONS
Portfolio Turnover
The Fund's portfolio turnover rate is determined by dividing the lesser
of securities purchases or sales for a year by the monthly average value of
securities held by the Fund (excluding, for purposes of this determination,
securities the maturities of which as of the time of their acquisition were one
year or less). The portfolio turnover rates for the fiscal years ended June 30,
1994 and 1995 were 30.98% and 62.94%, respectively.
The Investment Manager believes the portfolio turnover rate for the
fiscal year ended June 30, 1994 was significantly lower than that for the
previous fiscal year because there was less volatility in the natural gas
markets, thereby leading to fewer changes in portfolio strategy; and also
because there were fewer redemptions of Fund shares which allowed the Investment
Manager to hold portfolio securities longer, as additional cash was not needed
to meet redemption requests.
Conversely, the Investment Manager believes the portfolio turnover rate
for the fiscal year ended June 30, 1995 was significantly higher than that for
the previous fiscal year because of opposite forces, namely, more volatility in
the natural gas markets, thereby leading to more changes in portfolio strategy,
and more redemptions of Fund shares which required the Investment Manager to
liquidate portfolio securities.
31
<PAGE>
Brokerage Allocation
The Fund and the Investment Manager seek the best overall execution of
purchase or sale orders and the most favorable net price in securities
transactions consistent with their judgment as to the business qualifications of
the various broker or dealer firms with which the Fund may do business.
Decisions with respect to the market in which the transaction is to be
completed, 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 the performance, integrity and financial
responsibility of the various firms as well as to their demonstrated execution
experience and capability generally and in regard to particular markets or
securities and, in agency transactions, to the competitiveness of the commission
rates (or in principal transactions of the net prices) they charge. The
Investment Manager keeps current as to the range of rates or prices charged by
various firms and against this background evaluates the reasonableness of a
commission or price charged with respect to a particular transaction by
considering such factors as difficulty of execution or security positioning by
the executing firm.
When it appears that a number of firms can satisfy the required
standards in respect of a particular transaction, consideration may also be
given to services other than execution services which such firms have provided
in the past or may provide in the future. Among such other services are the
supplying of supplemental investment research, general economic and political
information, analytical and statistical data, relevant market information and
daily market quotations for computation of net asset value. In this connection
it should be noted that a substantial portion of brokerage commissions paid, or
principal transactions entered, by the Fund may be with brokers and investment
banking firms which, in the normal course of business, publish statistical,
research and other material which is received by the Investment Manager and
which may or may not prove useful to the Investment Manager, the Fund or other
clients of the Investment Manager.
Neither the Fund nor the Investment Manager has any definite agreements
with any firm as to the amount of business which that firm may expect to receive
for services supplied 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
business. These understandings are honored to the extent possible in accordance
with the policy set forth above. Neither the Fund nor the Investment Manager
intends to pay a firm in excess of that which another would charge for handling
the same transaction in recognition of services (other than execution services)
provided. However, the Fund and the Investment Manager are aware that this is an
area where differences of opinion as to fact and circumstances may exist, and in
such circumstances, if any, rely on the provisions of Section 28(e) of the
Securities Exchange Act of 1934, to the extent applicable. During the fiscal
years ended June 30, 1993, 1994 and 1995, the Fund paid $73,056, $99,253 and
$149,770, respectively, in brokerage commissions. 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.
32
<PAGE>
Occasions may arise when the Investment Manager determines that an
investment in a particular security, or the disposition of a particular
security, is simultaneously a proper investment decision for the Fund as well as
for the portfolio of one or more of its other clients. In this event, a purchase
or sale, as the case may be, of any such security on any given day will be
normally averaged as to price and allocated as to amount among the several
clients in a manner deemed equitable to each client.
On occasions when the Investment Manager deems the purchase or sale of
a security to be in the best interests of the Fund, as well as other clients of
the Investment Manager, the Investment Manager, to the extent permitted by
applicable laws and regulations, may aggregate such securities to be sold or
purchased for the Fund with those to be sold or purchased for other customers in
order to obtain best execution and lower brokerage commissions, if any. In such
event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Investment Manager in
the manner it considers to be most equitable and consistent with its fiduciary
obligations to all such customers, including the Fund. In some instances, this
procedure may affect the price and size of the positions obtainable for the
Fund.
CERTAIN TAX MATTERS
Federal Income Taxation of the Fund -- In General
The Fund intends to qualify and elect to be treated each taxable year
as a "regulated investment company" under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"), although it cannot give complete
assurance that it will do so. Accordingly, 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) stock 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).
The 30% test will limit the extent to which the Fund may sell
securities held for less than three months, write options which expire in less
than three months, and effect closing transactions with respect to call or put
options that have been written or purchased within the preceding three months.
(If the Fund purchases a put option for the purpose of hedging an
33
<PAGE>
underlying portfolio security, the acquisition of the option is treated as a
short sale of the underlying security unless, for purposes only of the 30% test,
the option and the security are acquired on the same date.) Finally, as
discussed below, this requirement may also limit investments by the Fund in
options on stock indices, listed options on nonconvertible debt securities,
futures contracts, options on interest rate futures contracts and certain
foreign currency contracts.
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 or accumulated earnings and profits. Also, the
shareholders, if they received a distribution in excess of current or
accumulated earnings and profits, would receive a return of capital that would
reduce the basis of their shares of the Fund to the extent thereof. Any
distribution in excess of a shareholder's basis in the shareholder's shares of
the Fund would be taxable as gain realized from the sale of such shares.
The Fund will be liable for a nondeductible 4% excise tax on amounts
not distributed on a timely basis in accordance with a calendar year
distribution requirement. To avoid the tax, during each calendar year the Fund
must distribute 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. The Fund intends to make sufficient distributions to avoid this 4%
excise tax.
Federal Income Taxation of the Fund's Investments
Original Issue Discount. For federal income tax purposes, debt
securities purchased by the Fund may be treated as having original issue
discount. Original issue discount represents interest for federal income tax
purposes and can generally be defined as the excess of the stated redemption
price at maturity of a debt obligation over the issue price. Original issue
discount is treated for federal income tax purposes as income earned by the
Fund, whether or not any income is actually received, and therefore is subject
to the distribution requirements of the Code. Generally, the amount of original
issue discount is determined on the basis of a constant yield to maturity which
takes into account the compounding of accrued interest. Under section 1286 of
the Code, an investment in a stripped bond or stripped coupon may result in
original issue discount.
Debt securities may be purchased by the Fund at a discount that exceeds
the original issue discount plus previously accrued original issue discount
remaining on the securities, if any, at the time the Fund purchases the
securities. This additional discount represents market discount for federal
income tax purposes. In the case of any debt security issued after July 18,
1984, having a fixed maturity date of more than one year from the date of issue
and having market discount, the gain realized on disposition will be treated as
interest to the extent it does not exceed the accrued market discount on the
security (unless the Fund
34
<PAGE>
elects to include such accrued market discount in income in the tax year to
which it is attributable). Generally, market discount is accrued on a daily
basis. The Fund may be required to capitalize, rather than deduct currently,
part or all of any direct interest expense incurred or continued to purchase or
carry any debt security having market discount, unless the Fund makes the
election to include market discount currently. Because the Fund must include
original issue discount in income, it will be more difficult for the Fund to
make the distributions required for the Fund to maintain its status as a
regulated investment company under Subchapter M of the Code or to avoid the 4%
excise tax described above.
Options and Futures Transactions. Certain of the Fund's investments may
be subject to provisions of the Code that (i) require inclusion of unrealized
gains or losses in the Fund's income for purposes of the 90% test, the 30% test,
the excise tax and the distribution requirements applicable to regulated
investment companies; (ii) defer recognition of realized losses; and (iii)
characterize both realized and unrealized gain or loss as short-term or
long-term gain or loss. Such provisions generally apply to, among other
investments, options on debt securities, indices on securities and futures
contracts.
Federal Income Taxation of Shareholders
Dividends paid by the Fund may be eligible for the 70%
dividends-received deduction for corporations. The percentage of the Fund's
dividends eligible for such tax treatment may be less than 100% to the extent
that less than 100% of the Fund's gross income may be from qualifying dividends
of domestic corporations. Any dividend declared in October, November or December
and made payable to shareholders of record in any such month is treated as
received by such shareholders on December 31, provided that the Fund pays the
dividend during January of the following calendar year.
Distributions by the Fund can result in a reduction in the fair market
value of the Fund's shares. Should a distribution reduce the fair market value
below a shareholder's cost basis, such distribution nevertheless may be taxable
to the shareholder as ordinary income or long-term capital gain, even though,
from an investment standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax implications of
buying shares just prior to a taxable distribution. The price of shares
purchased at that time includes the amount of any forthcoming distribution.
Those investors purchasing shares just prior to a taxable distribution will then
receive a return of investment upon distribution which will nevertheless be
taxable to them.
DISTRIBUTION OF SHARES OF THE FUND
State Street Research Equity Trust (formerly, MetLife - State Street
Equity Trust) is currently comprised of the following series: State Street
Research Capital Appreciation Fund, State Street Research Equity Investment
Fund, State Street Research Equity Income Fund and State Street Research Global
Resources Fund (formerly, MetLife - State Street Research Capital Appreciation
Fund, MetLife - State Street Research Equity Investment Fund, MetLife - State
Street Research Equity Income Fund and State Street Research Global
35
<PAGE>
Energy Fund, respectively). The Trustees have authorized the Fund to issue four
classes of shares: Class A, Class B, Class C and 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 classes.
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 (subject
to certain exceptions) a sales charge which, at the election of the investor,
may be imposed (i) at the time of purchase (the Class A shares) or (ii) on a
deferred basis (Class B and Class D shares). The Distributor may reallow all or
portions of such sales charges as concessions to dealers. For the fiscal years
ended June 30, 1993, 1994 and 1995, total sales charges on Class A shares paid
to the Distributor amounted to approximately $223,639, $218,494 and $93,586,
respectively. For the same periods, the Distributor retained $33,002, $25,672
and $10,670, respectively, after reallowance of concessions to dealers.
The differences in the price at which the Fund's Class A shares are
offered due to scheduled variations in sales charges, as described in the Fund's
Prospectus, result from cost savings inherent in economies of scale. Management
believes that the cost of sales efforts of the Distributor and broker-dealers
tends to decrease as the size of purchases increases, or does not involve any
incremental sales expenses as in the case of, for example, exchanges,
reinvestments or dividend investments at net asset value. Similarly, no
significant sales effort is necessary for sales of shares at net asset value to
certain Directors, Trustees, officers, employees, their relatives and other
persons directly or indirectly related to the Fund or associated entities. Where
shares of the Fund are offered at a reduced sales charge or without a sales
charge pursuant to sponsored arrangements, the amount of the sales charge
reduction will similarly reflect the anticipated reduction in sales expenses
associated with such sponsored arrangements. The reduction in sales expenses,
and therefore the reduction in sales charge, will vary depending on factors such
as the size and stability of the organization, the term of the organization's
existence and certain characteristics of its members. The Fund reserves the
right to make variations in, or eliminate, sales charges at any time or to
revise the terms of or to suspend or discontinue sales pursuant to sponsored
arrangements at any time.
On any sale of Class A shares to a single investor in the amount of
$1,000,000 or more, the Distributor will pay the authorized securities dealer
making such sale a commission on the shares sold. Such commission also is
payable to authorized securities dealers upon sales of Class A shares made
pursuant to a Letter of Intent to purchase shares having a net asset value of
$1,000,000 or more. Shares sold with such commissions payable are subject
36
<PAGE>
to a one-year contingent deferred sales charge of 1.00% on any portion of such
shares redeemed within one year following their sale. After a particular
purchase of Class A shares is made under the Letter of Intent, the commission
will be paid only in respect of that particular purchase of shares. If the
Letter of Intent is not completed, the commission paid will be deducted from any
discounts or commissions otherwise payable to such dealer in respect of shares
actually sold. If an investor is eligible to purchase shares at net asset value
on account of the Right of Accumulation, the commission will be paid only in
respect of the incremental purchase at net asset value.
For the periods shown below, the Distributor received contingent
deferred sales charges upon redemption of Class A, Class B and Class D shares
and paid initial commissions to securities dealers for sales of such Class A,
Class B and Class D shares as follows:
<TABLE>
<CAPTION>
June 1, 1993
(commencement
of share class
Fiscal Year Fiscal Year designations) to
Ended June 30, 1995 Ended June 30, 1994 June 30, 1993
------------------------------- ------------------------------- -----------------------
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 A $21,450 $0 $0 $0 $0 $0
Class B $36,122 $29,957 $8,308 $163,664 $0 $15,233
Class D $1,185 $0 $310 $ 15,955 $0 $502
</TABLE>
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 A, Class B and Class D 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 special promotional fees and cash
and noncash incentives based upon sales by securities dealers, 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
37
<PAGE>
consideration of the provision of personal services to investors and/or the
maintenance of shareholder accounts and expenses associated with the provision
of personal services 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 (i) with respect to Class A shares, an annual rate of 0.25% of the
average daily value of net assets represented by such Class A shares, and (ii)
with respect to Class B and Class D shares, an annual rate of 0.75% of the
average daily value of the net assets represented by such Class B or Class D
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 D shares (as the case may be) to make payments for personal
services and/or the maintenance 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.
38
<PAGE>
During the fiscal year ended June 30, 1995, 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:
<TABLE>
<CAPTION>
Class A Class B Class D
------- ------- -------
<S> <C> <C> <C>
Advertising $ 5,671 $ 0 $ 1,338
Printing and mailing
of prospectuses to
other than current
shareholders 1,810 0 427
Compensation to dealers 82,408 64,359 11,751
Compensation to sales
personnel 16,914 0 3,990
Interest 0 0 0
Carrying or other
financing charges 0 0 0
Other expenses; marketing 13,185 0 3,110
---------- ---------- ----------
Total fees $119,988 $64,359 $20,616
========== ========= =========
</TABLE>
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 A, Class B, Class C and Class D shares of the Fund will be
calculated as set forth below. Total
39
<PAGE>
return and yield are computed separately for each class of shares of the Fund.
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. Performance data for a specified class
includes periods prior to the adoption of class designations.
The performance data below reflects Rule 12b-1 fees and, where
applicable, sales charges as follows:
<TABLE>
<CAPTION>
Rule 12b-1 Fees Sales Charges
--------------------------------------------------- ---------------------------------
Current
Class Amount Period
<S> <C> <C> <C>
A 0.25% 0.50% until March 10, 1995; Maximum 4.5% sales charge reflected
0.25% thereafter
B 1.00% 0.50% until June 1, 1993; 1.00% 1- and 5-year periods reflect a 5% and
June 1, 1993 to present; fee will reduce a 2% contingent deferred sales charge,
performance for periods after June 1, respectively
1993
C None 0.50% until June 1, 1993; None
0% thereafter
D 1.00% 0.50% until June 1, 1993; 1.00% 1-year period reflects a 1% contingent
June 1, 1993 to present; fee will reduce deferred sales charge
performance for periods after June 1,
1993
</TABLE>
All calculations of performance data in this section reflect the
voluntary measures by the Fund's affiliates to reduce fees or expenses relating
to the Fund; see "Accrued Expenses" later in this section.
Total Return
The Fund's average annual total return ("standard total return") of
each class of shares was as follows:
<TABLE>
<CAPTION>
Commencement of
Operations One Year Five Years
(March 2, 1990) Ended Ended
to June 30, 1995 June 30, 1995 June 30, 1995
---------------- ------------- -------------
With Without With Without With Without
Subsidy Subsidy Subsidy Subsidy Subsidy Subsidy
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Class A -0.40% -1.01% -1.92% -2.95% 0.80% 0.16%
Class B 0.26% -0.40% -2.88% -3.96% 1.13% 0.43%
Class C 0.63% -0.06% 3.11% 2.03% 1.91% 1.19%
Class D 0.24% -0.40% 1.12% 0.04% 1.49% 0.82%
</TABLE>
40
<PAGE>
Standard total return is computed separately for each class of shares
by determining the average annual compounded rates of return over the designated
periods that, if applied to the initial amount invested, would produce the
ending redeemable value, in accordance with the following formula:
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 maximum
initial or contingent deferred sales charge applicable to the investment is
deducted, and that all dividends and distributions by the Fund are reinvested at
net asset value on the reinvestment dates during the periods. All accrued
expenses and recurring charges are also taken into account as described later
herein.
Accrued Expenses
Accrued expenses include all recurring expenses that are charged to all
shareholder accounts in proportion to the length of the base period. The
standard total return results take sales charges, if applicable, into account,
although the results 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 during the subject period. In the absence of such
subsidization, the performance of the Fund would have been lower.
Nonstandardized Total Return
The Fund may provide the above described standard total return results
for Class A, Class B, Class C and Class D shares for periods which end no
earlier than the most recent calendar quarter end and which begin twelve months
before and at the time of commencement of the Fund's operations. In addition,
the Fund may provide nonstandardized total return results for differing periods,
such as for the most recent six months, and/or without taking sales charges into
account. Such nonstandardized total return is computed as otherwise described
under "Total Return" except the result may or may not be annualized,
41
<PAGE>
and as noted any applicable sales charge, if any, may not be taken into account
and therefore not deducted from the hypothetical initial payment of $1,000. For
example, the Fund's nonstandardized total returns for the six months ended
June 30, 1995 without taking sales charges into account, were as follows:
With Without
Subsidy Subsidy
------ ------
Class A 13.22% 12.62%
Class B 12.85% 12.25%
Class C 13.40% 12.80%
Class D 12.86% 12.26%
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) 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 and holders of record may request a copy of a current
supplementary report, if any, by calling State Street Research Shareholder
Services.
The following financial statements are for the Fund's fiscal year ended
June 30, 1995:
42
<PAGE>
STATE STREET RESEARCH GLOBAL RESOURCES FUND
INVESTMENT PORTFOLIO
June 30, 1995
<TABLE>
<CAPTION>
Value
Shares (Note 1)
-------------- ----------------
<S> <C> <C>
EQUITY SECURITIES 98.6%
Basic Industries 5.3%
Metal & Mining 5.3%
Aber Resources, Ltd.* 40,000 $ 287,500
Crown Resources Corp.* 100,000 462,500
Cyprus Amax Minerals Co. 5,000 142,500
DeBeers Consolidated Mines Ltd. ADR 1,000 25,875
Dia Met Minerals Ltd. Cl. A* 5,000 47,324
Dia Met Minerals Ltd. Cl. B* 20,000 196,578
Gibraltar Mines Ltd.* 30,000 144,703
Magma Copper Co. Cl. B* 15,000 243,750
Southernera Resources Ltd.* 80,000 267,929
TVX Gold, Inc.* 30,000 217,500
----------------
2,036,159
----------------
Total Basic Industries 2,036,159
----------------
Energy 84.6%
Oil 60.8%
Abacan Resource Corp.* 129,900 392,490
Ballistic Energy Corp.* 80,000 458,682
Basin Exploration, Inc.* 55,200 327,750
Belden & Blake Corp.* 30,000 487,500
Tom Brown, Inc.* 100,000 1,487,500
CS Resources Ltd.* 200,000 1,201,311
Coda Energy, Inc.* 75,000 515,625
Crystal Oil Corp.* 41,600 1,279,200
Discovery West Corp.* 70,000 203,859
Edisto Resources Corp.* 25,000 181,250
Forest Oil Corp.* 150,000 243,750
Fortune Petroleum Corp.* 75,000 173,438
Garnet Resources Corp.* 60,000 135,000
Gerrity Oil & Gas Co.* 110,000 371,250
Global Natural Resources Inc.* 165,500 1,779,125
Intensity Resources, Ltd.* 270,400 600,451
Inverness Petroleum Ltd.* 98,967 531,403
Louisiana Land & Exploration Co. 5,000 199,375
Morgan Hydrocarbons, Inc.* 300,000 873,680
Nuevo Energy Co.* 70,000 1,408,750
Optima Petroleum Corp.* 46,700 113,831
Oryx Energy Co.* 39,700 545,875
Phoenix Resource Cos., Inc. 95,900 3,044,825
Plains Resources, Inc.* 120,000 1,050,000
Ranchmens Resources Ltd.* 60,000 196,578
Ranger Oil Ltd.* 250,000 1,562,500
Oil (cont'd)
Richland Petroleum Corp.* 40,000 $ 269,385
Summit Resources Ltd. 60,600 716,964
Swift Energy Co.* 53,110 484,629
Tatham Offshore, Inc.* 100,000 350,000
Tipperary Corp.* 20,700 120,319
Ulster Petroleum Ltd.* 275,000 1,001,092
United Meridian Corp.* 22,800 353,400
Wascana Energy, Inc.* 50,000 432,290
Clayton Williams Energy, Inc.* 40,000 120,000
XCL Ltd.* 117,200 95,225
----------------
23,308,302
----------------
Oil Service 23.8%
Atwood Oceanics, Inc.* 4,100 65,856
BJ Services Co.* 38,000 864,500
Dawson Geophysical Co.* 20,000 235,000
Dreco Energy Services Ltd.* 30,000 435,000
Energy Ventures, Inc.* 57,600 1,036,800
Ensco International, Inc.* 40,000 635,000
Grant Geophysical, Inc.* 70,000 148,750
Landmark Graphics Corp.* 15,000 382,500
J. Ray McDermott S.A.* 6,800 150,450
Nabors Industries, Inc.* 67,200 554,400
Noble Drilling Corp.* 175,000 1,290,625
Nowsco Well Service Ltd. 100,000 975,000
Oceaneering International, Inc.* 25,600 227,200
Pool Energy Services Co.* 70,000 577,500
Rowan Companies, Inc.* 50,000 406,250
Solid State Geophysical, Inc.* 9,500 40,635
TMBR/Sharp Drilling, Inc.* 50,000 346,875
Tesco Corp.* 50,000 107,390
Tuboscope Vetco International Corp.* 75,000 478,125
Unit Corp.* 50,000 181,250
----------------
9,139,106
----------------
Total Energy 32,447,408
----------------
Utility 8.7%
Natural Gas 8.7%
ENSERCH Corp. 80,000 1,370,000
TransTexas Gas Corp.* 129,500 1,958,687
----------------
3,328,687
----------------
Total Utility 3,328,687
----------------
Total Equity Securities (Cost
$34,815,947) 37,812,254
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STATE STREET RESEARCH GLOBAL RESOURCES FUND
<TABLE>
<CAPTION>
Principal Maturity Value
Amount Date (Note 1)
------------ ------------ -------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS 2.9%
American Express Credit
Corp., 5.85% $398,000 7/5/1995 $ 398,000
American Express Credit
Corp., 5.80% 152,000 7/6/1995 152,000
Ford Motor Credit Co., 5.92% 566,000 7/3/1995 566,000
-------------
Total Short-Term Obligations (Cost $1,116,000) 1,116,000
-------------
Total Investments (Cost $35,931,947)--101.5% 38,928,254
Cash and Other Assets, Less Liabilities--(1.5)% (569,266)
-------------
Net Assets--100.0% $38,358,988
=============
Federal Income Tax Information:
At June 30, 1995, the net unrealized appreciation of
investments based on cost for Federal income tax purposes of
$36,019,398 was as follows:
Aggregate gross unrealized appreciation for all investments
in which there is an excess of value over tax cost $ 8,104,767
Aggregate gross unrealized depreciation for all investments
in which there is an excess of tax cost over value (5,195,911)
-------------
$ 2,908,856
=============
</TABLE>
* Nonincome-producing securities
ADR stands for American Depositary Receipt, representing ownership of foreign
securities.
Diversification of Equity Securities and Short-Term Obligations at June 30,
1995 (as a percentage of net assets) was United States 80.2%, Canada 19.7%
and South Africa 0.1%.
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995
<TABLE>
<CAPTION>
<S> <C>
Assets
Investments, at value (Cost $35,931,947) (Note 1) $38,928,254
Cash 1,884
Receivable for fund shares sold 74,499
Receivable from Distributor (Note 3) 10,907
Dividends and interest receivable 4,470
Other assets 1,630
------------
39,021,644
Liabilities
Payable for securities purchased 310,240
Payable for fund shares redeemed 149,085
Accrued transfer agent and shareholder services
(Note 2) 89,605
Accrued management fee (Note 2) 25,738
Accrued distribution fee (Note 5) 14,402
Accrued trustees' fees (Note 2) 4,507
Other accrued expenses 69,079
------------
662,656
------------
Net Assets $38,358,988
============
Net Assets consist of:
Unrealized appreciation of investments $ 2,996,307
Accumulated net realized loss (4,928,307)
Shares of beneficial interest 40,290,988
------------
$38,358,988
============
Net Asset Value and redemption price per share of
Class A shares ($25,691,662 / 2,112,869 shares of
beneficial interest) $12.16
============
Maximum Offering Price per share of Class A shares
($12.16 / .955) $12.73
============
Net Asset Value and offering price per share of
Class B shares ($7,029,514 / 584,193 shares of
beneficial interest)* $12.03
============
Net Asset Value, offering price and redemption
price per share of Class C shares ($3,287,790 /
267,853 shares of beneficial interest) $12.27
============
Net Asset Value and offering price per share of
Class D shares ($2,350,022 / 195,480 shares of
beneficial interest)* $12.02
============
</TABLE>
* 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.
4
<PAGE>
STATE STREET RESEARCH GLOBAL RESOURCES FUND
STATEMENT OF OPERATIONS
For the year ended June 30, 1995
<TABLE>
<S> <C>
Investment Income
Dividends, net of foreign taxes of $7,810 $ 94,420
Interest 36,910
------------
131,330
Expenses
Transfer agent and shareholder services (Note 2) 303,332
Management fee (Note 2) 284,926
Custodian fee 71,781
Registration fees 48,427
Reports to shareholders 33,122
Audit fee 30,449
Distribution fee--Class A (Note 5) 119,988
Distribution fee--Class B (Note 5) 64,359
Distribution fee--Class D (Note 5) 20,616
Amortization of organization costs (Note 1) 15,762
Trustees' fees (Note 2) 14,971
Legal fees 3,579
Miscellaneous 7,035
------------
1,018,347
Expenses borne by the Distributor (Note 3) (307,559)
------------
710,788
------------
Net investment loss (579,458)
------------
Realized and Unrealized Gain (Loss)
on Investments
Net realized loss on investments (Notes 1 and 4) (1,268,036)
Net unrealized appreciation of investments 2,488,313
------------
Net gain on investments 1,220,277
------------
Net increase in net assets resulting from operations $ 640,819
============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended June 30
1995 1994
------------------------------------------------------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment loss $ (579,458) $ (566,197)
Net realized loss on
investments and foreign
currency* (1,268,036) (93,001)
Net unrealized appreciation
(depreciation) of investments 2,488,313 (3,484,508)
----------- ------------
Net increase (decrease)
resulting from operations 640,819 (4,143,706)
----------- ------------
Net increase (decrease) from
fund share transactions
(Note 7) (2,185,277) 8,751,694
----------- ------------
Total increase (decrease) in
net assets (1,544,458) 4,607,988
Net Assets
Beginning of year 39,903,446 35,295,458
----------- ------------
End of year $38,358,988 $39,903,446
=========== ============
* Net realized loss for
Federal income tax purposes
(Note 1) $(1,203,874) $ (760,656)
=========== ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATE STREET RESEARCH GLOBAL RESOURCES FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 1995
Note 1
State Street Research Global Resources Fund, formerly State Street Research
Global Energy Fund (the "Fund"), is a series of MetLife-State Street Equity
Trust (the "Trust"), which was organized as a Massachusetts business trust in
March, 1986 and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company. The Fund commenced
operations in March, 1990. The Trust presently consists of four separate
funds: State Street Research Global Resources Fund, MetLife-State Street
Research Capital Appreciation Fund, MetLife-State Street Research Equity
Income Fund and MetLife-State Street Research Equity Investment Fund.
The Fund offers four classes of shares. Class A shares are subject to an
initial sales charge of up to 4.50% and an annual service fee of 0.25% of
average daily net assets. Prior to March 10, 1995, Class A shares paid annual
distribution and service fees of 0.50% of average daily net assets.
Investments of $1 million or more in Class A shares, which are not subject to
any initial sales charge, are subject to a 1.00% contingent deferred sales
charge if redeemed within one year of purchase. 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 A 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%. 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, relating 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
Values for listed securities reflect final sales on national securities
exchanges quoted prior to the close of the New York Stock Exchange.
Over-the-counter securities quoted on the National Association of Securities
Dealers Automated Quotation ("NASDAQ") system are valued at closing prices
supplied through such system. In the absence of recorded sales and for those
over-the-counter securities not quoted on the NASDAQ system, valuations are
at the mean of the closing bid and asked quotations. Securities quoted in
foreign currencies are translated into U.S. dollars at the current exchange
rate. Gains and losses that arise from changes in exchange rates are not
segregated from gains and losses that arise from changes in market prices of
investments. Short-term securities maturing within sixty days are valued at
amortized cost. Other securities, if any, are valued at their fair value as
determined in accordance with established methods consistently applied.
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 are reported on the basis
of identified cost of securities delivered.
C. Net Investment Income
Investment income is accrued daily as earned. Dividend income is accrued on
the ex-dividend date. The Fund is charged for expenses directly attributable
to it, while indirect expenses are allocated among all funds in the Trust.
D. Dividends
Dividends from net investment income, if any, are declared and paid or
reinvested semiannually. Net realized capital gains, if any, are distributed
annually, unless additional distributions are required for compliance with
applicable tax regulations.
Income dividends and capital gains distributions are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles.
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. At June 30, 1995, the Fund
had a capital loss carryforward of $4,210,961 available, to the extent
provided in regulations, to offset future capital gains, if any, of which
$278,720, $1,767,752, $199,959, $760,656 and $1,203,874 expire on June 30,
1999, 2000, 2001, 2002 and 2003, respectively.
In order to meet certain excise tax distribution requirements under Section
4982 of the Internal Revenue Code, the Fund is required to measure and
distribute annually, if necessary, net capital gains realized during a
twelve-month period ending October 31. In this connection, the Fund is
permitted to defer into its next fiscal year any net capital losses incurred
between each November 1 and the end of its fiscal year. From November 1, 1993
through June 30, 1994, the Fund incurred net capital losses of $649,003 and
it has deferred and treated such losses as arising in the fiscal year ending
June 30, 1995. From November 1, 1994 through June 30, 1995, the Fund incurred
net capital losses of approximately $630,000 and it intends to defer and
treat such losses as arising in the fiscal year ending June 30, 1996.
F. Deferred Organization Costs
Certain costs incurred in the organization and registration of the Fund were
capitalized and amortized under the straight-line method over a period of
five years.
6
<PAGE>
STATE STREET RESEARCH GLOBAL RESOURCES FUND
NOTES (cont'd)
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 0.75% 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 June 30, 1995, the fees pursuant to such
agreement amounted to $284,926.
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. In addition, Metropolitan receives a fee for maintenance
of the accounts of certain shareholders who are participants in sponsored
arrangements, employee benefit plans and similar programs or plans, through
or under which shares of the Fund may be purchased. During the year ended
June 30, 1995, the amount of such shareholder servicing and account
maintenance expenses was $72,518.
The fees of the Trustees not currently affiliated with the Adviser amounted
to $14,971 during the year ended June 30, 1995.
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 June 30, 1995, the amount of such expenses
assumed by the Distributor and its affiliates was $307,559.
Note 4
For the year ended June 30, 1995, purchases and sales of securities,
exclusive of short-term obligations, aggregated $23,450,521 and $26,659,165,
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, as amended. Under the Plan,
the Fund pays annual service fees to the Distributor at a rate of 0.25% of
average daily net assets for Class A, Class B and Class D shares. In
addition, the Fund pays annual distribution fees of 0.75% of average daily
net assets for Class B and Class D shares. Prior to March 10, 1995, the Fund
paid annual distribution fees of 0.25% of average daily net assets for Class
A shares. The Distributor uses such payments for personal services and/or the
maintenance 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 June 30, 1995, fees pursuant to such plan amounted to
$119,988, $64,359 and $20,616 for Class A, Class B and Class D, respectively.
The Fund has been informed that the Distributor and MetLife Securities, Inc.,
a wholly-owned subsidiary of Metropolitan, earned initial sales charges
aggregating $10,670 and $24,466, respectively, on sales of Class A shares of
the Fund during the year ended June 30, 1995, and that MetLife Securities,
Inc. earned commissions aggregating $29,957 on sales of Class B shares, and
that the Distributor collected contingent deferred sales charges of $21,450,
$36,122 and $1,185 on redemptions of Class A, Class B and Class D shares,
respectively, during the same period.
Note 6
Under normal market conditions the Fund invests not less than 65% of its
total assets in equity securities of domestic and foreign companies in the
energy and natural resources industries. Also, the Fund may invest up to 35%
of its total assets in the securities of issuers in industries that are not
related to the energy or natural resources industries. Accordingly, the
Fund's investments will fluctuate in response to a variety of economic,
political and other factors peculiar to the energy industries and may
fluctuate more widely than a portfolio that invests in a broader range of
industries.
7
<PAGE>
STATE STREET RESEARCH GLOBAL RESOURCES FUND
Note 7
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share. At June 30, 1995,
Metropolitan owned 38,491 Class D shares and the Distributor owned one Class
A share of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
Year ended June 30
-------------------------------------------------------
1995 1994
------------------------- ---------------------------
Class A Shares Amount Shares Amount
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 2,514,296 $ 28,346,425 2,293,708 $ 27,669,872
Shares repurchased (2,992,842) (33,679,131) (2,182,001) (26,635,350)
---------- ----------- ---------- -------------
Net increase
(decrease) (478,546) $ (5,332,706) 111,707 $ 1,034,522
========== =========== ========== =============
Class B Shares Amount Shares Amount
- ---------------------------------------------------------------------------------
Shares sold 314,583 $ 3,497,941 652,256 $ 7,742,089
Shares repurchased (267,978) (3,006,916) (192,274) (2,299,142)
---------- ----------- ---------- -------------
Net increase 46,605 $ 491,025 459,982 $ 5,442,947
========== =========== ========== =============
Class C Shares Amount Shares Amount
- ---------------------------------------------------------------------------------
Shares sold 280,275 $ 3,409,713 137,750 $ 1,700,753
Shares repurchased (93,086) (1,092,177) (67,902) (824,239)
---------- ----------- ---------- -------------
Net increase 187,189 $ 2,317,536 69,848 $ 876,514
========== =========== ========== =============
Class D Shares Amount Shares Amount
- ---------------------------------------------------------------------------------
Shares sold 108,958 $ 1,239,952 176,812 $ 2,112,870
Shares repurchased (77,489) (901,084) (56,352) (715,159)
---------- ----------- ---------- -------------
Net increase 31,469 $ 338,868 120,460 $ 1,397,711
========== =========== ========== =============
</TABLE>
8
<PAGE>
STATE STREET RESEARCH GLOBAL RESOURCES FUND
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each year.
<TABLE>
<CAPTION>
Class A Class B
---------------------------------------------------- ---------------------------------
June 1,
1993
(Commencement
of Share
Class
Designations)
Year ended June 30 Year ended June 30 to
---------------------------------------------------- ------------------ June 30,
1995** 1994** 1993 1992 1991 1995** 1994** 1993
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $11.84 $13.51 $8.02 $9.12 $11.23 $11.78 $13.51 $12.99
Net investment income (loss)* (.16) (.17) (.13) (.12) .03 (.23) (.23) (.02)
Net realized and unrealized gain
(loss) on investments .48 (1.50) 5.62 (.98) (2.07) .48 (1.50) .54
Distribution from net realized
gains -- -- -- -- (.06) -- -- --
Dividends from net investment
income -- -- -- -- (.01) -- -- --
------- ------- ------- ------- ------- ------- ------- -----------
Net asset value, end of year $12.16 $11.84 $13.51 $8.02 $9.12 $12.03 $11.78 $13.51
======= ======= ======= ======= ======= ======= ======= ===========
Total return 2.70%+ (12.36)%+ 68.45%+ (12.06)%+ (18.28)%+ 2.12%+ (12.81)%+ 4.00%++
Net assets at end of year (000s) $25,692 $30,679 $33,513 $19,227 $29,760 $7,030 $6,333 $1,048
Ratio of operating expenses to
average net assets* 1.75% 1.75% 1.75% 1.75% 1.75% 2.33% 2.25% 2.25%+++
Ratio of net investment income
(loss) to average net assets (1.41)% (1.46)% (1.44)% (1.16%) 0.25% (1.98)% (1.93)% (1.98)%+++
Portfolio turnover rate 62.94% 30.98% 61.00% 47.09% 108.18% 62.94% 30.98% 61.00%
*Reflects voluntary assumption of
fees or expenses per share in each
year (Note 3). $ .09 $ .11 $ .03 $ .05 $ .03 $ .09 $ .14 $ .00
</TABLE>
<TABLE>
<CAPTION>
Class C Class D
--------------------------------------- -----------------------------------------
June 1,
1993 June 1, 1993
(Commencement (Commencement
of of
Share Class Share Class
Designations) Designations)
Year ended June 30 to Year ended June 30 to
------------------- June 30, ------------------ June 30,
1995** 1994** 1993 1995** 1994** 1993
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $11.90 $13.52 $12.99 $11.77 $13.51 $12.99
Net investment loss* (.11) (.15) (.00) (.23) (.23) (.02)
Net realized and unrealized gain (loss)
on investments .48 (1.47) .53 .48 (1.51) .54
----------- ----------- ----------- ----------- ----------- ------------
Net asset value, end of year $12.27 $11.90 $13.52 $12.02 $11.77 $13.51
=========== =========== =========== =========== =========== ============
Total return 3.11%+ (11.98)%+ 4.08%++ 2.12%+ (12.88)%+ 4.00%++
Net assets at end of year (000s) $3,288 $960 $146 $2,350 $1,931 $588
Ratio of operating expenses to average
net assets* 1.33% 1.25% 1.25%++ 2.33% 2.25% 2.25%+++
Ratio of net investment loss to average
net assets* (1.01)% (0.95)% (1.05)%++ (1.99)% (1.94)% (2.00)%+++
Portfolio turnover rate 62.94% 30.98% 61.00% 62.94% 30.98% 61.00%
*Reflects voluntary assumption of fees
or expenses per share in each year
(Note 3). $ .08 $ .16 $ .00 $ .09 $ .13 $ .00
</TABLE>
**Per share figures have been calculated using the average shares method.
+++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.
9
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of MetLife-State Street
Equity Trust and the Shareholders of
State Street Research Global Resources 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 Global
Resources Fund (formerly State Street Research Global Energy Fund) (a series
of MetLife-State Street Equity Trust, hereafter referred to as the "Trust")
at June 30, 1995, 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 June 30, 1995 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable
basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Boston, Massachusetts
August 4, 1995
10
<PAGE>
STATE STREET RESEARCH GLOBAL RESOURCES FUND
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
Global Resources Fund (formerly Global Energy Fund) underperformed the
average for Lipper Analytical Services' natural resources fund category for
the 12 months ended June 30, 1995 (does not reflect sales charge). The sharp
drop in natural gas prices caused Fund performance to decline. Historically,
the Fund's performance has been closely linked to natural gas and oil prices.
Currently, the Fund has substantial holdings in small-capitalization stocks,
which typically experience greater price fluctuation than larger stocks.
Generally, we target stocks that offer long-term growth, low debt levels, and
attractive valuations.
Our oil holdings focus on small exploration companies. Oil service stocks
represent nearly 25% of the portfolio. This percentage is lower than in the
past because of mergers and acquisitions among the many small oil service
companies. We took advantage of sharp price declines and added to our natural
gas holdings late in 1994.
The Standard & Poor's 500 Composite Index (S&P 500) includes 500 widely
traded common stocks and is a commonly used measure of U.S. stock market
performance. The index is unmanaged and does not take sales charges into
consideration. Direct investment in the index is not possible; results are
for illustrative purposes only. All returns represent past performance, which
is no guarantee of future results. The investment return and principal value
of an investment made in the Fund will fluctuate and shares, when redeemed,
may be worth more or less than their original cost. All returns assume
reinvestment of capital gain distributions and income dividends. Performance
for a class includes periods prior to the adoption of class designations in
1993. Performance reflects up to a maximum 4.5% front-end sales charge or 5%
contingent deferred sales charge. "C" shares, offered without a sales charge,
are available only to certain employee benefit plans and institutions.
Performance for "B" and "D" shares prior to class designations in 1993
reflects annual 12b-1 fees of .50% and subsequent performance reflects annual
12b-1 fees of 1%. Performance results for the Fund are increased by the
Distributor's voluntary reduction of Fund fees and expenses. The first figure
reflects expense reduction; the second shows what results would have been
without subsidization.
Comparison Of Change In Value Of A $10,000
Investment In State Street Research
Global Resources Fund and The S&P 500
[line chart] Class A Shares
Average Annual Total Return
1 Year 5 Years Life of Fund
- -1.92%/-2.95% +0.80%/+0.16% -0.40%/-1.01%
Global S&P
3/90 $ 9,550 $10,000
6/90 8,982 10,913
6/91 7,339 11,720
6/92 6,454 13,290
6/93 10,872 15,101
6/94 9,528 15,313
6/95 9,786 19,299
[line chart] Class B Shares
Average Annual Total Return
1 Year 5 Years Life of Fund
- -2.88%/-3.96% +1.13%/+0.43% +0.26%/-0.40%
Global S&P
3/90 $10,000 $10,000
6/90 9,405 10,913
6/91 7,685 11,720
6/92 6,758 13,290
6/93 11,385 15,101
6/94 9,927 15,313
6/95 10,137 19,299
[line chart] Class C Shares
Average Annual Total Return
1 Year 5 Years Life of Fund
+3.11%/+2.03% +1.91%/+1.19% +0.63%/-0.06%
Global S&P
3/90 $10,000 $10,000
6/90 9,405 10,913
6/91 7,685 11,720
6/92 6,758 13,290
6/93 11,393 15,101
6/94 10,028 15,313
6/95 10,340 19,299
[line chart] Class D Shares
Average Annual Total Return
1 Year 5 Years Life of Fund
+1.12%/+0.04% +1.49%/+0.82% +0.24%/-0.40%
Global S&P
3/90 $10,000 $10,000
6/90 9,405 10,913
6/91 7,685 11,720
6/92 6,758 13,290
6/93 11,385 15,101
6/94 9,918 15,313
6/95 10,129 19,299
[legend for line charts]
solid rule=Global Resources Fund
broken rule=S&P 500
11
<PAGE>
METLIFE - STATE STREET EQUITY TRUST
PART C
OTHER INFORMATION
Item 24: Financial Statements and Exhibits
(a) Financial Statements
(1) Financial Statements included in PART A (Prospectus) of
this Registration Statement:
Financial Highlights for MetLife - State Street Research
Capital Appreciation Fund, MetLife - State Street Research
Equity Investment Fund and MetLife - State Street Research
Equity Income Fund for the period August 25, 1986
(commencement of operations) through June 30, 1995
and for State Street Research Global Resources Fund
for the period March 2, 1990 (commencement of operations)
through June 30, 1995.
(2) Financial Statements included in PART B (Statement of
Additional Information) of this Registration Statement:
For MetLife - State Street Research Capital Appreciation
Fund, MetLife - State Street Research Equity Investment
Fund, MetLife - State Street Research Equity Income
Fund and State Street Research Global Resources Fund
for the fiscal year ended June 30, 1995 (except as
provided below):
Investment Portfolio
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets (Fiscal years
ended June 30, 1995 and June 30, 1994)
Notes to Financial Statements (including financial
highlights)
Report of Independent Accountants
Management's Discussion of Fund Performance
C-1
<PAGE>
(b) Exhibits
(1)(a) First Amended and Restated Master Trust Agreement, Amendment No.
1, Amendment No. 2 and Amendment No. 3
(1)(b) Form of Amendment No. 4 to First Amended and Restated Master
Trust Agreement
(2)(a) By-Laws of the Registrant(1)
(2)(b) Amendment No. 1 to By-Laws effective September 30, 1992(13)
(3) Not Applicable
(4)(a) Specimen Share Certificates -- MetLife - State Street Capital
Appreciation Fund, MetLife - State Street Equity Investment Fund
and MetLife - State Street Equity Income Fund(6)*
(4)(b) Specimen Share Certificate -- MetLife - State Street Energy
Fund(7)*
(4)(c) Specimen Share Certificate -- MetLife - State Street Global
Energy Fund(11)*
(5)(a) Advisory Agreement with MetLife - State Street Investmen
Services, Inc.(2)**
(5)(c) Letter Agreement with respect to the Advisory Agreement relating
to MetLife - State Street Energy Fund(11)*
(5)(e) Transfer and Assumption of Responsibilities and Rights relating
to the Advisory Agreement between State Street Financial
Services, Inc. and State Street Research & Management
Company(12)**
(6)(a) Distribution Agreement with MetLife - State Street Investment
Services, Inc.(2)**
(6)(b) Form of Selected Dealer Agreement
(6)(c) Form of Bank and Bank-Affiliated Broker-Dealer Agreement(16)
(6)(d) Letter Agreement with respect to the Distribution Agreement
relating to MetLife - State Street Energy Fund(11)*
(7) Not applicable
C-2
<PAGE>
(8)(a) Custodian Contract with State Street Bank and Trust Company(2)
(8)(b) Amendment to Custodian Contract with State Street Bank and Trust
Company(6)
(8)(e) Letter Agreement with respect to the Custodian Contract relating
to MetLife - State Street Energy Fund(11)*
(9) Not applicable
(10)(a) Opinion and Consent of Goodwin, Procter & Hoar with respect to
the MetLife - State Street Equity Income, MetLife - State Street
Equity Investment and MetLife - State Street Capital Appreciation
Funds(2)*
(10)(b) Opinion and Consent of Goodwin, Procter & Hoar with respect to
MetLife - State Street Energy Fund(7)*
(11) Consent of Price Waterhouse LLP
(12) Not applicable
(13)(a) Purchase Agreement and Investment Letter(2)
(13)(b) Purchase Agreement and Investment Letter(2)
(13)(c) Subscription and Investment Letter -- MetLife - State Street
Energy Fund(11)*
(14)(a) State Street Research IRA: Disclosure Statement, Forms Booklet
and Transfer of Assets/Direct Rollover Form
(14)(b) State Street Research 403(b): Brochure, Account Agreement,
Maximum Salary Reduction Worksheet, Account Application, Salary
Reduction Agreement and Direct Rollover of Assets Form(15)
(15)(a) First Amended and Restated Plan of Distribution Pursuant to
Rule 12b-1(14)
(15)(b) Amendment No. 1 to First Amended and Restated Plan of
Distribution Pursuant to Rule 12b-1(16)
(16)(a) Calculation of Performance Data(5)
(16)(b) Calculation of Performance Data with respect to MetLife -
State Street Energy Fund(8)*
(16)(c) Calculation of Distribution Rate and Yield with respect to
MetLife - State Street Energy Fund(9)*
(16)(d) Calculation of Distribution Rate and Yield with respect to
MetLife - State Street Capital Appreciation Fund, MetLife -
State Street Equity Investment Fund and MetLife - State Street
Equity Income Fund(10)*
(17) Multiple Class Expense Allocation Plan Adopted Pursuant to
Rule 18f-3
(18) Powers of Attorney
(19) Certificate of Board Resolution respecting Powers of Attorney
(20) Application Forms (16)
(27) Financial Data Schedules
C-3
<PAGE>
- -----------------
* The Series of the Registrant have changed their names at various times.
Documents in this listing of Financial Statements and Exhibits which
were effective prior to the most recent name change accordingly refer to
a former name of such Series.
** MetLife - State Street Investment Services, Inc. changed its name to
State Street Financial Services, Inc. effective as of June 18, 1992, and
subsequently changed its name to State Street Research Investment
Services, Inc. effective October 28, 1992. Documents in this listing of
Exhibits which were effective prior to the relevant name change
accordingly refer to MetLife - State Street Investment Services, Inc. or
State Street Financial Services, Inc.
C-4
<PAGE>
Filed as part of the Registration Statement as noted below and incorporated
herein by reference:
Footnote Securities Act of 1933
Reference Registration/Amendment Date Filed
1 Initial Registration March 25, 1986
2 Pre-Effective Amendment No. 1 July 18, 1986
3 Post-Effective Amendment No. 1 August 12, 1986
4 Post-Effective Amendment No. 3 October 29, 1987
5 Post-Effective Amendment No. 5 October 25, 1988
6 Post-Effective Amendment No. 6 October 30, 1989
7 Post-Effective Amendment No. 7 November 27, 1989
8 Post-Effective Amendment No. 8 July 24, 1990
9 Post-Effective Amendment No. 9 August 31, 1990
10 Post-Effective Amendment No. 10 October 30, 1990
11 Post-Effective Amendment No. 11 October 31, 1991
12 Post-Effective Amendment No. 12 October 30, 1992
13 Post-Effective Amendment No. 13 April 2, 1993
14 Post-Effective Amendment No. 14 October 27, 1993
15 Post-Effective Amendment No. 15 September 1, 1994
16 Post-Effective Amendment No. 16 April 28, 1995
Item 25. Persons Controlled by or Under Common Control with Registrant
Inapplicable.
C-5
<PAGE>
Item 26. Number of Holders of Securities
As of June 30, 1995, the number of record holders of the Registrant's
Funds were as follows:
(1) (2)
Number of
Title of Class Record Holders
Shares of Beneficial Interest
MetLife - State Street Research
Capital Appreciation Fund
Class A 47,271
Class B 12,927
Class C 504
Class D 128
MetLife - State Street Research
Equity Investment Fund
Class A 4,930
Class B 765
Class C 50
Class D 17
MetLife - State Street Research
Equity Income Fund
Class A 4,751
Class B 1,243
Class C 41
Class D 57
State Street Research
Global Resources Fund
Class A 5,368
Class B 1,175
Class C 61
Class D 146
C-6
<PAGE>
Item 27. Indemnification
Under Article VI of the Registrant's Master Trust Agreement each of its
Trustees and officers or persons serving in such capacity with another entity at
the request of the Registrant ("Covered Person") shall be indemnified against
all liabilities, including, but not limited to, amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and expenses, including
reasonable accountants' and counsel fees, incurred by any Covered Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
legislative body, in which such Covered Person may be or may have been involved
as a party or otherwise or with which such person may be or may have been
threatened, while in office or thereafter, by reason of being or having been
such a Trustee or officer, director or trustee, except with respect to any
matter as to which it has been determined that such Covered Person had acted
with willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of such Covered Person's office (such conduct
being referred to hereafter as "Disabling Conduct"). A determination that the
Covered Person is entitled to indemnification may be made by (i) a final
decision on the merits by a court or other body before which the proceeding was
brought that the person to be indemnified was not liable by reason of Disabling
Conduct, (ii) dismissal of a court action or an administrative proceeding
against a Covered Person for insufficiency of evidence of Disabling Conduct, or
(iii) a reasonable determination, based upon a review of the facts, that the
indemnitee was not liable by reason of Disabling Conduct by (a) a vote of a
majority of a quorum of Trustees who are neither "interested persons" of the
Registrant as defined in section 2(a)(19) of the 1940 Act nor parties to the
proceeding, or (b) an independent legal counsel in a written opinion.
Under the Distribution Agreement between the Registrant and State Street
Research Investment Services, Inc., the Registrant's distributor, the Registrant
has agreed to indemnify and hold harmless State Street Research Investment
Services, Inc. and each person who has been, is, or may hereafter be an officer,
director, employee or agent of State Street Research Investment Services, Inc.
against any loss, damage or expense reasonably incurred by any of them in
connection with any claim or in connection with any action, suit or proceeding
to which any of them may be a party, which arises out of or is alleged to arise
out of or is based upon a violation of any of its covenants herein contained or
any untrue or alleged untrue statement of material fact, or the omission or
alleged omission to state a material fact necessary to make the statements made
not misleading, in a Registration Statement or Prospectus of the Registrant, or
any amendment or supplement thereto, unless such statement or omission was made
in reliance upon written information furnished by State Street Research
Investment Services, Inc.
Insofar as indemnification by the Registrant for liabilities arising
under the Securities Act of 1933 may be permitted to trustees, officers,
underwriters and controlling persons of the Registrant, pursuant to Article VI
of the Registrant's Master Trust Agreement, or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission
C-7
<PAGE>
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted against the
Registrant by such trustee, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
C-8
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
Describe any other business, profession, vocation or employment of a
substantial nature in which each investment adviser of the Registrant, and each
director, officer or partner of any such investment adviser, is or has been, at
any time during the past two fiscal years, engaged for his own account or in the
capacity of director, officer, employee, partner or trustee.
<TABLE>
<CAPTION>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
<S> <C> <C> <C>
State Street Investment Adviser Various investment Boston, MA
Research & advisory clients
Management
Company
Bangs, Linda L. None
Vice President
Barton, Michael E. None
Vice President
Bennett, Peter C. Vice President State Street Research Capital Trust Boston, MA
Director and Vice President State Street Research Exchange Trust Boston, MA
Executive Vice Vice President State Street Research Growth Trust Boston, MA
President Vice President State Street Research Master Investment Trust Boston, MA
Vice President MetLife - State Street Equity Trust
Director State Street Research Investment Services, Inc Boston, MA
Director Boston Private Bank & Trust Co. Boston, MA
President and Director Christian Camps & Conferences, Inc. Boston, MA
Director (until 12/93) Gefinor Securities S.A. Geneva, Switzerland
Chairman and Trustee Gordon College Wenham, MA
Brown, Susan H. None
Vice President
Burbank, John F. None
Vice President
Canavan, Joseph W. Assistant Treasurer MetLife - State Street Equity Trust Boston, MA
Vice President Assistant Treasurer MetLife - State Street Financial Trust Boston, MA
Assistant Treasurer MetLife - State Street Income Trust Boston, MA
Assistant Treasurer MetLife - State Street Money Market Trust Boston, MA
Assistant Treasurer State Street Research Tax-Exempt Trust Boston, MA
Assistant Treasurer State Street Research Capital Trust Boston, MA
Assistant Treasurer State Street Research Exchange Trust
Assistant Treasurer State Street Research Growth Trust Boston, MA
Assistant Treasurer State Street Research Master Investment Trust Boston, MA
Assistant Treasurer State Street Research Securities Trust Boston, MA
Assistant Controller State Street Research Portfolios, Inc. New York, NY
C-9
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Carmen, Michael T. None
Vice President
Carstens, Linda C. None
Vice President
Clifford, Jr., Paul J. Vice President State Street Research Tax-Exempt Trust Boston, MA
Vice President Director Avalon, Inc. Boston, MA
DiFazio, Susan M.W. Senior Vice President State Street Research Investment Services, Inc. Boston, MA
Vice President (Vice President until
8/93)
Drake, Susan W. Vice President State Street Research Tax-Exempt Trust Boston, MA
Vice President
Duggan, Peter J. Vice President New England Mutual Life Insurance Company Boston, MA
Senior Vice (until 8/94)
President
Evans, Gordon Vice President State Street Research Investment Services, Inc. Boston, MA
Vice President
Federoff, Alex G. None
Vice President
Finch, Edward R. None
Senior Vice President
(Vice President
until 10/93)
Gardner, Michael D. Vice President The Prudential Insurance Company of America Shorthills, NJ
Senior Vice President (until 9/93)
(Vice President until Partner Prism Group Seattle, WA
6/95)
Geer, Bartlett R. Vice President MetLife - State Street Equity Trust Boston, MA
Senior Vice President Vice President MetLife - State Street Income Trust Boston, MA
(Vice President Vice President State Street Research Investment Services, Inc. Boston, MA
until 8/93)
C-10
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Glovsky, Charles S. Vice President State Street Research Capital Trust Boston, MA
Senior Vice President
(Vice President until
8/93)
Hamilton, Jr., William A. Treasurer and Director Ellis Memorial and Eldredge House Boston, MA
Senior Vice President Treasurer and Director Nautical and Aviation Publishing Company, Inc. Baltimore, MD
(Vice President Treasurer and Director North Conway Institute Boston, MA
until 8/93)
Haverty, Jr., Lawrence J. None
Senior Vice President
(Vice President
until 8/93)
Heineke, George R. None
Vice President
Jackson, Jr., Trustee Certain trusts of related and
F. Gardner non-related individuals
Senior Vice President Trustee Vincent Memorial Hospital Boston, MA
(Vice President
until 8/93)
Jamieson, Frederick H. Vice President and Asst. Treasurer State Street Research Investment Services, Inc. Boston, MA
Senior Vice President Vice President and Asst. Treasurer SSRM Holdings, Inc. Boston, MA
(Vice President Vice President and Controller MetLife Securities, Inc. New York, NY
until 6/95)
Kallis, John H. Vice President State Street Research Investment Services, Inc. Boston, MA
Senior Vice President Vice President MetLife - State Street Financial Trust Boston, MA
Vice President MetLife - State Street Income Trust Boston, MA
Vice President State Street Research Tax-Exempt Trust Boston, MA
Vice President State Street Research Securities Trust Boston, MA
Trustee 705 Realty Trust Washington, D.C.
Director and President K&G Enterprises Washington, D.C.
Kasper, M. Katherine None
Vice President
C-11
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Kluiber, Rudolph K. Vice President State Street Research Capital Trust Boston, MA
Vice President
Kobrick, Frederick R. Vice President State Street Research Investment Services, Inc. Boston, MA
Senior Vice Vice President MetLife - State Street Equity Trust Boston, MA
President Vice President State Street Research Capital Trust Boston, MA
Vice President State Street Research Growth Trust Boston, MA
Member Harvard Business School Association Cambridge, MA
Member National Alumni Council, Boston University Boston, MA
Leary, Eileen M. None
Vice President
Lintz, Carol None
Vice President
McNamara, III, Francis J. Senior Vice President, Clerk State Street Research Investment Services, Inc. Boston, MA
Senior Vice President, and General Counsel
Secretary and Secretary and General Counsel State Street Research Master Investment Trust Boston, MA
General Counsel Secretary and General Counsel State Street Research Capital Trust Boston, MA
Secretary and General Counsel State Street Research Exchange Trust Boston, MA
Secretary and General Counsel State Street Research Growth Trust Boston, MA
Secretary and General Counsel State Street Research Securities Trust Boston, MA
Secretary and General Counsel MetLife - State Street Equity Trust Boston, MA
Secretary and General Counsel MetLife - State Street Financial Trust Boston, MA
Secretary and General Counsel MetLife - State Street Income Trust Boston, MA
Secretary and General Counsel MetLife - State Street Money Market Trust Boston, MA
Secretary and General Counsel State Street Research Tax-Exempt Trust Boston, MA
Secretary and General Counsel SSRM Holdings, Inc. Boston, MA
Senior Vice President, General The Boston Company, Inc. Boston, MA
Counsel and Assistant Secretary
(until 5/95)
Senior Vice President, General Boston Safe Deposit and Trust Company Boston, MA
Counsel and Assistant Secretary
(until 5/95)
Senior Vice President, General The Boston Company Advisors, Inc. Boston, MA
Counsel and Assistant Secretary
(until 5/95)
C-12
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Maus, Gerard P. Treasurer MetLife - State Street Equity Trust Boston, MA
Director, Executive Treasurer MetLife - State Street Financial Trust Boston, MA
Vice President Treasurer MetLife - State Street Income Trust Boston, MA
and Treasurer Treasurer MetLife - State Street Money Market Trust Boston, MA
Treasurer State Street Research Tax-Exempt Trust Boston, MA
Treasurer State Street Research Capital Trust Boston, MA
Treasurer State Street Research Exchange Trust Boston, MA
Treasurer State Street Research Growth Trust Boston, MA
Treasurer State Street Research Master Investment Trust Boston, MA
Treasurer State Street Research Securities Trust Boston, MA
Director, Executive Vice President, State Street Research Investment Services, Inc. Boston, MA
Treasurer and Chief Financial Officer
Director Metric Holdings, Inc. San Francisco, CA
Director Certain wholly-owned subsidiaries
of Metric Holdings, Inc.
Director GFM International Investors, Ltd. London, England
Treasurer and Chief Financial SSRM Holdings, Inc. Boston, MA
Officer
Treasurer MetLife Securities, Inc. New York, NY
Milder, Judith J. None
Senior Vice President
(Vice President
until 6/95)
Miller, Joan D. Senior Vice President State Street Research Investment Services, Inc. Boston, MA
Vice President
Moore, Jr., Thomas P. Director Hibernia Savings Bank Quincy, MA
Senior Vice Vice President State Street Research Capital Trust Boston, MA
President Vice President State Street Research Exchange Trust Boston, MA
Vice President State Street Research Growth Trust Boston, MA
Vice President State Street Research Master Investment Trust Boston, MA
Vice President MetLife - State Street Equity Trust Boston, MA
Mulligan, JoAnne C. Vice President MetLife - State Street Money Market Trust Boston, MA
Vice President
Orr, Stephen C. Member Technology Analysts of Boston Boston, MA
Vice President Member Electro-Science Analysts (of NYC) New York, NY
C-13
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Pannell, James C. None
Vice President
Peters, Kim M. Vice President State Street Research Securities Trust Boston, MA
Senior Vice President
(Vice President
until 7/94)
Pluckhahn, Charles W. None
Vice President
Ragsdale, Easton Senior Vice President Kidder, Peabody, & Co. Incorporated New York, NY
Vice President (until 12/94)
Rawlins, Jeffrey A. None
Vice President
Rice III, Daniel Joseph Vice President MetLife - State Street Equity Trust Boston, MA
Senior Vice President
(Vice President
until 8/93)
Richards, Scott None
Vice President
Romich, Douglas A. Assistant Treasurer MetLife - State Street Equity Trust Boston, MA
Vice President Assistant Treasurer MetLife - State Street Financial Trust Boston, MA
Assistant Treasurer MetLife - State Street Income Trust Boston, MA
Assistant Treasurer MetLife - State Street Money Market Trust Boston, MA
Assistant Treasurer State Street Research Tax-Exempt Trust Boston, MA
Assistant Treasurer State Street Research Capital Trust Boston, MA
Assistant Treasurer State Street Research Exchange Trust
Assistant Treasurer State Street Research Growth Trust Boston, MA
Assistant Treasurer State Street Research Master Investment Trust Boston, MA
Assistant Treasurer State Street Research Securities Trust Boston, MA
Assistant Controller State Street Research Portfolios, Inc. New York, NY
Row, III, Walter A. None
Vice President
C-14
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Schrage, Michael Senior Vice President Putnam Management Boston, MA
Vice President (until 12/93)
Schultz, David C. Director (non-voting) Capital Trust, S.A. Luxembourg
Executive Vice Director Alex Brown Capital, Ltd.
President
Hamilton, Bermuda
(Senior Vice President Director and Treasurer Mafraq Hospital Association Mafraq, Jordan
until 12/94, Vice Member Association of Investment
President until Management Sales Executives Atlanta, GA
4/94) Member, Investment Committee Lexington Christian Academy Lexington, MA
Shean, William G. None
Vice President
Shively, Thomas A. Vice President MetLife - State Street Financial Trust Boston, MA
Director and Vice President MetLife - State Street Money Market Trust Boston, MA
Executive Vice Vice President State Street Research Tax-Exempt Trust
President (Senior Director State Street Research Investment Services, Inc Boston, MA
Vice President Vice President State Street Research Securities Trust Boston, MA
until 6/93)
Shoemaker, Richard D. None
Senior Vice President
(Vice President
until 8/93)
Smith, Margaret D. Corporation Member New England Deaconess Boston, MA
Vice President Hospital Corporation
Somes, Steven P. Vice President MetLife - State Street Financial Trust Boston, MA
Vice President Vice President MetLife - State Street Equity Trust Boston, MA
Vice President State Street Research Master Investment Trust Boston, MA
Strelow, Dan R. None
Senior Vice President
(Vice President
until 8/93)
Stuka, Paul None
Senior Vice President
C-15
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Swanson, Amy McDermott None
Senior Vice President
(Vice President
until 8/93)
Trebino, Anne M. Vice President SSRM Holdings, Inc. Boston, MA
Senior Vice President
(Vice President
until 6/95)
Verni, Ralph F. Chairman, President, Chief State Street Research Capital Trust Boston, MA
Chairman, President, Executive Officer and Trustee
Chief Executive Chairman, President, Chief State Street Research Exchange Trust Boston, MA
Officer and Executive Officer and Trustee
Director Chairman, President, Chief State Street Research Growth Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Master Investment Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Securities Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief MetLife - State Street Equity Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief MetLife - State Street Financial Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief MetLife - State Street Income Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief MetLife - State Street Money Market Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Tax-Exempt Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Investment Services, Inc. Boston, MA
Executive Officer and Director
Chairman and Director Metric Holdings, Inc. San Francisco, CA
Director and Officer Certain wholly-owned subsidiaries
of Metric Holdings, Inc.
Director MetLife Securities, Inc. New York, NY
Chairman and Director (until 11/94) GFM International Investors, Ltd. London, England
President, Chief Executive SSRM Holdings, Inc. Boston, MA
Officer and Director
Director CML Group, Inc. Boston, MA
C-16
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Wade, Dudley Vice President State Street Research Growth Trust Boston, MA
Freeman Vice President State Street Research Master Investment Trust Boston, MA
Senior Vice
President
Wallace, Julie K. None
Vice President
Ward, Geoffrey None
Senior Vice President
(Vice President
until 8/93)
Westvold, President and Director Bondurant, Inc. Medfield, MA
Elizabeth McCombs (until 2/94)
Vice President
Wing, Darman A. Senior Vice President and State Street Research Investment Services, Inc. Boston, MA
Vice President, Asst. Clerk (Vice President
Assistant Secretary until 6/95)
and Assistant Assistant Secretary State Street Research Capital Trust Boston, MA
General Counsel Assistant Secretary State Street Research Exchange Trust Boston, MA
Assistant Secretary State Street Research Growth Trust Boston, MA
Assistant Secretary State Street Research Master Investment Trust Boston, MA
Assistant Secretary State Street Research Securities Trust Boston, MA
Assistant Secretary MetLife - State Street Equity Trust Boston, MA
Assistant Secretary MetLife - State Street Financial Trust Boston, MA
Assistant Secretary MetLife - State Street Income Trust Boston, MA
Assistant Secretary MetLife - State Street Money Market Trust Boston, MA
Assistant Secretary State Street Research Tax-Exempt Trust Boston, MA
Assistant Secretary SSRM Holdings, Inc. Boston, MA
Woodbury, Robert S. Employee Metropolitan Life Insurance Company New York, NY
Vice President
Woodworth, Jr., Kennard Vice President State Street Research Exchange Trust Boston, MA
Senior Vice Vice President State Street Research Growth Trust Boston, MA
President
C-17
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Wu, Norman N. Partner Atlantic-Acton Realty Framingham, MA
Senior Vice President Director Bond Analysts Society of Boston Boston, MA
(Vice President
until 8/93)
Yogg, Michael Richard Vice President MetLife - State Street Financial Trust Boston, MA
Senior Vice Vice President MetLife - State Street Income Trust Boston, MA
President
</TABLE>
C-18
<PAGE>
Item 29. Principal Underwriters
(a) State Street Research Investment Services, Inc., serves as principal
underwriter for MetLife - State Street Equity Trust, MetLife - State Street
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 Growth Trust, State Street
Research Master Investment Trust, State Street Research Securities Trust and
State Street Research Portfolios, Inc.
(b) Directors and Officers of State Street Research Investment
Services, Inc. are as follows:
(1) (2) (3)
Positions Positions
Name and Principal and Offices and Offices
Business Address with Underwriter with Registrant
Ralph F. Verni Chairman of the Chairman of the
One Financial Center Board, President, Board, President,
Boston, MA 02111 Chief Executive Chief Executive
Officer and Officer and
Director Trustee
Peter C. Bennett Director Vice President
One Financial Center
Boston, MA 02111
Gerard P. Maus Executive Vice Treasurer
One Financial Center President, Treasurer,
Boston, MA 02111 Chief Financial
Officer and Director
Thomas A. Shively Director None
One Financial Center
Boston, MA 02111
George B. Trotta Executive Vice None
One Madison Avenue President
New York, NY 10010
C-19
<PAGE>
(1) (2) (3)
Positions Positions
Name and Principal and Offices and Offices
Business Address with Underwriter with Registrant
Dennis C. Barghann Senior Vice President None
One Financial Center
Boston, MA 02111
Peter Borghi Senior Vice President None
One Financial Center
Boston, MA 02111
Paul V. Daly Senior Vice None
One Financial Center President
Boston, MA 02111
Susan M.W. DiFazio Senior Vice None
One Financial Center President
Boston, MA 02111
Robert Haeusler Senior Vice None
One Financial Center President
Boston, MA 02111
Gregory R. McMahan Senior Vice None
One Financial Center President
Boston, MA 02111
Francis J. McNamara, III Senior Vice President Secretary
One Financial Center and Clerk
Boston, MA 02111
Joan D. Miller Senior Vice None
One Financial Center President
Boston, MA 02111
Richard P. Samartin Senior Vice None
One Financial Center President
Boston, MA 02111
C-20
<PAGE>
(1) (2) (3)
Positions Positions
Name and Principal and Offices and Offices
Business Address with Underwriter with Registrant
Darman A. Wing Senior Vice Assistant
One Financial Center President and Secretary
Boston, MA 02111 Assistant Clerk
Gordon Evans Vice President None
One Financial Center
Boston, MA 02111
Linda Grasso Vice President None
One Financial Center
Boston, MA 02111
Frederick H. Jamieson Vice President None
One Financial Center and Assistant
Boston, MA 02111 Treasurer
C-21
<PAGE>
Item 30. Location of Accounts and Records
Gerard P. Maus
State Street Research & Management Company
One Financial Center
Boston, MA 02111
Item 31. Management Services
Inapplicable.
Item 32. Undertakings
(a) Inapplicable.
(b) Deleted.
(c) Deleted.
(d) The Registrant undertakes to hold a special meeting of shareholders
of MetLife - State Street Equity Trust for the purpose of voting upon the
question of removal of any trustee or trustees when requested in writing so to
do by the record holders of not less than 10 per centum of the outstanding
shares of MetLife - State Street Equity Trust and, in connection with such
meeting, to comply with the provisions of Section 16(c) of the Investment
Company Act of 1940 relating to shareholder communications.
(e) The Registrant has elected to include the information required by
Item 5A of Form N-1A in its annual report to shareholders. The Registrant
undertakes to furnish each person to whom a prospectus is delivered with a copy
of the applicable fund's latest annual report to shareholders, upon request and
without charge.
C-22
<PAGE>
Notice
A copy of the Master Trust Agreement of the Registrant is on file with
the Secretary of State of the Commonwealth of Massachusetts and notice is hereby
given that the obligations of the Registrant hereunder, and the authorization,
execution and delivery of this amendment to the Registrant's Registration
Statement, shall not be binding upon any of the Trustees, shareholders,
nominees, officers, agents or employees of the Registrant as individuals or
personally, but shall bind only the property of the Funds of the Registrant, as
provided in the Master Trust Agreement. Each Fund of the Registrant shall be
solely and exclusively responsible for all of its direct or indirect debts,
liabilities and obligations, and no other Fund shall be responsible for the
same.
C-23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 17 to its Registration Statement on Form N-1A to be
signed on its behalf by the undersigned, thereto duly authorized, in the City of
Boston and the Commonwealth of Massachusetts on the 25th day of August, 1995.
METLIFE - STATE STREET EQUITY TRUST
By *
-------------------------------------
Ralph F. Verni
Chief Executive Officer and President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed on the
above date by the following persons in the capacities indicated:
Signature Capacity
* Trustee & Chief
_________________________________ Executive Officer
Ralph F. Verni (principal executive
officer)
* Treasurer (principal
_________________________________ financial and
Gerard P. Maus accounting officer)
*
_________________________________ Trustee
Edward M. Lamont
*
_________________________________ Trustee
Robert A. Lawrence
<PAGE>
*
_________________________________ Trustee
Dean O. Morton
*
_________________________________ Trustee
Thomas L. Phillips
*
_________________________________ Trustee
Toby Rosenblatt
*
_________________________________ Trustee
Michael S. Scott Morton
*
_________________________________ Trustee
Jeptha H. Wade
*By: /s/ Francis J. McNamara, III
Francis J. McNamara, III,
Attorney-in-Fact under
Powers of Attorney dated
August 24, 1995, filed
herein.
<PAGE>
1933 Act Registration No. 33-4296
1940 Act File No. 811-4624
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. ___ [ ]
Post-Effective Amendment No. 17 [X]
and/or
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 18 [X]
____________________
METLIFE - STATE STREET EQUITY TRUST
(Exact Name of Registrant as Specified in Declaration of Trust)
____________________
EXHIBITS
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INDEX TO EXHIBITS
(1)(a) First Amended and Restated
Master Trust Agreement,
Amendment No. 1, Amendment No. 2
and Amendment No. 3
(1)(b) Form of Amendment No. 4 to
First Amended and Restated
Master Trust Amendment
(6)(b) Form of Selected Dealer Agreement
(11) Consent of Price Waterhouse LLP
(14)(a) State Street Research IRA: Disclosure
Statement, Forms Booklet and Transfer of
Assets/Direct Rollover Form
(17) Multiple Class Expense Allocation Plan
Adopted Pursuant to Rule 18f-3
(18) Powers of Attorney
(19) Certificate of Board Resolution
respecting Powers of Attorney
(27) Financial Data Schedules
Exhibit (1)(a)
METLIFE - STATE STREET EQUITY TRUST
FIRST AMENDED AND RESTATED
MASTER TRUST AGREEMENT
June 1, 1993
Copyright 1993 Goodwin, Procter & Hoar
All Rights Reserved
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METLIFE - STATE STREET EQUITY TRUST
FIRST AMENDED AND RESTATED
MASTER TRUST AGREEMENT
Page
ARTICLE I NAME AND DEFINITIONS 1
Section 1.1 Name .............................................. 1
Section 1.2 Definitions ....................................... 2
(a) "By-Laws"..................................... 2
(b) "Class"....................................... 2
(c) "Commission" ................................. 2
(d) "Declaration of Trust"........................ 2
(e) "1940 Act".................................... 2
(f) "Shareholder" ................................ 2
(g) "Shares" ..................................... 2
(h) "Sub-Trust" or "Series" ...................... 2
(i) "Trust" ...................................... 2
(j) "Trustees" ................................... 2
ARTICLE II. PURPOSE OF TRUST 2
ARTICLE III. THE TRUSTEES 3
Section 3.1 Number, Designation, Election, Term, etc. ........ 3
(a) Initial Trustees.............................. 3
(b) Number ....................................... 3
(c) Election and Term ............................ 3
(d) Resignation and Retirement ................... 3
(e) Removal....................................... 3
(f) Vacancies .................................... 4
(g) Effect of Death, Resignation, etc ............ 4
(h) No Accounting................................. 4
Section 3.2 Powers of Trustees................................ 4
(a) Investments .................................. 6
(b) Disposition of Assets ........................ 6
(c) Ownership Powers ............................. 6
(d) Subscription.................................. 6
(e) Form of Holding .............................. 6
(f) Reorganization, etc .......................... 6
(g) Voting Trusts, etc ........................... 6
(h) Compromise ................................... 7
(i) Partnerships, etc ............................ 7
(j) Borrowing and Security ....................... 7
(k) Guarantees, etc .............................. 7
(1) Insurance .................................... 7
(m) Pensions, etc ................................ 7
(n) Distribution Plans............................ 8
(i)
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Section 3.3 Certain Contracts................................... 8
(a) Advisory........................................ 8
(b) Administration.................................. 8
(c) Distribution.................................... 9
(d) Custodian and Depository........................ 9
(e) Transfer and Dividend Disbursing
Agency.......................................... 9
(f) Shareholder Servicing........................... 9
(g) Accounting...................................... 9
Section 3.4 Payment of Trust Expenses and
Compensation of Trustees........................ 10
Section 3.5 Ownership of Assets of the Trust.................... 11
ARTICLE IV. SHARES 11
Section 4.1 Description of Shares............................... 11
Section 4.2 Establishment and Designation of
Sub-Trusts...................................... 12
(a) Assets Belonging to Sub-Trusts................. 12
(b) Liabilities Belonging to Sub-Trusts............ 13
(c) Dividends...................................... 14
(d) Liquidation.................................... 14
(e) Voting......................................... 15
(f) Redemption by Shareholder...................... 15
(g) Redemption by Trust............................ 15
(h) Net Asset Value................................ 16
(i) Transfer....................................... 16
(j) Equality....................................... 17
(k) Fractions...................................... 17
(1) Conversion Rights.............................. 17
Section 4.3 Ownership of Shares................................. 17
Section 4.4 Investments in the Trust............................ 17
Section 4.5 No Pre-emptive Rights............................... 18
Section 4.6 Status of Shares and Limitation of
Personal Liability.............................. 18
ARTICLE V. SHAREHOLDERS' VOTING POWERS AND MEETINGS 18
Section 5.1 Voting Powers....................................... 18
Section 5.2 Meetings............................................ 19
Section 5.3 Record Dates........................................ 19
(ii)
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Page
Section 5.4 Quorum and Required Vote............................ 20
Section 5.5 Action by Written Consent........................... 20
Section 5.6 Inspection of Records............................... 20
Section 5.7 Additional Provisions............................... 20
Section 5.8 Shareholder Communications.......................... 20
ARTICLE VI. LIMITATION OF LIABILITY; INDEMNIFICATION 21
Section 6.1 Trustees, Shareholders, etc. Not
Personally Liable............................... 21
Section 6.2 Trustee's Good Faith Action; Expert
Advice; No Bond or Surety....................... 22
Section 6.3 Indemnification of Shareholders..................... 23
Section 6.4 Indemnification of Trustees, Officers,
etc............................................. 23
Section 6.5 Compromise Payment.................................. 24
Section 6.6 Indemnification Not Exclusive, etc.................. 24
Section 6.7 Liability of Third Persons Dealing with
Trustees........................................ 25
ARTICLE VII. MISCELLANEOUS 25
Section 7.1 Duration and Termination of Trust................... 25
Section 7.2 Reorganization...................................... 25
Section 7.3 Amendments.......................................... 26
Section 7.4 Filing of Copies; References; Headings.............. 27
Section 7.5 Applicable Law...................................... 27
(iii)
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METLIFE - STATE STREET EQUITY TRUST
FIRST AMENDED AND RESTATED
MASTER TRUST AGREEMENT
FIRST AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST made at
Boston, Massachusetts this 1st day of June, 1993, by the Trustees hereunder, and
by the holders of shares of beneficial interest to be issued hereunder as
hereinafter provided.
WITNESSETH
WHEREAS this Trust has been formed to carry on the business of an investment
company; and
WHEREAS this Trust is authorized to issue its shares of beneficial interest
in separate series, each separate series to be a Sub-Trust hereunder, all in
accordance with the provisions hereinafter set forth; and
WHEREAS the Trustees have agreed to manage all property coming into their
hands as trustees of a Massachusetts business trust in accordance with the
provisions hereinafter set forth.
WHEREAS, the Trustees desire to amend and restate the Declaration of Trust
dated March 18, 1986 in its entirety by adopting this First Amended and Restated
Master Trust Agreement, which shall supersede such Declaration of Trust and be
the governing instrument of the Trust from and after the date hereof.
NOW, THEREFORE, the Trustees hereby amend and restate the Declaration of
Trust dated March 18, 1986 in its entirely and declare that they will hold all
cash, securities and other assets which they may from time to time acquire in
any manner as Trustees hereunder IN TRUST to manage and dispose of the same upon
the following terms and conditions for the benefit of the holders from time
to-time of shares of beneficial interest in this Trust or Sub-Trusts (as
hereinafter defined) created hereunder as hereinafter set forth.
ARTICLE I
NAME AND DEFINITIONS
Section 1.1 Name. This Trust shall be known as MetLife - State Street Equity
Trust and the Trustees shall conduct the business of the Trust under that name
or any other name or names as they may from time to time determine.
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Section 1.2 Definitions. Whenever used herein, unless otherwise required by
the context or specifically provided:
(a) "By-Laws" shall mean the By-Laws of the Trust as amended from time to
time;
(b) "Class" refers to any class of Shares of any Series or Sub-Trust
established and designated under or in accordance with the provisions of Article
IV;
(c) "Commission" shall have the meaning given it in the 1940 Act;
(d) "Declaration of Trust" shall mean this First Amended and Restated
Agreement and Declaration of Trust as amended or restated from time to time;
(e) "1940 Act" refers to the Investment Company Act of 1940 and the Rules
and Regulations thereunder, all as amended from time to time;
(f) "Shareholder" means a record owner of Shares;
(g) "Shares" refers to the transferable units of interest into which the
beneficial interest in the Trust and each Sub-Trust of the Trust and/or any
class of any Series (as the context may require) shall be divided from time to
time;
(h) "Sub-Trust" or "Series" refers to a series of Shares established and
designated under or in accordance with the provisions of Article IV;
(i) "Trust" refers to the Massachusetts business trust established by this
Declaration of Trust, as amended from time to time, inclusive of each and every
Sub-Trust established hereunder; and
(j) "Trustees" refers to the Trustees of the Trust and of each Sub-Trust
hereunder named herein or elected in accordance with Article III.
ARTICLE II
PURPOSE OF TRUST
The purpose of the Trust is to operate as an investment company and to offer
Shareholders of the Trust and each Sub-Trust of the Trust one or more investment
programs primarily in securities and debt instruments.
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ARTICLE III
THE TRUSTEES
Section 3.1 Number, Designation, Election, Term, etc.
(a) Initial Trustees. The Trustees hereof are Edward M. Lamont, Robert A.
Lawrence, Dean O. Morton, Thomas L. Phillips, Toby Rosenblatt, Michael S. Scott
Morton, Ralph F. Verni and Jeptha H. Wade.
(b) Number. The Trustees serving as such, whether named above or hereafter
becoming Trustees, may increase or decrease (to not less than two at any time
after the effective date of the Trust's Registration Statement on Form N-1A with
the Commission) the number of Trustees to a number other than the number
theretofore determined. No decrease in the number of Trustees shall have the
effect of removing any Trustee from office prior to the expiration of his term,
but the number of Trustees may be decreased in conjunction with the removal of a
Trustee pursuant to subsection (e) of this Section 3.1.
(c) Election and Term. The Shareholders shall elect a Board of Trustees at
the first meeting of Shareholders following the initial public offering of
Shares. Each Trustee, whether named above or hereafter becoming a Trustee, shall
serve as a Trustee of the Trust and of each Sub-Trust hereunder during the
lifetime of this Trust and until its termination as hereinafter provided except
as such Trustee sooner dies, resigns or is removed. The Trustees may elect their
own successors and may, pursuant to Section 3.1(f) hereof, appoint Trustees to
fill vacancies; provided, however, that the Shareholders shall have the right to
elect Trustees subsequent to the initial election contemplated by this Section
3.1(c) in the event there shall at any time be no Trustees in office or when and
to the extent otherwise required by Section 16(a) of the 1940 Act.
(d) Resignation and Retirement. Any Trustee may resign his trust or retire
as a Trustee, by written instrument signed by him and delivered to the other
Trustees or to any officer of the Trust, and such resignation or retirement
shall take effect upon such delivery or upon such later date as is specified in
such instrument and shall be effective as to the Trust and each Sub-Trust
hereunder.
(e) Removal. Any Trustee may be removed with or without cause at any time:
(i) by written instrument, signed by at least two-thirds of the number of
Trustees in office immediately prior to such removal, specifying the date upon
which such removal shall become effective; or (ii) by vote of Shareholders
holding not less than two-thirds of the Shares then outstanding, cast in person
or by proxy at any meeting
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called for the purpose; or (iii) by a written declaration signed by
Shareholders holding not less than two-thirds of the Shares then outstanding and
filed with the Trust's custodian. Any such removal shall be effective as to the
Trust and each Sub-Trust hereunder.
(f) Vacancies. Any vacancy or anticipated vacancy resulting from any reason,
including without limitation the death, resignation, retirement, removal or
incapacity of any of the Trustees, or resulting from an increase in the number
of Trustees by the other Trustees may (but so long as there are at least two
remaining Trustees, need not unless required by the 1940 Act) be filled by a
majority of the remaining Trustees, subject to the provisions of Section 16(a)
of the 1940 Act, through the appointment in writing of such other person as such
remaining Trustees in their discretion shall determine and such appointment
shall be effective upon the written acceptance of the person named therein to
serve as a Trustee and agreement by such person to be bound by the provisions of
this Declaration of Trust, except that any such appointment in anticipation of a
vacancy to occur by reason of retirement, resignation or increase in number of
Trustees to be effective at a later date shall become effective only at or after
the effective date of said retirement, resignation or increase in number of
Trustees. As soon as any Trustee so appointed shall have accepted such
appointment and shall have agreed in writing to be bound by this Declaration of
Trust and the appointment is effective, the Trust estate shall vest in the new
Trustee, together with the continuing Trustees, without any further act or
conveyance.
(g) Effect of Death, Resignation, etc. The death, resignation, retirement,
removal or incapacity of the Trustees, or any one of them, shall not operate to
annul or terminate the Trust or any Sub-Trust hereunder or to revoke or
terminate any existing agency or contract created or entered into pursuant to
the terms of this Declaration of Trust.
(h) No Accounting. Except to the extent required by the 1940 Act or under
circumstances which would justify his removal for cause, no person ceasing to be
a Trustee as a result of his death, resignation, retirement, removal or
incapacity (nor the estate of any such person) shall be required to make an
accounting to the Shareholders or remaining Trustees upon such cessation.
Section 3.2 Powers of Trustees. Subject to the provisions of this
Declaration of Trust, the business of the Trust shall be managed by the
Trustees, and they shall have all powers necessary or convenient to carry out
that responsibility and the purpose of the Trust. The Trustees in all instances
shall act as principals, and are and shall be free from the control of the
Shareholders. The Trustees shall have full power and
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authority to do any and all acts and to make and execute any and all contracts
and instruments that they may consider necessary or appropriate in connection
with the management of the Trust. The Trustees shall not be bound or limited by
present or future laws or customs with regard to investment by trustees or
fiduciaries, but shall have full authority and absolute power and control over
the assets of the Trust and the business of the Trust to the same extent as if
the Trustees were the sole owners of the assets of the Trust and the business in
their own right, including such authority, power and control to do all acts and
things as they, in their uncontrolled discretion, shall deem proper to
accomplish the purposes of this Trust. Without limiting the foregoing, the
Trustees may adopt By-Laws not inconsistent with this Declaration of Trust
providing for the conduct of the business and affairs of the Trust and may amend
and repeal them to the extent that such By-Laws do not reserve that right to the
Shareholders; they may sue or be sued in the name of the Trust; they may from
time to time in accordance with the provisions of Section 4.1 hereof establish
classes of Shares of any Series or divide the Shares of any Series into classes,
each such Sub-Trust to operate as a separate and distinct investment medium and
with separately defined investment objectives and policies and distinct
investment purposes; they may as they consider appropriate elect and remove
officers and appoint and terminate agents and consultants and hire and terminate
employees, any one or more of the foregoing of whom may be a Trustee, and may
provide for the compensation of all of the foregoing; they may appoint from
their own number, and terminate, any one or more committees consisting of two or
more Trustees, including without implied limitation an executive committee,
which may, when the Trustees are not in session and subject to the 1940 Act,
exercise some or all of the power and authority of the Trustees as the Trustees
may determine; in accordance with Section 3.3 they may employ one or more
advisers, administrators, depositories and custodians and may authorize any
depository or custodian to employ subcustodians or agents and to deposit all or
any part of such assets in a system or systems for the central handling of
securities and debt instruments, retain transfer, dividend, accounting or
Shareholder servicing agents or any of the foregoing, provide for the
distribution of Shares by the Trust through one or more distributors, principal
underwriters or otherwise, and set record dates or times for the determination
of Shareholders or various of them with respect to various matters; they may
compensate or provide for the compensation of the Trustees, officers, advisers,
administrators, custodians, other agents, consultants and employees of the Trust
or the Trustees on such terms as they deem appropriate; and in general they may
delegate to any officer of the Trust, to any committee of the Trustees and to
any employee, adviser, administrator, distributor, depository, custodian,
transfer and dividend disbursing agent, or any other agent or consultant of the
Trust
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such authority, powers, functions and duties as they consider desirable or
appropriate for the conduct of the business and affairs of the Trust, including
without implied limitation the power and authority to act in the name of the
Trust and any Sub-Trust and of the Trustees, to sign documents and to act as
attorney-in-fact for the Trustees.
Without limiting the foregoing and to the extent not inconsistent with the
1940 Act or other applicable law, the Trustees shall have power and authority
for and on behalf of the Trust and each separate Sub-Trust established
hereunder:
(a) Investments. To invest and reinvest cash and other property, and to hold
cash or other property uninvested without in any event being bound or limited by
any present or future law or custom in regard to investments by trustees;
(b) Disposition of Assets. To sell, exchange, lend, pledge, mortgage,
hypothecate, write options on and lease any or all of the assets of the Trust;
(c) Ownership Powers. To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities, debt instruments or
property; and to execute and deliver proxies or powers of attorney to such
person or persons as the Trustees shall deem proper, granting to such person or
persons such power and discretion with relation to securities, debt instruments
or property as the Trustees shall deem proper;
(d) Subscription. To exercise powers and rights of subscription or otherwise
which in any manner arise out of ownership of securities or debt instruments;
(e) Form of Holding. To hold any security, debt instrument or property in a
form not indicating any trust, whether in bearer, unregistered or other
negotiable form, or in the name of the Trustees or of the Trust or of any
Sub-Trust or in the name of a custodian, subcustodian or other depository or a
nominee or nominees or otherwise;
(f) Reorganization, etc. To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or issuer, any
security or debt instrument of which is or was held in the Trust; to consent to
any contract, lease, mortgage, purchase or sale of property by such corporation
or issuer, and to pay calls or subscriptions with respect to any security or
debt instrument held in the Trust;
(g) Voting Trusts, etc. To join with other holders of any securities or debt
instruments in acting through a committee, depository, voting trustee or
otherwise, and in that connection to deposit any security or debt instrument
with, or transfer any security or debt instrument to, any such committee,
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depositary or trustee, and to delegate to them such power and authority with
relation to any security or debt instrument (whether or not so deposited or
transferred) as the Trustees shall deem proper, and to agree to pay, and to pay,
such portion of the expenses and compensation of such committee, depositary or
trustee as the Trustees shall deem proper;
(h) Compromise. To compromise, arbitrate or otherwise adjust claims in favor
of or against the Trust or any Sub-Trust or any matter in controversy, including
but not limited to claims for taxes;
(i) Partnerships, etc. To enter into joint ventures, general or limited
partnerships and any other combinations or associations;
(j) Borrowing and Securities. To borrow funds and to mortgage and pledge the
assets of the Trust or any part thereof to secure obligations arising in
connection with such borrowing;
(k) Guarantees, etc. To endorse or guarantee the payment of any notes or
other obligations of any person; to make contracts of guaranty or suretyship, or
otherwise assume liability for payment thereof; and to mortgage and pledge the
Trust property or any part thereof to secure any of or all such obligations;
(1) Insurance. To purchase and pay for entirely out of Trust property such
insurance as they may deem necessary or appropriate for the conduct of the
business, including, without limitation, insurance policies insuring the assets
of the Trust and payment of distributions and principal on its portfolio
investments, and insurance policies insuring the Shareholders, Trustees,
officers, employees, agents, consultants, investment advisers, managers,
administrators, distributors, principal underwriters, or independent
contractors, or any thereof (or any person connected therewith), of the Trust
individually against all claims and liabilities of every nature arising by
reason of holding, being or having held any such office or position, or by
reason of any action alleged to have been taken or omitted by any such person in
any such capacity, including any action taken or omitted that may be determined
to constitute negligence, whether or not the Trust would have the power to
indemnify such person against such liability;
(m) Pensions, etc. To pay pensions for faithful service, as deemed
appropriate by the Trustees, and to adopt, establish and carry out pension,
profit-sharing, share bonus, share purchase, savings, thrift and other
retirement, incentive and benefit plans, trusts and provisions, including the
purchasing of life insurance and annuity contracts as a means of providing such
retirement and other benefits, for any or all of the Trustees, officers,
employees and agents of the Trust; and
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(n) Distribution Plans. To adopt on behalf of the Trust or any Sub-Trust a
plan of distribution and related agreements thereto pursuant to the terms of
Rule 12b-1 of the 1940 Act and to make payments from the assets of the Trust or
the relevant Sub-Trust or Sub-Trusts or class or classes thereof pursuant to
said Rule 12b-1 Plan.
Except as otherwise provided by the 1940 Act or other applicable law, this
Declaration of Trust or the By-Laws, any action to be taken by the Trustees on
behalf of the Trust or any Sub-Trust may be taken by a majority of the Trustees
present at a meeting of Trustees (a quorum, consisting of at least one-half of
the Trustees then in office, being present), within or without Massachusetts,
including any meeting held by means of a conference telephone or other
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time, and participation by such means
shall constitute presence in person at a meeting, or by written consents of a
majority of the Trustees then in office (or such larger or different number as
may be required by the 1940 Act or other applicable law).
Section 3.3 Certain Contracts. Subject to compliance with the provisions of
the 1940 Act, but notwithstanding any limitations of present and future law or
custom in regard to delegation of powers by trustees generally, the Trustees
may, at any time and from time to time and without limiting the generality of
their powers and authority otherwise set forth herein, enter into one or more
contracts with any one or more corporations, trusts, associations, partnerships,
limited partnerships, other type of organizations, or individuals (a
"Contracting Party"), to provide for the performance and assumption of some or
all of the following services, duties and responsibilities to, for or on behalf
of the Trust and/or any Sub-Trust, and/or the Trustees, and to provide for the
performance and assumption of such other services, duties and responsibilities
in addition to those set forth below as the Trustees may determine appropriate:
(a) Advisory. Subject to the general supervision of the Trustees and in
conformity with the stated policy of the Trustees with respect to the
investments of the Trust or of the assets belonging to any Sub-Trust of the
Trust (as that phrase is defined in subsection (a) of Section 4.2), to manage
such investments and assets, make investment decisions with respect thereto, and
to place purchase and sale orders for portfolio transactions relating to such
investments and assets;
(b) Administration. Subject to the general supervision of the Trustees and
in conformity with any policies of the Trustees with respect to the operations
of the Trust and each Sub-Trust, to supervise all or any part of the operations
of the Trust and each Sub-Trust, and to provide all or any part of
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the administrative and clerical personnel, office space and office equipment
and services appropriate for the efficient administration and operations of the
Trust and each Sub-Trust;
(c) Distribution. To distribute the Shares of the Trust and each Sub-Trust
(including any classes thereof), to be principal underwriter of such Shares,
and/or to act as agent of the Trust and each Sub-Trust in the sale of Shares and
the acceptance or rejection of orders for the purchase of Shares;
(d) Custodian and Depository. To act as depository for and to maintain
custody of the property of the Trust and each Sub-Trust and accounting records
in connection therewith;
(e) Transfer and Dividend Dividend Disbursing Agency. To maintain records of
the ownership of outstanding Shares, the issuance and redemption and the
transfer thereof, and to disburse any dividends declared by the Trustees and in
accordance with the policies of the Trustees and/or the instructions of any
particular Shareholder to reinvest any such dividends;
(f) Shareholder Servicing. To provide service with respect to the
relationship of the Trust and its Shareholders, records with respect to
Shareholders and their Shares, and similar matters; and
(g) Accounting. To handle all or any part of the accounting
responsibilities, whether with respect to the Trust's properties, Shareholders
or otherwise.
The same person may be the Contracting Party for some or all of the
services, duties and responsibilities to, for and of the Trust and/or the
Trustees, and the contracts with respect thereto may contain such terms
interpretive of or in addition to the delineation of the services, duties and
responsibilities provided for, including provisions that are not inconsistent
with the 1940 Act relating to the standard of duty of and the rights to
indemnification of the Contracting Party and others, as the Trustees may
determine. Nothing herein shall preclude, prevent or limit the Trust or a
Contracting Party from entering into sub-contractual arrangements relating to
any of the matters referred to in Sections 3.3(a) through (g) hereof.
The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, manager,
adviser, principal underwriter or distributor or agent of or for any
Contracting Party, or of or for any parent or affiliate of any Contracting
Party or that the Contracting Party or any parent or affiliate thereof is a
Shareholder or has an interest in the Trust or any Sub-Trust, or that
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(ii) any Contracting Party may have a contract providing for the
rendering of any similar services to one or more other corporations, trusts,
associations, partnerships, limited partnerships or other organizations, or
have other business or interests,
shall not affect the validity of any contract for the performance and assumption
of services, duties and responsibilities to, for or of the Trust or any
Sub-Trust and/or the Trustees or disqualify any Shareholder, Trustee or officer
of the Trust from voting upon or executing the same or create any liability or
accountability to the Trust, any Sub-Trust or its Shareholders, provided that in
the case of any relationship or interest referred to in the preceding clause (i)
on the part of any Trustee or officer of the Trust either (x) the material facts
as to such relationship or interest have been disclosed to or are known by the
Trustees not having any such relationship or interest and the contract involved
is approved in good faith by a majority of such Trustees not having any such
relationship or interest (even though such unrelated or disinterested Trustees
are less than a quorum of all of the Trustees), (y) the material facts as to
such relationship or interest and as to the contract have been disclosed to or
are known by the Shareholders entitled to vote thereon and the contract involved
is specifically approved in good faith by vote of the Shareholders, or (z) the
specific contract involved is fair to the Trust as of the time it is authorized,
approved or ratified by the Trustees or by the Shareholders.
Section 3.4 Payment of Trust Expenses and Compensation of Trustees. The
Trustees are authorized to pay or to cause to be paid out of the principal or
income of the Trust or any Sub-Trust, or partly out of principal and partly out
of income, and to charge or allocate the same to, between or among such one or
more of the Sub-Trusts and/or one or more classes of Shares thereof that may be
established and designated pursuant to Article IV, as the Trustees deem fair,
all expenses, fees, charges, taxes and liabilities incurred or arising in
connection with the Trust or any Sub-Trust and/or one or more classes of Shares
thereof, or in connection with the management thereof, including, but not
limited to, the Trustees' compensation and such expenses and charges for the
services of the Trust's officers, employees, investment adviser, administrator,
distributor, principal underwriter, auditor, counsel, depository, custodian,
transfer agent, dividend disbursing agent, accounting agent, Shareholder
servicing agent, and such other agents, consultants, and independent contractors
and such other expenses and charges as the Trustees may deem necessary or proper
to incur. Without limiting the generality of any other provision hereof, the
Trustees shall be entitled to reasonable compensation from the Trust for their
services as Trustees and may fix the amount of such compensation.
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Section 3.5 Ownership of Assets of the Trust. Title to all of the assets of
the Trust shall at all times be considered as vested in the Trustees.
ARTICLE IV
SHARES
Section 4.1 Description of Shares. The beneficial interest in the Trust
shall be divided into Shares, all with $.001 par value, but the Trustees shall
have the authority from time to time to establish and designate one or more
Series of Shares (each of which Series of Shares shall be a separate and
distinct Sub-Trust of the Trust, including without limitation those Sub-Trusts
specifically established and designated in Section 4.2) and one or more classes
thereof, as they deem necessary or desirable. For all purposes under this
Declaration of Trust or otherwise, including, without implied limitation, (i)
with respect to the rights of creditors and (ii) for purposes of interpreting
the relevant rights of each Sub-Trust and the Shareholders of each Sub-Trust,
each Sub-Trust established hereunder shall be deemed to be a separate trust. The
Trustees shall have exclusive power without the requirement of Shareholder
approval to establish and designate such separate and distinct Sub-Trusts or
classes thereof, and to fix and determine the relative rights and preferences as
between the shares of the separate Sub-Trusts or classes as to right of
redemption and the price, terms and manner of redemption, special and relative
rights as to dividends and other distributions and on liquidation, sinking or
purchase fund provisions, conversion rights, and conditions under which the
several Sub-Trusts or classes thereof shall have separate voting rights or no
voting rights.
The number of authorized Shares and the number of Shares of each Sub-Trust
or classes thereof that may be issued is unlimited, and the Trustees may issue
Shares of any Sub-Trust for such consideration and on such terms as they may
determine (or for no consideration if pursuant to a Share dividend or split-up),
all without action or approval of the Shareholders. All Shares when so issued on
the terms determined by the Trustees shall be fully paid and non-assessable (but
may be subject to mandatory contribution back to the Trust as provided in
subsection (h) of Section 4.2). The Trustees may classify or reclassify any
unissued Shares or any Shares previously issued and reacquired of any Sub-Trust
or class into one or more Sub-Trusts or classes that may be established and
designated from time to time. The Trustees may hold as treasury Shares, reissue
for such consideration and on such terms as they may determine, or cancel, at
their discretion from time to time, any Shares of any Sub-Trust reacquired by
the Trust.
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The Trustees may from time to time close the transfer books or establish
record dates and times for the purposes of determining the holders of Shares
entitled to be treated as such, to the extent provided or referred to in Section
5.3.
The establishment and designation of any Sub-Trust or classes in addition to
those established and designated in Section 4.2 shall be effective (i) upon the
execution by a majority of the then Trustees of an instrument setting forth such
establishment and designation of the relative rights and preferences of the
Shares of such Sub-Trust, (ii) upon the execution of an instrument in writing by
an officer of the Trust pursuant to the vote of a majority of the Trustees, or
(iii) as otherwise provided in either such instrument. At any time that there
are no Shares outstanding of any particular Sub-Trust previously established and
designated, the Trustees may by an instrument executed by a majority of their
number abolish that Sub-Trust and the establishment and designation thereof.
Each instrument referred to in this paragraph shall have the status of an
amendment to this Declaration of Trust.
Any Trustee, officer or other agent of the Trust, and any organization in
which any such person is interested may acquire, own, hold and dispose of Shares
of any Sub-Trust of the Trust to the same extent as if such person were not a
Trustee, officer or other agent of the Trust; and the Trust may issue and sell
or cause to be issued and sold and may purchase Shares of any Sub-Trust from any
such person or any such organization subject only to the general limitations,
restrictions or other provisions applicable to the sale or purchase of Shares of
such Sub-Trust generally.
Section 4.2 Establishment and Designation of Sub-Trusts. Without limiting
the authority of the Trustees set forth in Section 4.1 to establish and
designate any further Sub-Trusts, the Trustees hereby establish and designate
four Sub-Trusts: the "MetLife - State Street Capital Appreciation Fund," the
"MetLife - State Street Equity Investment Fund," the "MetLife - State Street
Equity Income Fund" and the "MetLife - State Street Global Energy Fund." The
Shares of such Sub-Trusts and any Shares of any further Sub-Trusts that may from
time to time be established and designated by the Trustees shall (unless the
Trustees otherwise determine with respect to some further Sub-Trust at the time
of establishing and designating the same) have the following relative rights and
preferences:
(a) Assets Belonging to Sub-Trusts. All consideration received by the Trust
for the issue or sale of Shares of a particular Sub-Trust or any classes
thereof, together with all assets in which such consideration is invested or
reinvested, all income, earnings, profits, and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation of
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such assets, and any funds or payments derived from any reinvestment of such
proceeds in whatever form the same may be, shall be held by the Trustees in
trust for the benefit of the holders of Shares of that Sub-Trust and shall
irrevocably belong to that Sub-Trust (and be allocable to any classes thereof)
for all purposes, and shall be so recorded upon the books of account of the
Trust. Such consideration, assets, income, earnings, profits, and proceeds
thereof, including any proceeds derived from the sale, exchange or liquidation
of such assets, and any funds or payments derived from any reinvestment of such
proceeds, in whatever form the same may be, together with any General Items (as
hereinafter defined) allocated to that Sub-Trust as provided in the following
sentence, are herein referred to as "assets belonging to" that Sub-Trust (and be
allocable to any classes thereof). In the event that there are any assets,
income, earnings, profits, and proceeds thereof, funds, or payments which are
not readily identifiable as belonging to any particular Sub-Trust (collectively
"General Items"), the Trustees shall allocate such General Items to and among
any one or more of the Sub-Trusts established and designated from time to time
in such manner and on such basis as they, in their sole discretion, deem fair
and equitable; and any General Items so allocated to a particular Sub-Trust
shall belong to that Sub-Trust (and be allocable to any classes thereof). Each
such allocation by the Trustees shall be conclusive and binding upon the
Shareholders of all Sub-Trusts (including any classes thereof) for all purposes.
(b) Liabilities Belonging to Sub-Trusts. The assets belonging to each
particular Sub-Trust shall be charged with the liabilities in respect of that
Sub-Trust and all expenses, costs, charges and reserves belonging to that
Sub-Trust, and any general liabilities, expenses, costs, charges or reserves of
the Trust which are not readily identifiable as belonging to any particular
Sub-Trust shall be allocated and charged by the Trustees to and among any one or
more of the Sub-Trusts established and designated from time to time in such
manner and on such basis as the Trustees in their sole discretion deem fair and
equitable. In addition, the liabilities in respect of a particular class of
Shares of a particular Series and all expenses, costs, charges and reserves
belonging to that class of Shares, and any general liabilities, expenses, costs,
charges or reserves of that particular Series which are not readily identifiable
as belonging to any particular class of Shares of that Series shall be allocated
and charged by the Trustees to and among any one or more of the classes of
Shares of that Series established and designated from time to time in such
manner and on such basis as the Trustees in their sole discretion deem fair and
equitable. The liabilities, expenses, costs, charges and reserves allocated and
so charged to a Series or class thereof are herein referred to as "liabilities
belonging to" that Series or class thereof. Each allocation of liabilities,
expenses, costs, charges and reserves by the
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Trustees shall be conclusive and binding upon the Shareholders of all Series
(including any classes thereof) for all purposes. Any creditor of any Sub-Trust
may look only to the assets of that Sub-Trust to satisfy such creditor debt.
The Trustees shall have full discretion, to the extent not inconsistent with
the 1940 Act, to determine which items shall be treated as income and which
items as capital; and each such determination and allocation shall be conclusive
and binding upon the Shareholders.
(c) Dividends. Dividends and distributions on Shares of a particular
Sub-Trust or any classes thereof may be paid with such frequency as the Trustees
may determine, which may be daily or otherwise pursuant to a standing resolution
or resolutions adopted only once or with such frequency as the Trustees may
determine, to the holders of Shares of that Sub-Trust or class, from such of the
income and capital gains, accrued or realized, from the assets belonging to that
Sub-Trust or in the case of a class, belonging to that Sub-Trust and allocable
to that class, as the Trustees may determine, after providing for actual and
accrued liabilities belonging to that Sub-Trust or class. All dividends and
distributions on Shares of a particular Sub-Trust or class thereof shall be
distributed pro rata to the holders of Shares of that Sub-Trust or class in
proportion to the number of Shares of that Sub-Trust or class held by such
holders at the date and time of record established for the payment of such
dividends or distributions, except that in connection with any dividend or
distribution program or procedure the Trustees may determine that no dividend or
distribution shall be payable on Shares as to which the Shareholder's purchase
order and/or payment have not been received by the time or times established by
the Trustees under such program or procedure. Such dividends and distributions
may be made in cash or Shares of that Sub-Trust or class or a combination
thereof as determined by the Trustees or pursuant to any program that the
Trustees may have in effect at the time for the election by each Shareholder of
the mode of the making of such dividend or distribution to that Shareholder. Any
such dividend or distribution paid in Shares will be paid at the net asset value
thereof as determined in accordance with subsection (h) of Section 4.2.
(d) Liquidation. In the event of the liquidation or dissolution of the
Trust, the Shareholders of each Sub-Trust or any class thereof that has been
established and designated shall be entitled to receive, when and as declared by
the Trustees, the excess of the assets belonging to the Sub-Trust or in the case
of a class, belonging to that Sub-Trust and allocable to that class, over the
liabilities belonging to that Sub-Trust or class. The assets so distributable to
the Shareholders of any particular Sub-Trust or class thereof shall
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be distributed among such Shareholders in proportion to the number of Shares
of that Sub-Trust or class thereof held by them and recorded on the books of the
Trust. The liquidation of any particular Sub-Trust or class thereof may be
authorized at any time by vote of a majority of the Trustees then in office
subject to the approval of a majority of the outstanding voting shares of that
Sub-Trust or class, as defined in the 1940 Act.
(e) Voting. On each matter submitted to a vote of the Shareholders, each
holder of a Share of each Sub-Trust or class thereof shall be entitled to one
vote for each whole Share and to a proportionate fractional vote for each
fractional Share standing in his name on the books of the Trust and all Shares
of each Sub-Trust and classes thereof shall vote as a separate class except as
to voting for Trustees and as otherwise required by the 1940 Act. As to any
matter which does not affect the interest of a particular Sub-Trust or class,
only the holders of Shares of the one or more affected Sub-Trusts or classes
shall be entitled to vote.
(f) Redemption by Shareholder. Each holder of Shares of a particular
Sub-Trust or any class thereof shall have the right at such times as may be
permitted by the Trust, but no less frequently than once each week, to require
the Trust to redeem all or any part of his Shares of that Sub-Trust or class
thereof at a redemption price equal to the net asset value per Share of that
Sub-Trust or class thereof next determined in accordance with subsection (h) of
this Section 4.2 after the Shares are properly tendered for redemption, subject
to any contingent deferred sales charge in effect at the time of redemption.
Payment of the redemption price shall be in cash; provided, however, that if the
Trustees determine, which determination shall be conclusive, that conditions
exist which make payment wholly in cash unwise or undesirable, the Trust may,
subject to the requirements of the 1940 Act, make payment wholly or partly in
securities or other assets belonging to the Sub-Trust of which the Shares being
redeemed are part at the value of such securities or assets used in such
determination of net asset value.
Notwithstanding the foregoing, the Trust may postpone payment of the
redemption price and may suspend the right of the holders of Shares of any
Sub-Trust to require the Trust to redeem Shares of that Sub-Trust during any
period or at any time when and to the extent permissible under the 1940 Act.
(g) Redemption by Trust. Each Share of each Sub-Trust or class thereof that
has been established and designated is subject to redemption by the Trust at the
redemption price which would be applicable if such Share was then being redeemed
by the Shareholder pursuant to subsection (f) of this Section 4.2 upon such
other conditions as may from time to time
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be determined by the Trustees and set forth in the then current Prospectus
of the Trust with respect to maintenance of Shareholder accounts of a minimum
amount. Upon such redemption the holders of the Shares so redeemed shall have no
further right with respect thereto other than to receive payment of such
redemption price.
(h) Net Asset Value. The net asset value per Share of any Sub-Trust shall be
(i) in the case of a Sub-Trust whose shares are not divided into classes, the
quotient obtained by dividing the value of the net assets of that Sub-Trust
(being the value of the assets belonging to that Sub-Trust less the liabilities
belonging to that Sub-Trust) by the total number of Shares of that Sub-Trust
outstanding and (ii) in the case of a class of Shares of a Sub-Trust whose
Shares are divided into classes, the quotient obtained by dividing the value of
the net assets of that Sub-Trust allocable to such class (being the value of the
assets belonging to that Sub-Trust allocable to such class less the liabilities
belonging to such class) by the total number of Shares of such class
outstanding; all determined in accordance with the methods and procedures,
including without limitation those with respect to rounding, established by the
Trustees from time to time.
The Trustees may determine to maintain the net asset value per Share of any
Sub-Trust at a designated constant dollar amount and in connection therewith may
adopt procedures not inconsistent with the 1940 Act for the continuing
declarations of income attributable to that Sub-Trust as dividends payable in
additional Shares of that Sub-Trust at the designated constant dollar amount and
for the handling of any losses attributable to that Sub-Trust. Such procedures
may provide that in the event of any loss each Shareholder shall be deemed to
have contributed to the capital of the Trust attributable to that Sub-Trust his
pro rata portion of the total number of Shares required to be cancelled in order
to permit the net asset value per Share of that Sub-Trust to be maintained,
after reflecting such loss, at the designated constant dollar amount. Each
Shareholder of the Trust shall be deemed to have agreed, by his investment in
any Sub-Trust with respect to which the Trustees shall have adopted any such
procedure, to make the contribution referred to in the preceding sentence in the
event of any such loss.
(i) Transfer. All Shares of each particular Sub-Trust or class thereof shall
be transferable, but transfers of Shares of a particular Sub-Trust or class
thereof will be recorded on the Share transfer records of the Trust applicable
to that Sub-Trust or class only at such times as Shareholders shall have the
right to require the Trust to redeem Shares of that Sub-Trust or class and at
such other times as may be permitted by the Trustees.
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(j) Equality. Except as provided herein or in the instrument designating and
establishing any class of Shares or any Sub-Trust, all Shares of each particular
Sub-Trust or class thereof shall represent an equal proportionate interest in
the assets belonging to that Sub-Trust, or in the case of a class, belonging to
that Sub-Trust and allocable to that class, subject to the liabilities belonging
to that Sub-Trust or class, and each Share of any particular Sub-Trust or class
shall be equal to each other Share of that Sub-Trust or class; but the
provisions of this sentence shall not restrict any distinctions permissible
under subsection (c) of this Section 4.2 that may exist with respect to
dividends and distributions on Shares of the same Sub-Trust or class. The
Trustees may from time to time divide or combine the Shares of any particular
Sub-Trust or class into a greater or lesser number of Shares of that Sub-Trust
or class without thereby changing the proportionate beneficial interest in the
assets belonging to that Sub-Trust or class or in any way affecting the rights
of Shares of any other Sub-Trust or class.
(k) Fractions. Any fractional Share of any Sub-Trust, if any such fractional
Share is outstanding, shall carry proportionately all the rights and obligations
of a whole Share of that Sub-Trust, including rights and obligations with
respect to voting, receipt of dividends and distributions, redemption of Shares,
and liquidation of the Trust.
(l) Conversion Rights. Subject to compliance with the requirements of the
1940 Act, the Trustees shall have the authority to provide that holders of
Shares of any Sub-Trust or class thereof shall have the right to convert said
Shares into Shares of one or more other Sub-Trust or class thereof in accordance
with such requirements and procedures as may be established by the Trustees.
Section 4.3 Ownership of Shares. The ownership of Shares shall be recorded
on the books of the Trust or of a transfer or similar agent for the Trust, which
books shall be maintained separately for the Shares of each Sub-Trust and each
class thereof that has been established and designated. No certificates
certifying the ownership of Shares need be issued except as the Trustees may
otherwise determine from time to time. The Trustees may make such rules as they
consider appropriate for the issuance of Share certificates, the use of
facsimile signatures, the transfer of Shares and similar matters. The record
books of the Trust as kept by the Trust or any transfer or similar agent, as the
case may be, shall be conclusive as to who are the Shareholders and as to the
number of Shares of each Sub-Trust held from time to time by each such
Shareholder.
Section 4.4 Investments in the Trust. The Trustees may accept investments in
the Trust and each Sub-Trust thereof from
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such persons and on such terms and for such consideration, not inconsistent
with the provisions of the 1940 Act, as they from time to time authorize. The
Trustees may authorize any distributor, principal underwriter, custodian,
transfer agent or other person to accept orders for the purchase of Shares that
conform to such authorized terms and to reject any purchase orders for Shares
whether or not conforming to such authorized terms.
Section 4.5 No Pre-emptive Rights. Shareholders shall have no pre-emptive or
other right to subscribe to any additional Shares or other securities issued by
the Trust.
Section 4.6 Status of Shares and Limitation of Personal Liability. Shares
shall be deemed to be personal property giving only the rights provided in this
instrument. Every Shareholder by virtue of having become a Shareholder shall be
held to have expressly assented and agreed to the terms hereof and to have
become a party hereto. The death of a Shareholder during the continuance of the
Trust shall not operate to terminate the Trust or any Sub-Trust thereof nor
entitle the representative of any deceased Shareholder to an accounting or to
take any action in court or elsewhere against the Trust or the Trustees, but
only to the rights of said decedent under this Trust. Ownership of Shares shall
not entitle the Shareholder to any title in or to the whole or any part of the
Trust property or right to call for a partition or division of the same or for
an accounting, nor shall the ownership of Shares constitute the Shareholders
partners. Neither the Trust nor the Trustees, nor any officer, employee or agent
of the Trust shall have any power to bind personally any Shareholder, nor except
as specifically provided herein to call upon any Shareholder for the payment of
any sum of money or assessment whatsoever other than such as the Shareholder may
at any time personally agree to pay.
ARTICLE V
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 5.1 Voting Powers. The Shareholders shall have power to vote only
(i) for the election or removal of Trustees as provided in Section 3.1, (ii)
with respect to any contract with a Contracting Party as provided in Section 3.3
as to which Shareholder approval is as required by the 1940 Act, (iii) with
respect to any termination or reorganization of the Trust or any Sub-Trust to
the extent and as provided in Sections 7.1 and 7.2, (iv) with respect to any
amendment of this Declaration of Trust to the extent and as provided in Section
7.3, (v) to the same extent as the stockholders of a Massachusetts business
corporation as to whether or not a court action, proceeding or claim should or
should not be brought or maintained
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derivatively or as a class action on behalf of the Trust or any Sub-Trust
thereof or the Shareholders (provided, however, that a Shareholder of a
particular Sub-Trust shall not be entitled to a derivative or class action on
behalf of any other Sub-Trust (or Shareholder of any other Sub-Trust) of the
Trust) and (vi) with respect to such additional matters relating to the Trust as
may be required by the 1940 Act, this Declaration of Trust, the By-Laws or any
registration of the Trust with the Commission (or any successor agency) or any
state, or as the Trustees may consider necessary or desirable. There shall be no
cumulative voting in the election of Trustees. Shares may be voted in person or
by proxy. A proxy with respect to Shares held in the name of two or more persons
shall be valid if executed by any one of them unless at or prior to exercise of
the proxy the Trust receives a specific written notice to the contrary from any
one of them. A proxy purporting to be executed by or on behalf of a Shareholder
shall be deemed valid unless challenged at or prior to its exercise and the
burden of proving invalidity shall rest on the challenger. Until Shares are
issued, the Trustees may exercise all rights of Shareholders and may take any
action required by law, this Declaration of Trust or the By-Laws to be taken by
Shareholders.
Section 5.2 Meetings. No annual or regular meeting of Shareholders is
required. Special meetings of Shareholders may be called by the Trustees from
time to time for the purpose of taking action upon any matter requiring the vote
or authority of the Shareholders as herein provided or upon any other matter
deemed by the Trustees to be necessary or desirable. Written notice of any
meeting of Shareholders shall be given or caused to be given by the Trustees by
mailing such notice at least seven days before such meeting, postage prepaid,
stating the time, place and purpose of the meeting, to each Shareholder at the
Shareholder's address as it appears on the records of the Trust. The Trustees
shall promptly call and give notice of a meeting of Shareholders for the purpose
of voting upon removal of any Trustee of the Trust when requested to do so in
writing by Shareholders holding not less than 10% of the Shares then
outstanding. If the Trustees shall fail to call or give notice of any meeting of
Shareholders for a period of 30 days after written application by Shareholders
holding at least 10% of the Shares then outstanding requesting a meeting be
called for any other purpose requiring action by the Shareholders as provided
herein or in the By-Laws, then Shareholders holding at least 10% of the Shares
then outstanding may call and give notice of such meeting, and thereupon the
meeting shall be held in the manner provided for herein in case of call thereof
by the Trustees.
Section 5.3 Record Dates. For the purpose of determining the Shareholders
who are entitled to vote or act at any meeting or any adjournment thereof, or
who are entitled to participate in any dividend or distribution, or for the
purpose of any
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other action, the Trustees may from time to time close the transfer books
for such period, not exceeding 30 days (except at or in connection with the
termination of the Trust), as the Trustees may determine; or without closing the
transfer books the Trustees may fix a date and time not more than 60 days prior
to the date of any meeting of Shareholders or other action as the date and time
of record for the determination of Shareholders entitled to vote at such meeting
or any adjournment thereof or to be treated as Shareholders of record for
purposes of such other action, and any Shareholder who was a Shareholder at the
date and time so fixed shall be entitled to vote at such meeting or any
adjournment thereof or to be treated as a Shareholder of record for purposes of
such other action, even though he has since that date and time disposed of his
Shares, and no Shareholder becoming such after that date and time shall be so
entitled to vote at such meeting or any adjournment thereof or to be treated as
a Shareholder of record for purposes of such other action.
Section 5.4 Quorum and Required Vote. A majority of the Shares entitled to
vote shall be a quorum for the transaction of business at a Shareholders'
meeting, but any lesser number shall be sufficient for adjournments. Any
adjourned session or sessions may be held, within a reasonable time after the
date set for the original meeting without the necessity of further notice. A
majority of the Shares voted, at a meeting of which a quorum is present shall
decide any questions and a plurality shall elect a Trustee, except when a
different vote is required or permitted by any provision of the 1940 Act or
other applicable law or by this Declaration of Trust or the By-Laws.
Section 5.5 Action by Written Consent. Subject to the provisions of the 1940
Act and other applicable law, any action taken by Shareholders may be taken
without a meeting if a majority of Shareholders entitled to vote on the matter
(or such larger proportion thereof as shall be required by the 1940 Act or by
any express provision of this Declaration of Trust or the By-Laws) consent to
the action in writing and such written consents are filed with the records of
the meetings of Shareholders. Such consent shall be treated for all purposes as
a vote taken at a meeting of Shareholders.
Section 5.6 Inspection of Records. The records of the Trust shall be open to
inspection by Shareholders to the same extent as is permitted stockholders of a
Massachusetts business corporation under the Massachusetts Business Corporation
Law.
Section 5.7 Additional Provisions. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters not
inconsistent with the provisions hereof.
Section 5.8 Shareholder Communications. Whenever ten or more Shareholders of
record who have been such for at least six
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months preceding the date of application, and who hold in the aggregate either
Shares having a net asset value of at least $25,000 or at least 1% of the
outstanding Shares, whichever is less, shall apply to the Trustees in writing,
stating that they wish to communicate with other Shareholders with a view to
obtaining signatures to a request for a Shareholder meeting and accompanied by a
form of communication and request which they wish to transmit, the Trustees
shall within five business days after receipt of such application either (1)
afford to such applicants access to a list of the names and addresses of all
Shareholders as recorded on the books of the Trust or Sub-Trust, as applicable;
or (2) inform such applicants as to the approximate number of Shareholders of
record, and the approximate cost of mailing to them the proposed communication
and form of request.
If the Trustees elect to follow the course specified in clause (2) above,
the Trustees, upon the written request of such applicants, accompanied by a
tender of the material to be mailed and of the reasonable expenses of mailing,
shall, with reasonable promptness, mail such material to all Shareholders of
record at their addresses as recorded on the books, unless within five business
days after such tender the Trustees shall mail to such applicants and file with
the Commission, together with a copy of the material to be mailed, a written
statement- signed by at least a majority of the Trustees-to the effect that in
their opinion either such material contains untrue- statements of fact or omits
to state facts necessary to make the statements contained therein not
misleading, or would be in violation of applicable law, and specifying the basis
of such opinion. The Trustees shall thereafter comply with any order entered by
the Commission and the requirements of the 1940 Act and the Securities Exchange
Act of 1934.
ARTICLE VI
LIMITATION OF LIABILITY; INDEMNIFICATION
Section 6.1 Trustees, Shareholders, etc. Not Personally Liable. All persons
extending credit to, contracting with or having any claim against the Trust
shall look only to the assets of the Sub-Trust with which such person dealt for
payment under such credit, contract or claim; and neither the Shareholders of
any Sub-Trust nor the Trustees, nor any of the Trust's officers, employees or
agents, whether past, present or future, nor any other Sub-Trust shall be
personally liable therefor. Every note, bond, contract, instrument, certificate
or undertaking and every other act or thing whatsoever executed or done by or on
behalf of the Trust, any Sub-Trust or the Trustees or any of them in connection
with the Trust shall be conclusively deemed to have been executed or done only
by or for the Trust (or the Sub-Trust) or the Trustees and not
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personally. Nothing in this Declaration of Trust shall protect any Trustee or
officer against any liability to the Trust or the Shareholders to which such
Trustee or officer would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office of Trustee or of such officer.
Section 6.2 Trustee's Good Faith Action; Expert Advice; No Bond or Surety.
The exercise by the Trustees of their powers and discretion hereunder shall be
binding upon everyone interested. A Trustee shall be liable for his own willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee, and for nothing else, and
shall not be liable for errors of judgment or mistakes of fact or law. Subject
to the foregoing, (a) the Trustees shall not be responsible or liable in any
event for any neglect or wrongdoing of any officer, agent, employee, consultant,
adviser, administrator, distributor or principal underwriter, custodian or
transfer, dividend disbursing, Shareholder servicing or accounting agent of the
Trust, nor shall any Trustee be responsible for the act or omission of any other
Trustee; (b) the Trustees may take advice of counsel or other experts with
respect to the meaning and operation of this Declaration of Trust and their
duties as Trustees, and shall be under no liability for any act or omission in
accordance with such advice or for failing to follow such advice; and (c) in
discharging their duties, the Trustees, when acting in good faith, shall be
entitled to rely upon the books of account of the Trust and upon written reports
made to the Trustees by any officer appointed by them, any independent public
accountant, and (with respect to the subject matter of the contract involved)
any officer, partner or responsible employee of a Contracting Party appointed by
the Trustees pursuant to Section 3.3. The Trustees as such shall not be required
to give any bond or surety or any other security for the performance of their
duties.
Section 6.3 Indemnification of Shareholders. In case any Shareholder (or
former Shareholder) of any Sub-Trust of the Trust shall be charged or held to be
personally liable for any obligation or liability of the Trust solely by reason
of being or having been a Shareholder and not because of such Shareholder's acts
or omissions or for some other reason, said Sub-Trust (upon proper and timely
request by the Shareholder) shall assume the defense against such charge and
satisfy any judgment thereon, and the Shareholder or former Shareholder (or his
heirs, executors, administrators or other legal representatives or in the case
of a corporation or other entity, its corporate or other general successor)
shall be entitled out of the assets of said Sub-Trust estate to be held
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harmless from and indemnified against all loss and expense arising from such
liability.
Section 6.4 Indemnification of Trustees, Officers, etc. The Trust shall
indemnify (from the assets of the Sub-Trust or Sub-Trusts in question) each of
its Trustees and officers (including persons who serve at the Trust's request as
directors, officers or trustees of another organization in which the Trust has
any interest as a shareholder, creditor or otherwise (hereinafter referred to as
a "Covered Person")) against all liabilities, including but not limited to
amounts paid in satisfaction of judgments, in compromise or as fines and
penalties, and expenses, including reasonable accountants' and counsel fees,
incurred by any Covered Person in connection with the defense or disposition of
any action, suit or other proceeding, whether civil or criminal, before any
court or administrative or legislative body, in which such Covered Person may be
or may have been involved as a party or otherwise or with which such person may
be or may have been threatened, while in office or thereafter, by reason of
being or having been such a Trustee or officer, director or trustee, except with
respect to any matter as to which it has been determined that such Covered
Person had acted with willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such Covered
Person's office (such conduct referred to hereafter as "Disabling Conduct"). A
determination that the Covered Person is entitled to indemnification may be made
by (i) a final decision on the merits by a court or other body before whom the
proceeding was brought that the person to be indemnified was not liable by
reason of Disabling Conduct, (ii) dismissal of a court action or an
administrative proceeding against a Covered Person for insufficiency of evidence
of Disabling Conduct, or (iii) a reasonable determination, based upon a review
of the facts, that the indemnitee was not liable by reason of Disabling Conduct
by (a) a vote of a majority of a quorum of Trustees who are neither "interested
persons" of the Trust as defined in section 2(a)(19) of the 1940 Act nor parties
to the proceeding, or (b) an independent legal counsel in a written opinion.
Expenses, including accountants' and counsel fees so incurred by any such
Covered Person (but excluding amounts paid in satisfaction of judgments, in
compromise or as fines or penalties), may be paid from time to time by the
Sub-Trust in question in advance of the final disposition of any such action,
suit or proceeding, provided that the Covered Person shall have undertaken to
repay the amounts so paid to the Sub-Trust in question if it is ultimately
determined that indemnification of such expenses is not authorized under this
Article VI and (i) the Covered Person shall have provided security for such
undertaking, (ii) the Trust shall be insured against losses arising by reason of
any lawful advances, or
23
<PAGE>
(iii) a majority of a quorum of the disinterested Trustees who are not a
party to the proceeding, or an independent legal counsel in a written
opinion, shall have determined, based on a review of readily available facts
(as opposed to a full trial-type inquiry), that there is reason to believe
that the Covered Person ultimately will be found entitled to
indemnification.
Section 6.5 Compromise Payment. As to any matter disposed of by a compromise
payment by any such Covered Person referred to in Section 6.4, pursuant to a
consent decree or otherwise, no such indemnification either for said payment or
for any other expenses shall be provided unless such indemnification shall be
approved (a) by a majority of the disinterested Trustees who are not parties to
the proceeding or (b) by an independent legal counsel in a written opinion.
Approval by the Trustees pursuant to clause (a) or by independent legal counsel
pursuant to clause (b) shall not prevent the recovery from any Covered Person of
any amount paid to such Covered Person in accordance with any of such clauses as
indemnification if such Covered Person is subsequently adjudicated by a court of
competent jurisdiction to have been liable to the Trust or its Shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of such Covered Person's office.
Section 6.6 Indemnification Not Exclusive, etc. The right of indemnification
provided by this Article VI shall not be exclusive of or affect any other rights
to which any such Covered Person may be entitled. As used in this Article VI,
"Covered Person" shall include such person's heirs, executors and
administrators, an "interested Covered Person" is one against whom the action,
suit or other proceeding in question or another action, suit or other proceeding
on the same or similar grounds is then or has been pending or threatened, and a
"disinterested" person is a person against whom none of such actions, suits or
other proceedings or another action, suit or other proceeding on the same or
similar grounds is then or has been pending or threatened. Nothing contained in
this Article shall affect any rights to indemnification to which personnel of
the Trust, other than Trustees and officers, and other persons may be entitled
by contract or otherwise under law, nor the power of the Trust to purchase and
maintain liability insurance on behalf of any such person.
Section 6.7 Liability of Third Persons Dealing with Trustees. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application
24
<PAGE>
of any payments made or property transferred to the Trust or upon its order.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Duration and Termination of Trust. Unless terminated as provided
herein, the Trust shall continue without limitation of time and, without
limiting the generality of the foregoing, no change, alteration or modification
with respect to any Sub-Trust shall operate to terminate the Trust. The Trust or
any Sub-Trust or class may be terminated at any time by a majority of the
Trustees then in office subject to a favorable vote of a majority of the
outstanding voting securities, as defined in the 1940 Act, Shares of each
Sub-Trust or class voting separately by Sub-Trust or class.
Section 7.2 Reorganization. The Trustees may sell, convey, merge and
transfer the assets of the Trust, or the assets belonging to any one or more
Sub-Trusts, to another trust, partnership, association or corporation organized
under the laws of any state of the United States, or to the Trust to be held as
assets belonging to another Sub-Trust of the Trust, in exchange for cash, shares
or other securities (including, in the case of a transfer to another Sub-Trust
of the Trust, Shares of such other Sub-Trust) with such transfer either (1)
being made subject to, or with the assumption by the transferee of, the
liabilities belonging to each Sub-Trust the assets of which are so transferred,
or (2) not being made subject to, or not with the assumption of, such
liabilities; provided, however, that no assets belonging to any particular
Sub-Trust shall be so transferred unless the terms of such transfer shall have
first been approved at a meeting called for the purpose by the affirmative vote
of the holders of a majority of the outstanding voting Shares, as defined in the
1940 Act, of that Sub-Trust. Following such transfer, the Trustees shall
distribute such cash, shares or other securities (giving due effect to the
assets and liabilities belonging to and any other differences among the various
Sub-Trusts the assets belonging to which have so been transferred) among the
Shareholders of the Sub-Trust the assets belonging to which have been so
transferred; and if all of the assets of the Trust have been so transferred, the
Trust shall be terminated.
The Trust, or any one or more Sub-Trusts, may, either as the successor,
survivor, or non-survivor, (1) consolidate with one or more other trusts,
partnerships, associations or corporations organized under the laws of the
Commonwealth of Massachusetts or any other state of the United States, to form
25
<PAGE>
a new consolidated trust, partnership, association or corporation under the laws
of which any one of the constituent entities is organized, or (2) merge into one
or more other trusts, partnerships, associations or corporations organized under
the laws of the Commonwealth of Massachusetts or any other state of the United
States, or have one or more such trusts, partnerships, associations or
corporations merged into it, any such consolidation or merger to be upon such
terms and conditions as are specified in an agreement and plan of reorganization
entered into by the Trust, or one or more Sub-Trusts as the case may be, in
connection therewith. The terms "merge" or "merger" as used herein shall also
include the purchase or acquisition of any assets of any other trust,
partnership, association or corporation which is an investment company organized
under the laws of the Commonwealth of Massachusetts or any other state of the
United States. Any such consolidation or merger shall require the affirmative
vote of the holders of a majority of the outstanding voting Shares, as defined
in the 1940 Act, of each Sub-Trust affected thereby.
Section 7.3 Amendments. All rights granted to the Shareholders under this
Declaration of Trust are granted subject to the reservation of the right to
amend this Declaration of Trust as herein provided, except that no amendment
shall repeal the limitations on personal liability of any Shareholder or Trustee
or repeal the prohibition of assessment upon the Shareholders without the
express consent of each Shareholder or Trustee involved. Subject to the
foregoing, the provisions of this Declaration of Trust (whether or not related
to the rights of Shareholders) may be amended at any time, so long as such
amendment does not adversely affect the rights of any Shareholder with respect
to which such amendment is or purports to be applicable and so long as such
amendment is not in contravention of applicable law, including the 1940 Act, by
an instrument in writing signed by a majority of the then Trustees (or by an
officer of the Trust pursuant to the vote of a majority of such Trustees). Any
amendment to this Declaration of Trust that adversely affects the rights of
Shareholders may be adopted at any time by an instrument in writing signed by a
majority of the then Trustees (or by an officer of the Trust pursuant to a vote
of a majority of such Trustees) when authorized to do so by the vote in
accordance with subsection (e) of Section 4.2 of Shareholders holding a majority
of the Shares entitled to vote. Subject to the foregoing, any such amendment
shall be effective as provided in the instrument containing the terms of such
amendment or, if there is no provision therein with respect to effectiveness,
upon the execution of such instrument and of a certificate (which may be a part
of such instrument) executed by a Trustee or officer of the Trust to the effect
that such amendment has been duly adopted.
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Section 7.4 Filing of Copies; References; Headings. The original or a copy
of this instrument and of each amendment hereto shall be kept at the office of
the Trust where it may be inspected by any Shareholder. A copy of this
instrument and of each amendment hereto shall be filed by the Trust with the
Secretary of The Commonwealth of Massachusetts and with the Boston City Clerk,
as well as any other governmental office where such filing may from time to time
be required, but the failure to make any such filing shall not impair the
effectiveness of this instrument or any such amendment. Anyone dealing with the
Trust may rely on a certificate by an officer of the Trust as to whether or not
any such amendments have been made, as to the identities of the Trustees and
officers, and as to any matters in connection with the Trust hereunder; and,
with the same effect as if it were the original, may rely on a copy certified by
an officer of the Trust to be a copy of this instrument or of any such
amendments. In this instrument and in any such amendment, references to this
instrument, and all expressions like "herein", "hereof" and "hereunder" shall be
deemed to refer to this instrument as a whole as the same may be amended or
affected by any such amendments. The masculine gender shall include the feminine
and neuter genders. Headings are placed herein for convenience of reference only
and shall not be taken as a part hereof or control or affect the meaning,
construction or effect of this instrument. This instrument may be executed in
any number of counterparts each of which shall be deemed an original.
Section 7.5 Applicable Law. This Declaration of Trust is made in The
Commonwealth of Massachusetts, and it is created under and is to be governed by
and construed and administered according to the laws of said Commonwealth,
including the Massachusetts Business Corporation Law as the same may be amended
from time to time, to which reference is made with the intention that matters
not specifically covered herein or as to which an ambiguity may exist shall be
resolved as if the Trust were a business corporation organized in Massachusetts,
but the reference to said Business Corporation Law is not intended to give the
Trust, the Trustees, the Shareholders or any other person any right, power,
authority or responsibility available only to or in connection with an entity
organized in corporate form. The Trust shall be of the type referred to in
Section 1 of Chapter 182 of the Massachusetts General Laws and of the type
commonly called a Massachusetts business trust, and without limiting the
provisions hereof, the Trust may exercise all powers which are ordinarily
exercised by such a trust.
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<PAGE>
IN WITNESS WHEREOF, the undersigned officer of the Trust hereby adopts the
foregoing on behalf of the Trust pursuant to authorization by the Trustees of
the Trust.
/s/ Constantine Hutchins, Jr.
Constantine Hutchins, Jr.
Secretary
Date: June 1 , 1993
Principal office of the Trust:
One Financial Center
Boston, Massachusetts 02111
DP-3079/d
5/27/93
CR.002
<PAGE>
METLIFE - STATE STREET EQUITY TRUST
Amendment No. 1
to
First Amended and Restated Master Trust Agreement
INSTRUMENT OF AMENDMENT
Pursuant to Article VII, Section 7.3 of the First Amended
and Restated Master Trust Agreement ("Master Trust Agreement") of
the MetLife - State Street Equity Trust ("Trust") dated June 1,
1993, the first paragraph of Section 4.2 of the Master Trust
Agreement is hereby amended to change the name of the Sub-Trust
established and currently designated under the Trust as
"MetLife - State Street Global Energy Fund" to "State Street
Research Global Energy Fund."
This Amendment shall be effective as of November 1, 1993.
IN WITNESS WHEREOF, the undersigned officer of the Trust
hereby adopts the foregoing on behalf of the Trust pursuant to
authorization by the Trustees of the Trust.
/s/ Constantine Hutchins, Jr.
Constantine Hutchins, Jr.
Secretary
<PAGE>
METLIFE - STATE STREET EQUITY TRUST
Amendment No. 2
to
First Amended and Restated Master Trust Agreement
INSTRUMENT OF AMENDMENT
Pursuant to Article VII, Section 7.3 of the First Amended and Restated
Master Trust Agreement ("Master Trust Agreement") of the MetLife - State Street
Equity Trust ("Trust") dated June 1, 1993, the following actions are taken:
The third sentence of the second paragraph of Section 4.1 of Article IV
of the Master Trust Agreement is hereby amended to read as follows:
"The Trustees may classify or reclassify any Shares of any Sub-Trust or
class into one or more Sub-Trusts or classes that may be established and
designated from time to time provided, however, that no such classification or
reclassification shall adversely affect the rights of any Shareholder."
The first paragraph of Section 4.2 of the Master Trust Agreement is
hereby amended to change the name of the Sub-Trusts established and currently
designated under the Trust
as "MetLife - State Street Capital Appreciation Fund" to
"MetLife - State Street Research Capital Appreciation Fund,"
as "MetLife - State Street Equity Investment Fund" to
"MetLife - State Street Research Equity Investment Fund,"
and as "MetLife - State Street Equity Income Fund" to
"MetLife - State Street Research Equity Income Fund."
This Amendment shall be effective as of November 1, 1994.
IN WITNESS WHEREOF, the undersigned officer of the Trust
hereby adopts the foregoing on behalf of the Trust pursuant to
authorization by the Trustees of the Trust.
/s/ Constantine Hutchins, Jr.
Constantine Hutchins, Jr.
Secretary
<PAGE>
METLIFE - STATE STREET EQUITY TRUST
Amendment No. 3
to
First Amended and Restated Master Trust Agreement
INSTRUMENT OF AMENDMENT
Pursuant to Article VII, Section 7.3 of the First Amended and Restated Master
Trust Agreement (the "Master Trust Agreement") of MetLife - State Street Equity
Trust (the "Trust") dated June 1, 1993, the first paragraph of Section 4.2 of
the Master Trust Agreement is hereby amended to change the name of one of the
series of shares under such Trust, currently a Sub-Trust designated as "State
Street Research Global Energy Fund" to "State Street Research Global Resources
Fund."
This Amendment shall be effective as of July 17, 1995.
IN WITNESS WHEREOF, the undersigned officer of the Trust hereby adopts
the foregoing on behalf of the Trust pursuant to authorization by the Trustees
of the Trust.
/s/ Francis J. McNamara, III
Francis J. McNamara, III
Secretary
EXHIBIT(1)(b)
METLIFE - STATE STREET EQUITY TRUST
Amendment No. 4 to First Amended and
Restated Master Trust Agreement
INSTRUMENT OF AMENDMENT
Pursuant to Article I, Section 1.1, Article IV, Sections 4.1 and 4.2 and
Article VII, Section 7.3 of the First Amended and Restated Master Trust
Agreement of the MetLife - State Street Equity Trust (the "Trust") dated June 1,
1993 ("Master Trust Agreement"), as heretofore amended, the Master Trust
Agreement is hereby amended to change the name of the Trust to "State Street
Research Equity Trust" and to change the name of the Sub-Trusts established and
currently designated under the Trust as "MetLife - State Street Research Capital
Appreciation Fund" to "State Street Research Capital Appreciation Fund", as
"MetLife - State Street Research Equity Investment Fund" to "State Street
Research Equity Investment Fund" and as "MetLife - State Street Research Equity
Income Fund" to "State Street Research Equity Income Fund".
Pursuant to Article VII, Section 7.3 of the Master Trust Agreement, the
following actions are taken:
The last sentence of Article IV, Section 4.2(d) of the Master Trust
Agreement is hereby amended to read as follows: "The liquidation of any
particular Sub-Trust or class thereof may be authorized by vote of a majority of
the Trustees then in office without the approval of shareholders of such
Sub-Trust."
Section 7.2 of Article VII of the Master Trust Agreement is revised in
its entirety to read as follows: "Section 7.2 Reorganization. The Trust, or any
one or more Sub-Trusts, may, either as the successor, survivor, or non-survivor,
(1) consolidate or merge with one or more other trusts, sub-trusts,
partnerships, associations or corporations organized under the laws of The
Commonwealth of Massachusetts or any other state of the United States, to form a
consolidated or merged trust, sub-trust, partnership, limited liability company,
association or corporation under the laws of which any one of the constituent
entities is organized, with the Trust to be the survivor or non-survivor of such
consolidation or merger or (2) transfer a substantial portion of its assets to
one or more other trusts, sub-trusts, partnerships, limited liability companies,
associations or corporations organized under the laws of The Commonwealth of
Massachusetts or any other state of the United States, or have one or more such
trusts, sub-trusts, partnerships, limited liability companies, associations or
corporations transfer a substantial portion of its assets to it, any such
consolidation, merger or transfer to be upon such terms and conditions as are
specified in an agreement and plan of reorganization authorized and approved by
the Trustees and entered into by the Trust, or one or more Sub-Trusts, as the
case may be, in connection therewith. Any such consolidation, merger or transfer
may be authorized by vote of a majority of the Trustees then in office without
the approval of shareholders of any Sub-Trust."
Section 5.3 of Article V of the Master Trust Agreement is revised in
its entirety to read as follows:
"Section 5.3 Record Dates. For the purpose of determining the
Shareholders who are entitled to vote or act at any meeting or any adjournment
thereof, or who are entitled to participate in any dividend or distribution or
for the purpose of any other action, the Trustees may from time to time close
the transfer books for such period, not exceeding 30 days (except at or in
connection with the termination of the Trust), as the Trustees may determine; or
without closing the transfer books the Trustees may fix a reasonable date and
time prior to the date of any meeting of Shareholders or other action as the
date and time of record for the determination of Shareholders entitled to vote
at such meeting or any adjournment thereof or to be treated as a Shareholder of
record for purposes of such other action, even though he has since that date and
time disposed of his Shares, and no Shareholder becoming such after that date
and time shall be so entitled to vote at such meeting or any adjournment thereof
or to be treated as a Shareholder of record for purposes of such other action."
This Amendment shall be effective as of November 1, 1995.
IN WITNESS WHEREOF, the undersigned officer of the Trust hereby adopts
the foregoing on behalf of the Trust pursuant to authorization by the Trustees
of the Trust.
______________________________
Francis J. McNamara, III
Secretary
Exhibit (6)(b)
SELECTED DEALER AGREEMENT
Boston, Massachusetts
Effective Date: __________
Dealer Name:
---------------------------------------
Address:
---------------------------------------
---------------------------------------
Attn:
---------------------------------------
Ladies and Gentlemen:
We have been appointed to serve as an agent and principal underwriter as
defined in the Investment Company Act of 1940 (the "1940 Act") for the purpose
of selling and distributing shares (the "Shares") of each of the portfolio
series as specified from time to time, of certain investment companies,
including, but not limited to, the MetLife - State Street trusts, the State
Street trusts and MetLife Portfolios, Inc. Hereinafter the specified portfolio
series shall be denoted individually as a "Fund" and collectively as the
"Funds", and the investment companies shall be denoted individually as an
"Investment Company" and collectively as the "Investment Companies" for purposes
of this Agreement.
We are hereby inviting you, as a selected dealer and subject to the terms
and conditions set forth below, to make available to your customers Shares of
the Funds. By your acceptance hereof, you agree that you shall exercise your
best efforts to find purchasers for the Shares, shall purchase Shares only from
us or from your customers, and shall act only as agent for your customers or
dealer for your own account, with no authority to act as agent for the Funds,
for us or for any other dealer in any respect.
1. Acceptance of Orders. Orders received from you will be accepted only at
the public offering price (as defined below in Section 2) applicable to each
order. You agree to place orders for Shares immediately upon the receipt of, and
in the same amount as, orders from your customers. We will not accept a
conditional order from you on any basis. All orders are subject to our receipt
of Shares from the Investment Company and to acceptance and confirmation of such
<PAGE>
orders by us and by the Investment Company. The procedures relating to the
handling of orders shall be subject to instructions which we shall provide from
time to time to you. We and the Investment Companies reserve the right in our
sole discretion to reject any order.
2. Public Offering Price and Sales Charge. The public offering price shall
be the net asset value per Share plus any sales charge payable upon the purchase
of Shares of such Fund or class thereof as described in the then current
prospectus applicable to such Shares, as amended and in effect from time to time
(the "Prospectus"). The public offering price may reflect scheduled variations
in, or the elimination of, the sales charge on sales of the Shares either
generally to the public or in connection with special purchase plans, as
described in the Prospectus and related Statement of Additional Information. You
agree that you will apply any scheduled variation in, or elimination of, the
sales charge uniformly to all offerees in the class specified in the Prospectus.
The sales charge applicable to any sale of Shares by you and the dealer
concession or commission applicable to any order from you for the purchase of
Shares accepted by us shall be as set forth in the applicable Prospectus and
related Statement of Additional Information. You agree that you will not combine
customer orders to reach breakpoints in commissions for any purpose unless
authorized by the Prospectus or by us in writing. All commissions and
concessions are subject to change without notice by us.
3. 12b-1 Plans.
(a) As consideration for your providing distribution and marketing
services in the promotion of the sale of Shares of certain Funds or classes
thereof which have adopted Distribution Plans pursuant to Rule 12b-1 under the
1940 Act, and for providing personal services to and/or the maintenance of the
accounts of, your customers who invest in and own such Shares, we shall pay you
such fee, if any, as is described in the applicable Prospectus and otherwise
established by us from time to time on Shares which are owned of record by your
firm as nominee for your customers or which are owned by those customers of your
firm whose records, as maintained by such Fund or its agent, designate your firm
as the customer's dealer of record. Any fee payable hereunder shall be computed
and accrued daily and for each month shall be based on average daily net asset
value of the relevant Shares which remain outstanding during such month. No such
fee will be paid to you with respect to Shares redeemed or repurchased by such
Fund within seven business days after the date of our confirmation of such
purchase. No such fee will be paid to you with respect to any of your customers
2
<PAGE>
if the amount of such fee based upon the value of such customer's Shares will be
less than $1.00.
(b) The provisions of this Paragraph 3 may be terminated with respect to
any Fund or class thereof in accordance with the provisions of Rule 12b-1 under
the 1940 Act or the rules of the National Association of Securities Dealers,
Inc. (the "NASD") and thereafter no such fee will be paid to you.
(c) Consistent with NASD policies as amended or interpreted from time to
time (i) you waive payment of amounts due from us which are funded by fees we
receive under such Distribution Plans until we are in receipt of the fees on the
relevant shares of a Fund, and (ii) our liability for amounts payable to you is
limited solely to the proceeds of the fees receivable to us on the relevant
shares.
4. Payment for Shares. Payment for Shares sold through you shall be made on
or before the settlement date specified in the applicable confirmation, at the
office of our clearing agent, and by your check payable to the order of such
Fund or, if applicable, by Federal Funds wire for credit to such Fund, in any
case in accordance with the procedures and conditions described in the
applicable Prospectus. Each Fund reserves the right to delay issuance or
transfer of Shares until such check has cleared. If such payment is not received
by us, we reserve the right, without notice, forthwith to cancel the sale.
Unless other instructions are received by us on or before the settlement date,
orders accepted by us may be placed in an Open Account in your name. If such
payment or instruments are not timely received by us, we may hold you
responsible for any expense or loss, including loss of profit, suffered by us or
by such Fund resulting from your failure to make payment as aforesaid.
5. Redemption and Repurchase of Shares. If any of the Shares sold through
you hereunder are redeemed by such Fund or repurchased by us as agent for such
Fund within seven business days after confirmation of the original purchase, it
is agreed that you shall forfeit your right to the entire dealer concession and
related commission, if any, received by you on such Shares. We will notify you
of any such repurchase or redemption within ten business days from the date
thereof and you shall forthwith refund to us the entire concession and
commission, if any, received by you on such sale. We agree, in the event of any
such repurchase or redemption, to refund to such Fund our share of the sales
charge retained by us, if any, and upon receipt from you of the refund of the
concession allowed to you, to pay such refund forthwith to such Fund.
3
<PAGE>
If you purchase Shares from any customer in connection with repurchase
arrangements offered by an Investment Company, you agree to pay such customer
not less than the applicable repurchase price as established by the Prospectus.
If you act as agent for your customer in selling Shares to us or a Fund, you
agree not to charge your customer more than a fair commission for handling the
transaction. Any order placed by you for the repurchase of Shares of a Fund is
subject to the timely receipt by the Fund's transfer agent of all required
documents in good order. If such documents are not received within a reasonable
time after the order is placed, the order is subject to cancellation, in which
case you agree to be responsible for any loss resulting to the Fund or to us
from such cancellation.
6. Manner of Offering.
(a) No person is authorized to make any representations concerning
Shares except those contained in the applicable Prospectus, in the related
Statement of Additional Information and in any then current sales literature or
other material issued by us supplemental to such Prospectus, which sales
literature or other material is used in conformity with applicable rules or
conditions. All offerings of Shares by you shall be subject to the conditions
set forth in the applicable Prospectus (including the condition relating to
minimum purchases) and to the terms and conditions herein set forth. We will
furnish additional copies of the Prospectuses and such sales literature and
other material issued by us in reasonable quantities upon request. You will
provide all customers with the applicable Prospectus prior to or at the time
such customer purchases Shares and will forward promptly to us any customer
request for a copy of the applicable Statement of Additional Information. Sales
and exchanges of Shares may only be made in those states and jurisdictions where
the Shares are registered or qualified for sale to the public. We agree to
advise you currently of the identity of those states and jurisdictions in which
the Shares are registered or qualified for sale, and you agree to indemnify us
and/or the Funds for any claim, liability, expense or loss in any way arising
out of a sale of Shares in any state or jurisdiction in which such Shares are
not so registered or qualified.
(b) You agree to conform to any compliance or offering standards that we
may establish from time to time, including without limitation standards as to
when classes of Shares may appropriately be sold to particular investors.
4
<PAGE>
7. NASD Matters. This Agreement is conditioned upon your representation and
warranty that you are a member of the NASD or, in the alternative, that you are
a foreign dealer not eligible for membership in the NASD. You and we agree to
abide by the Rules and Regulations of the NASD, including Rule 26 of its Rules
of Fair Practice, and all applicable federal, state, and foreign laws, rules and
regulations.
8. Rejection of Orders. We shall have the right to accept or reject orders
for the purchase of Shares of any Fund. It is understood that for the purposes
hereof no Share shall be considered to have been sold by you and no compensation
will be payable to you with respect to any subscription for Shares which is
rejected by us or an Investment Company. Any consideration which you may receive
in connection with a rejected purchase order will be returned promptly.
Confirmations of all accepted purchase orders will be transmitted by the
Transfer Agent for the applicable Fund or class thereof to the investor or to
you, if authorized.
9. Status of Soliciting Dealer. Nothing herein shall make you a partner
with us or render our relationship an association. You are responsible for your
own conduct, for the employment, control and conduct of your employees and
agents and for injury to such employees or agents or to others through such
employees or agents. You assume full responsibility for your employees and
agents under applicable laws and agree to pay all employer taxes relating
thereto.
10. No Liability. As distributor of the Shares, we shall have full
authority to take such action as we may deem advisable in respect of all matters
pertaining to the distribution of such Shares. We shall not be under any
liability to you, except for lack of good faith and for obligations expressly
assumed by us in this Agreement; provided, however, that nothing in this
sentence shall be deemed to relieve any of us from any liability imposed by the
Securities Act of 1933, as amended.
11. Term of Contract; Amendment; Termination. This Agreement shall become
effective on the date hereof. We and each Fund reserve the right, in our
discretion upon notice to you, to amend, modify or terminate this Agreement at
any time, to change any sales charges, commissions, concessions and other fees
described in the applicable Prospectus or to suspend sales or withdraw the
offering of Shares of any Fund or class of Shares thereof entirely. You agree
that any order to purchase Shares placed by you after notice of any amendment to
this Agreement has been sent to you shall constitute your agreement to such
amendment.
5
<PAGE>
12. Miscellaneous. This Agreement supersedes any and all prior agreements
between us. All communications to us should be sent to the above address. Any
notice to you shall be duly given if mailed or telefacsimiled to you at the
address specified by you above. This Agreement shall be effective when accepted
by you below and shall be construed under the laws of the Commonwealth of
Massachusetts.
The following provision, as marked, applies to this agreement.
|_| This document constitutes an amendment to and restatement of the Selected
Dealer Agreement currently in effect between you and us.
|_| Please confirm your agreement hereto by signing and returning the enclosed
counterpart of this Agreement at once to: State Street Research Investment
Services, Inc., One Financial Center, Boston, Massachusetts 02111,
Attention: President. Upon receipt thereof, this Agreement and such signed
duplicate copy will evidence the agreement between us as of the date
indicated.
State Street Research
Investment Services, Inc.
(Distributor)
By:
-----------------------
ACCEPTED:
[ ]
(Selected Dealer)
By:
----------------------------
6
<PAGE>
SUPPLEMENT NO. 1 TO
SELECTED DEALER AGREEMENT
Boston, Massachusetts
Effective Date: _________________
Dealer Name: _____________________________________
Address: _____________________________________
_____________________________________
Attn: _____________________________________
Ladies and Gentlemen:
This Agreement amends and supplements the Selected Dealer Agreement
between you and us, as in effect from time to time (the "Selected Dealer
Agreement"). All of the terms and provisions of the Selected Dealer Agreement
remain in full force and effect, and this Agreement and the Selected Dealer
Agreement shall be construed and interpreted as one Agreement, provided that in
the event of any inconsistency between this Agreement and the Selected Dealer
Agreement, the terms and provisions of this Agreement shall control. Capitalized
terms used in this Agreement and not defined herein are used as defined in the
Selected Dealer Agreement.
We understand that you wish to use Shares of the Funds in managed
fee-based programs in which you participate (the "Fee-Based Program"), and that
you wish to afford investors participating in such programs the opportunity to
qualify for the ability to purchase shares of the Funds at net asset value. We
are willing to allow you to purchase Shares of the Funds for sale to investors
participating in the Fee-Based Program on such basis, subject to the terms and
conditions of this Agreement and the Selected Dealer Agreement.
1. Sale of Shares through Fee-Based Program
You may, in connection with the Fee-Based Program, sell shares of any
Funds made available by us, from time to time, at net asset value to investors
participating in a bona fide Fee-Based Program. You will receive no discount,
commission or other concession with respect to any
<PAGE>
such sale, but will be entitled to receive any service fees otherwise payable
with respect thereto to the extent provided from time to time in the applicable
Funds' Prospectuses and in the Dealer Agreement. We will, after consulting with
you, determine, from time to time, which Funds we will make available to you for
use in the Fee-Based Program. You agree that Shares will not be made available
through the Fee-Based Program for the sole purpose of enabling evasion of sales
charges.
2. Fees under Fee-Based Program
For any Fee-Based Program investor eligible to purchase Fund shares at
net asset value, the investor shall be subject to an annual fee of not more than
2.50% of such investor's average net assets included in the Fee-Based Program,
nor less than 0.50% of such assets. You shall send to us upon request from time
to time the then-current standard fee schedule for the applicable Fee-Based
Program and a copy of the applicable Schedule H to the Form ADV containing the
required disclosures relating to the Fee-Based Program, or any successor
required disclosures. Any brochures, written materials or advertising relating
to the Fee-Based Program may refer to the Funds as available at net asset value
if the fees and expenses of the Fee-Based Program are given at least equal
prominence. In connection with explaining the fees and expenses of the Fee-Based
Program, your representatives may describe to customers the option of purchasing
Fund shares through such Program at net asset value.
3. Undertakings
You will (i) provide us with continuous reasonable access to your
offices, representatives and mutual fund and Fee-Based Program sales support
personnel and to meetings, including national and regional sales conferences and
training programs, of your representatives and sales personnel, (ii) include
descriptions of all Funds offered through the Fee-Based Program in internal
sales materials and electronic information displays used in conjunction with the
Fee-Based Program, (iii) include our representatives on your internal sales
lines and conference calls on a regular basis, (iv) use reasonable efforts to
motivate your representatives to recommend suitable Funds for clients of the
Fee-Based Program, (v) provide us with sales information in reasonable
Fund-by-Fund detail, including identification of offices and representatives
that account for the most significant sales of shares of the Funds through the
Fee-Based Program, and (vi) include the Funds on any approved, preferred or
other similar list of mutual fund products offered through the Fee-Based
Program.
4. Customer Accounts
You may maintain with the Funds' shareholder servicing agent either (i)
one or more omnibus accounts solely for the participants in the applicable
Fee-Based Program or (ii) separate accounts for each participant in the
applicable Fee-Based Program. If one or more omnibus accounts are maintained,
you shall, among other things, be responsible for forwarding proxies, annual and
semi-annual reports and other materials to each beneficial owner in a timely
manner.
5. Applicable Law
This Agreement shall be governed by and construed and interpreted in
accordance with the internal laws of The Commonwealth of Massachusetts.
6. Disclaimer and Indemnity
We are not endorsing, recommending and are not otherwise involved in
providing any investment product of yours, including but not limited to any
Fee-Based Program. We are merely affording you the opportunity to use shares of
the Funds as an investment medium for the applicable Fee-Based Program. You
acknowledge and agree that you are solely responsible for any such Fee-Based
Program and you agree to indemnify, defend and hold harmless us, the Funds and
our and their affiliates, directors, trustees, officers, employees and agents
from and against any claims, losses, damages or costs (including attorneys'
fees) arising from or related to such Fee-Based Program, including without
limitation any brochures, written materials or advertising in any form that
refers to the Funds or the Fee-Based Program.
7. Miscellaneous
This Agreement is not exclusive and shall terminate automatically upon
termination of the Selected Dealer Agreement. We reserve the right, in our
discretion upon notice to you, to amend, modify or terminate this Agreement at
any time. You agree that any order to purchase Shares placed by you after notice
of any amendment to this Agreement has been sent to you shall constitute your
agreement to such amendment.
STATE STREET RESEARCH
INVESTMENT SERVICES, INC.
By: __________________________
Name:
Title:
Accepted:
__________________________________
Name of Dealer
By: __________________________________
Name:
Title:
Exhibit (11)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statements of Additional
Information constituting part of this Post-Effective Amendment to
the registration statement (No. 33-4296) on Form N-1A (the
"Registration Statement") of our reports dated August 4, 1995,
relating to the financial statements and financial highlights of
MetLife - State Street Research Capital Appreciation Fund,
MetLife - State Street Research Equity Investment Fund, MetLife -
State Street Research Equity Income Fund and State Street
Research Global Resources Fund (formerly, State Street Research
Global Energy Fund) (each a series of MetLife - State Street
Equity Trust), which appear in such Statements of Additional
Information and to the incorporation by reference of our reports
into the Prospectuses which constitute part of this Registration
Statement. We also consent to the reference to us under the
heading "Independent Accountants" in such Statements of
Additional Information and to the reference to us under the
heading "Financial Highlights" in such Prospectuses.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Boston, Massachusetts
August 25, 1995
Exhibit (14)(a)
[LOGO] STATE STREET RESEARCH
[LOGO]
STATE STREET RESEARCH
IRA
Forms Booklet
o o o o o o o o o o o o o o o o o o o
This IRA Forms Booklet includes:
o Terms and Conditions
o Application
o Lump Sum Profile
o Distribution Form
o Pre-59 1/2 Distribution
Information Request Form
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Just about everything you will need to open an IRA at
State Street Research is included in this Forms Booklet.
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Terms and Conditions
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This legal document explains the provisions of your Individual Retirement
Account.
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IRA Application
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This application allows you or your investment representative to open all types
of IRAs, including:
o Regular/accumulation IRAs (you can make contributions to it each year).
o Rollover IRAs (you can move money from another qualified retirement
plan--such as a former employer's 401(k) plan--into an IRA at State Street
Research.) You will also need to complete the Transfer of Assets/Direct
Rollover Form.
o Transfer of assets IRAs (you can transfer money from an IRA somewhere else
to an IRA at State Street Research.) You will also need to complete the
Transfer of Assets/Direct Rollover Form.
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Lump Sum Profile
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You or your investment representative may fill out this form to request a
personalized, hypothetical illustration based on a lump-sum distribution from a
qualified retirement plan.
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Distribution Form
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When it's time to withdraw money from your IRA, this is the form to use. Among
other things, the form allows you to withdraw all of your money, set up a
Systematic Withdrawal Plan, or begin "required minimum distributions."
Before you begin withdrawals from your IRA, please consult your tax adviser
to determine whether any tax penalties apply to you. Also, don't forget that a
contingent deferred sales charge may apply to distributions. If you plan to
direct your distributions to an address besides your address of record--a bank
account or a State Street Research mutual fund, for instance--you will need a
signature guarantee.
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Pre-59 1/2 Distribution Information Request Form
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In certain cases, it may be possible to receive distributions from your IRA
before you reach age 59 1/2--without paying a tax penalty. This form lets you
request additional information. Before you begin withdrawals from your IRA,
please consult your tax adviser to determine whether any tax penalties apply to
you.
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Transfer of Assets/Direct Rollover Form
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(not included in the Forms Booklet)
Fill out this form to move money to State Street Research from an IRA at another
company (transfer of assets), or from your employee retirement plan (direct
rollover). Send us a completed Transfer of Assets/Direct Rollover Form and a
completed IRA Application, and we'll do the rest.
If you have any questions, please contact your investment representative,
or call us at 1-800-562-0032.
<PAGE>
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[LOGO] State Street Research IRA
Terms & Conditions
- --------------------------------------------------------------------------------
These Terms and Conditions are in the form promulgated by the Internal Revenue
Service in Form 5305 for use in establishing an individual retirement trust
account.
ARTICLE I.
The Trustee may accept additional cash contributions on behalf of the Grantor
for a tax year of the Grantor. The total cash contributions are limited to
$2,000 for the tax year unless the contribution is a rollover contribution
described in section 402(c) (but only after December 31, 1992), 403(a)(4),
403(b)(8), 408(d)(3), or an employer contribution to a simplified employee
pension plan as described in section 408(k). Rollover contributions before
January 1, 1993, include rollovers described in section 402(a)(5), 402(a)(6),
402(a)(7), 403(a)(4), 403(b)(8), 408(d)(3), or an employer contribution to a
simplified employee pension plan as described in section 408(k).
ARTICLE II.
The Grantor's interest in the balance in the custodial account is
nonforfeitable.
ARTICLE III.
1. No part of the custodial funds may be invested in life insurance contracts,
nor may the assets of the custodial account be commingled with other property
except in a common trust fund or common investment fund (within the meaning of
section 408(a)(5)).
2. No part of the custodial funds may be invested in collectibles (within the
meaning of section 408(m)) except as otherwise permitted by section 408(m)(3)
which provides an exception for certain gold and silver coins and coins issued
under the laws of any state.
ARTICLE IV.
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Grantor's interest in the custodial account shall be made in
accordance with the following requirements and shall otherwise comply with
section 408(a)(6) and Proposed Regulations section 1.408-8, including the
incidental death benefit provisions of Proposed Regulations section
1.401(a)(9)-2, the provisions of which are herein incorporated by reference.
2. Unless otherwise elected by the time distributions are required to begin to
the Grantor under paragraph 3, or to the surviving spouse under paragraph 4,
other than in the case of life annuity, life expectancies shall be recalculated
annually. Such election shall be irrevocable as to the Grantor and the surviving
spouse and shall apply to all subsequent years. The life expectancy of a
nonspouse beneficiary may not be recalculated.
3. The Grantor's entire interest in the custodial account must be, or begin to
be, distributed by the Grantor's required beginning date (April 1 following the
calendar year end in which the Grantor reaches age 70 1/2). By that date, the
Grantor may elect, in a manner acceptable to the Trustee, to have the balance in
the custodial account distributed in:
(a) A single sum payment
(b) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the life of the Grantor.
(c) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the joint and last survivor lives of the
Grantor and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a specified period that
may not be longer than the Grantor's life expectancy.
(e) Equal or substantially equal annual payments over a specified period that
may not be longer than the joint life and last survivor expectancy of the
Grantor and his or her designated beneficiary.
4. If the Grantor dies before his or her entire interest is distributed to him
or her, the entire remaining interest will be distributed as follows:
(a) If the Grantor dies on or after distribution of his or her interest has
begun, distribution must continue to be made in accordance with paragraph 3.
(b) If the Grantor dies before distribution of his or her interest has begun,
the entire remaining interest will, at the election of the Grantor or, if the
Grantor has not so elected, at the election of the beneficiary or
beneficiaries, either
(i) Be distributed by the December 31 of the year containing the fifth
anniversary of the Grantor's death, or
(ii) Be distributed in equal or substantially equal payments over the life
or life expectancy of the designated beneficiary or beneficiaries starting
by December 31 of the year following the year of the Grantor's death. If,
however, the beneficiary is the Grantor's surviving spouse, then this
distribution is not required to begin before December 31 of the year in
which the Grantor would have turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting the
requirements of section 408(b)(3) and its related regulations has irrevocably
commenced, distributions are treated as having begun on the Grantor's required
beginning date, even though payments may actually have been made before that
date.
(d) If the Grantor dies before his or her entire interest has been distributed
and if the beneficiary is other than the surviving spouse, no additional cash
contributions or rollover contributions may he accepted in the account.
5. In the case of distribution over life expectancy in equal or substantially
equal annual payments, to determine the minimum annual payment for each year,
divide the Grantor's entire interest in the custodial account as of the close of
business on December 31 of the preceding year by the life expectancy of the
Grantor (or the joint life and last survivor expectancy of the Grantor and the
Grantor's designated beneficiary, or the life expectancy of the designated
beneficiary, whichever applies). In the case of distributions under paragraph 3,
determine the initial life expectancy (or joint life and last survivor
expectancy) using the attained ages of the Grantor and designated beneficiary as
of their birthdays in the year the Grantor reaches age 70 1/2. In the case of a
distribution in accordance with paragraph 4(b)(ii), determine life expectancy
using the attained age of the designated beneficiary as of the beneficiary's
birthday in the year distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C. B. 524, to satisfy the
minimum distribution requirements described above. This method permits an
individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for another.
ARTICLE V.
1. The Grantor agrees to provide the Trustee with information necessary for the
Trustee to prepare any reports required under section 408(i) and Regulations
sections 1.408-5 and 1.408-6.
2. The Trustee agrees to submit reports to the Internal Revenue Service and the
Grantor as prescribed by the Internal Revenue Service.
ARTICLE Vl.
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with section 408(a) and related
regulations will be invalid.
ARTICLE Vll.
This agreement will be amended from time to time to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the persons whose signatures appear below.
<PAGE>
ARTICLE VIII.
1. The amount of each contribution credited to the Grantor's individual
retirement trust account shall (except to the extent applied to pay fees or
other charges under section 7 below) be applied to purchase full and fractional
shares of beneficial interest of one or more classes in one or more mutual funds
(hereinafter collectively the "Funds" or individually a "Fund"), as designated
from time to time by State Street Research Investment Services, Inc. ("SSRIS")
as available for investment under this agreement (provided always that such
shares may legally be offered for sale in the state of the Grantor's residence),
in accordance with instructions of the Grantor given under Section 3 below. The
Trustee (or any party appointed to act as agent for the Trustee under section 16
of this Article VlIl--the "Agent"; whenever an Agent is acting for the Trustee,
references to the Trustee will be deemed to include the Agent) may retain the
Grantor's initial deposit for a period of up to ten days after receipt thereof
without liability for any loss of interest, earnings or appreciation, and may
invest such initial deposit at the end of such period if the Grantor has not
revoked his account. The Grantor may revoke the account by written notice to the
Trustee or its Agent received by the Trustee or its Agent within seven calendar
days after the Grantor establishes the account. Upon revocation, the amount of
the Grantor's initial deposit will be returned to him, without interest.
2. All dividends and capital gain distributions received on the shares of a
particular class of any Fund held in the Grantor's account shall be retained in
the account and (unless received in additional shares of such class) shall be
reinvested in full and fractional shares of such class of such Fund.
3. For each contribution, the Grantor shall designate the portion that will be
invested in each Fund. A contribution may be invested entirely in one Fund, or
may be invested in two or more Funds. However, investment designations will be
subject to any minimum initial or additional investment rules applicable to a
Fund. In addition, the Grantor shall designate which class of shares of each
such Fund the Grantor's contribution shall be invested in.
The Grantor shall make such designation on the State Street Research
Individual Retirement Account Application or other written notice acceptable to
the Trustee.
4. Subject to the minimum initial or additional investment, minimum balance and
other exchange rules applicable to a Fund, the Grantor may at any time direct
the Trustee to exchange all or a specified portion of the shares of a Fund in
the Grantor's account for shares and fractional shares of one or more other
Funds.
The Grantor shall give such directions by written, telephonic or other
notice acceptable to the Trustee and the Trustee will process such directions as
soon as practicable after receipt thereof.
If any investment designation or direction relating to investments under
these Terms and Conditions is, in the opinion of the Trustee (or SSRIS or the
Agent), ambiguous or incomplete, the Trustee may refrain from carrying out such
designation or other investment direction until the designation or other
investment direction has been clarified or completed to the Trustee's
satisfaction, and neither the Trustee, SSRIS, the Agent nor any Fund (nor any of
their affiliates) will have any liability for loss of interest, earnings or
investment gains or appreciation during such period.
5. The Grantor, by written notice to the Trustee, may designate one or more
beneficiaries to receive the balance (if any) remaining in the Grantor's account
after his death and the time and manner of payment of such balance (subject to
the applicable requirements of the preceding Articles of these Terms and
Conditions). A designation may be on a form provided by the Trustee or on a
written instrument acceptable to the Trustee executed by the Grantor and filed
with the Trustee. The Grantor may revoke or change such designation in like
manner, at any time and from time to time. No designation will be effective
until received by the Trustee. Any designation filed with the Trustee (whether
or not such designation fully disposes of the Grantor's account) will revoke all
other designations previously filed with the Trustee. If no such designation is
in effect upon the Grantor's death, or if such a designation is in effect but
does not fully dispose of the Grantor's account, the balance in the account
shall be paid in a single sum, as soon as is practicable, to the Grantor's
estate.
Subject to the applicable requirements of the preceding Articles of these
Terms and Conditions, the Grantor may designate a form of payment to the
beneficiary by filing an instrument so specifying with the Trustee. In the
absence of such written instructions from the Grantor, the Trustee will pay the
beneficiary in such form as the beneficiary selects.
Except as provided in the first sentence of the preceding paragraph,
following the Grantor's death, each beneficiary (or the representative of the
Grantor's estate) will exercise the powers and responsibilities of the Grantor
hereunder with respect to the portion of the Grantor's account passing to such
beneficiary (or estate).
6. The Trustee shall forward to the Grantor any notices, prospectuses, reports
to shareholders, financial statements, proxies and proxy soliciting materials,
relating to the Fund shares in the Grantor's account. The Trustee shall vote any
such shares held in the account in accordance with the timely written
instructions of the Grantor if received. If no timely written instructions are
received from the Grantor, the Trustee may vote such shares in such manner as it
deems appropriate (including "present" or in accordance with the recommendations
of SSRIS).
7. The Trustee's fee for performing its duties hereunder shall be such
reasonable amounts as shall be agreed to from time to time by the Trustee and
SSRIS. Such fee, any taxes of any kind and any liabilities with respect to the
account, and any and all expenses reasonably incurred by the Trustee shall, if
not paid by the Grantor, be paid from the Grantor's account.
8. The Trustee shall make distributions from the account at such times and in
such manner as the Grantor directs in writing, subject (except where otherwise
specifically provided in this Article VIII) to the applicable requirements of
the preceding Articles of these Terms and Conditions.
The recalculation of life expectancy of the Grantor and/or the Grantor's
spouse in connection with distributions from the account before the Grantor's
death will be made only at the written election of the Grantor. The
recalculation of life expectancy of the surviving spouse in connection with
distributions from the account after the Grantor's death will be made only at
the written election of the surviving spouse. By establishing the account, the
Grantor (for himself and his surviving spouse, if any) determines not to
recalculate life expectancies unless the Grantor (or surviving spouse)
specifically elects the recalculation of life expectancies approach in
accordance with the following sentence. Any such election may be made in such
form as the Grantor (or the surviving spouse) provides for (including
instructions to such effect to the Trustee or the calculation of minimum
distribution amounts in accordance with a method that provides for recalculation
of life expectancy and instructions to the Trustee to make distributions in
accordance with such method).
9. It shall be the sole responsibility of the Grantor to determine the time and
amount of contributions to the account and the time, amount and manner of
payment of distributions from the account (and to instruct the Trustee or the
Agent accordingly), and the federal and state tax treatment of any contributions
to or distributions from the account. SSRIS, the Agent, the Trustee and the
Funds shall be fully protected in following the direction of the Grantor with
respect to the time, amount and manner of payment of such distributions, or in
not acting in the absence of such direction. If the Grantor (or beneficiary)
does not direct the Trustee to make distributions from the account by the time
that such distributions are required to commence in accordance with the
preceding Articles of these Terms and Conditions, the Trustee (and SSRIS and the
Agent) will assume that the Grantor (or beneficiary) is meeting the minimum
distribution requirements from another individual retirement arrangement
maintained by the Grantor (or beneficiary) and will be fully protected in so
doing. SSRIS, the Agent, the Trustee and the Funds shall not be liable for any
taxes, penalties, liabilities or other costs to the Grantor or any other person
resulting from contributions to or distributions from the
<PAGE>
Grantor's account.
10. SSRIS, the Agent, the Trustee and the Funds shall not be responsible for any
loss or diminution in the value of the Grantor's account arising out of the
Grantor's establishment of a State Street Research Individual Retirement Account
or arising out of any investment instructions of the Grantor, whether relating
to the portion of contributions invested in one or more of the Funds, the
selection of a particular class of shares of a particular Fund, or the exchange
of shares of one Fund for shares of one or more other Funds. SSRIS, the Agent,
the Trustee and the Funds shall not render any investment advice to the Grantor
(or beneficiary) and will have no duty of inquiry concerning the Grantor's (or
beneficiary's) investment directions (subject to the right of the Trustee, SSRIS
or the Agent to obtain clarification or completion of any investment directions
under section 4 above). The Grantor (or beneficiary) will have exclusive
investment control over the account.
11. Whenever the Grantor (or beneficiary) is responsible for any direction,
notice, representation or instruction under these Terms and Conditions, SSRIS,
the Agent, the Trustee and the Funds shall be entitled to assume the propriety
and truth of any statement made by the Grantor (or beneficiary), and shall be
under no duty of further inquiry with respect thereto, and shall have no
liability with respect to any action taken in reliance upon such statement.
However, the Trustee (or Agent or SSRIS) shall be entitled to receive such
information or documentation (including signature guarantees, waivers or
indemnifications) as it may reasonably request before carrying out any
direction, notice or instruction from the Grantor (or beneficiary).
Grantor agrees to provide information to the Trustee at such times as may be
necessary to enable the Trustee to administer the account hereunder.
Except to the extent provided by applicable law, the account will not be
subject to assignment, transfer, pledge or hypothecation, nor shall it be liable
for the debts of the Grantor (or beneficiary) or subject to seizure, attachment,
execution or other legal process. However, the Trustee (or Agent or SSRIS) may
carry out the requirements of any apparently valid order of a governmental
authority (including a court) relating to the Grantor's account and will have no
liability for so doing.
12. These Terms and Conditions shall terminate upon the complete distribution of
the account to the Grantor or his beneficiaries or to a successor individual
retirement account, annuity or bond, to a qualified plan, or to an annuity or
custodial account under Section 403(b) of the Internal Revenue Code. The Trustee
shall have the right to terminate this account upon 60 days notice to the
Grantor, or to his beneficiaries if he is then dead. In such event, upon
expiration of such 60 day period, the Trustee shall transfer the amount in the
account into such successor individual retirement accounts, annuities or bonds,
qualified plan, or annuity or custodial account as the Grantor (or his
beneficiaries) shall designate, or, in the absence of such designation, to the
Grantor, or if he is then dead, to the beneficiaries or the Grantor's estate as
their interests shall appear.
13. The Trustee may resign at any time upon 60 days notice in writing to SSRIS
and may be removed by SSRIS at any time upon 60 days notice in writing to the
Trustee. Upon such resignation or removal, SSRIS shall appoint a successor
trustee which satisfies the requirements of Section 408 of the Internal Revenue
Code.
14. Upon receipt by the Trustee of written notice of appointment of a successor
trustee or custodian and of written acceptance of such appointment by the
successor, the Trustee shall transfer to such successor the assets of the
account and copies of all records pertaining thereto. The Trustee may reserve
such sum of money as it deems advisable for payment of its fees, taxes, costs,
expenses or liabilities with respect to the account, with the balance (if any)
of such reserve remaining after the payment of such items to be paid over to the
successor. The successor shall hold the assets paid over to it under terms that
satisfy the requirements of Section 408 of the Internal Revenue Code.
15. If, within 60 days after the Trustee's resignation or removal, SSRIS has not
appointed a successor trustee which has accepted such appointment, the Trustee
shall appoint such a successor unless it elects to terminate the Agreement under
Section 12 of this Article VIII.
16. The Trustee may employ or designate one or more parties to serve as agents
or contractors to perform any or all of its duties hereunder.
17. Any notice sent to the Grantor or to his beneficiaries or estate, if he is
then dead, shall be effective if sent by first class mail to him or them at his
or their last addresses of record as provided to the Trustee.
18. Any distributions from the account may be mailed, first-class postage
prepaid to the last known address of the person who is to receive such
distribution, as shown on the Trustee's records, and such distribution shall to
the extent of the amount thereof completely discharge the Trustee's liability
for such payment.
19. Any purchase or redemption of shares of any class of a Fund for or from the
Grantor's account will be effected at the public offering price or net asset
value of such Fund (as described in the then effective prospectus for such Fund)
next established after the Fund's transfer agent receives the contribution or
other directions.
Any purchase, exchange, transfer or redemption of shares of any class of a
Fund for or from the Grantor's account will be subject to any sales charge,
distribution fee or redemption charge, or other fee or charge applicable to
shares of such class, as described in the then effective prospectus for such
Fund. In addition, shares of any class of a Fund will be subject to any service
fee, charge or other annual maintenance or servicing fees or charges applicable
to shares of such class as described in the then effective prospectus for such
Fund.
20. SSRIS may amend these Terms and Conditions from time to time, and shall give
written notice of any material amendment to the Grantor within a reasonable time
after the amendment is adopted or becomes effective, whichever is later. The
Grantor hereby expressly delegates authority to SSRIS to amend these Terms and
Conditions and consents to any such amendments.
21. These Terms and Conditions shall be construed, administered and enforced
according to the laws of Massachusetts. The Grantor agrees that any legal
proceedings relating to the Grantor's account must be brought in a court
(including a federal district court) located in Massachusetts.
22. The term "Trustee" refers to the person serving as the Trustee of the
Individual Retirement Account established hereby, and the term "Grantor" refers
to the person for whose benefit such Account was established.
23. Articles I through VII of these Terms and Conditions are in the form
promulgated by the Internal Revenue Service. It is anticipated that if and when
the Internal Revenue Service promulgates changes to Form 5305, SSRIS will adopt
such changes as an amendment to these Terms and Conditions. Pending the adoption
of any amendment necessary or desirable to conform these Terms and Conditions to
the requirements of any amendment to the Internal Revenue Code or regulations or
rulings thereunder, the Trustee (and SSRIS and the Agent) may operate the
Grantor's account in accordance with such requirements to the extent deemed
necessary to preserve the tax benefits of the account.
24. The Grantor acknowledges that he or she has received and read the current
prospectus for each Fund in which his or her account is invested and the State
Street Research Individual Retirement Account Disclosure Statement.
(References are to the Internal Revenue Code.)
[LOGO] STATE STREET RESEARCH
<PAGE>
- --------------------------------------------------------------------------------
[LOGO] State Street Research IRA
IRA Application
- --------------------------------------------------------------------------------
Upon completion, send application and check (if you are making a
contribution at this time) made payable to "State Street Bank and Trust Company,
Trustee" to the address listed on the back.
1 What Type of IRA?
/ / Regular/Accumulation
(if you plan to make additional investments
into the account)
/ / Rollover IRA
/ / Direct rollover (sent trustee to trustee, from
a qualified retirement plan elsewhere to a
State Street Research IRA)
/ / Rollover (proceeds from my former qualified
retirement plan were paid to me, and my
check is enclosed) Please note: Rollover must be
transferred within 60 days of the date proceeds
were paid to you.
Do not rollover or transfer any amounts required
to be paid to you under the minimum distribution
rules that apply after you reach age 70 1/2, or any
other amounts which are not eligible rollover
distributions or would not be otherwise includable
in your gross income.
/ / Transfer of Assets
(from an IRA at another company to a State Street
Research IRA)
/ / SEP IRA / / SAR-SEP IRA
- --------------------------------------------------------------------------------
Name of employer Employer telephone
- --------------------------------------------------------------------------------
Address of employer
2 What is your name and address?
(Please print.)
- --------------------------------------------------------------------------------
Your name
- --------------------------------------------------------------------------------
Street address
- --------------------------------------------------------------------------------
City State ZIP
- --------------------------------------------------------------------------------
Daytime telephone number Evening telephone number
/ /
- --------------------------------------------------------------------------------
Social security number/taxpayer identification number Date of birth
3 Which funds have you selected?
- --------------------------------------------------------------------------------
Fund name
$ / / A / / B / / D*
- --------------------------------------------------------------------------------
Amount ($2,000 minimum) Share class**
- --------------------------------------------------------------------------------
Fund name
$ / / A / / B / / D*
- --------------------------------------------------------------------------------
Amount ($2,000 minimum) Share class**
- --------------------------------------------------------------------------------
Fund name
$ / / A / / B / / D*
- --------------------------------------------------------------------------------
Amount ($2,000 minimum) Share class**
$
- ---------------------
Total amount invested
* "D" shares not available through MSI.
**Investments in Money Market Fund will purchase
class E shares.
If a check is enclosed, make it payable to "State Street Bank and Trust
Company, Trustee." Please add $10 for the first year's trustee fee;
otherwise, the fee will be deducted from your account at year end.
<PAGE>
4 Who is your beneficiary?
Primary beneficiary
(only one required per account. If you have more than
two, include them on a separate sheet. If two or more
are named, they will receive equal amounts unless you
specify otherwise; also if one of the named primary
beneficiaries predeceases you, that person's share will
be distributed pro-rata to the other primary beneficiaries
who survive you, unless you specify otherwise.)
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City State ZIP
/ /
- --------------------------------------------------------------------------------
Social security number/taxpayer identification number Date of birth
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City State ZIP
/ /
- --------------------------------------------------------------------------------
Social security number/taxpayer identification number Date of birth
Secondary beneficiary
(if the person(s) named as primary beneficiary fails to
survive you.)
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City State ZIP
/ /
- --------------------------------------------------------------------------------
Social security number/taxpayer identification number Date of birth
5 We need your signature
I hereby establish a State Street Research IRA, appoint State Street Bank and
Trust Company as Trustee, direct that contributions to my IRA be invested as
specified by this application, and designate the individual(s) named above, or
in any signed attachment, as my beneficiary(ies). I have received a current
prospectus for the Fund(s) indicated above and the Terms and Conditions of the
State Street Research IRA (which are incorporated herein by reference) and have
read its Disclosure Statement.
Under penalties of perjury, I certify that: (1) the number shown on this form is
my correct taxpayer identification number (or I am waiting for a number to be
issued to me), and (2) I am not subject to backup withholding because (a) I am
exempt from backup withholding, or (b) I have not been notified by the Internal
Revenue Service that I am subject to backup withholding as a result of a failure
to report all interest or dividends, or (c) the IRS has notified me that I am no
longer subject to backup withholding. (You must cross out item (2) above if you
have been notified by the IRS that you are currently subject to backup
withholding because of under-reporting interest or dividends on your tax
return.)
I confirm that all the information, instructions and agreements set forth hereon
shall apply to the account, and if applicable, shall also apply to any other
fund account with shares acquired upon exchange of share of the Fund.
- --------------------------------------------------------------------------------
Signature Date
<PAGE>
6 Dealer information
(for Dealer use only)
- --------------------------------------------------------------------------------
Dealer name
- --------------------------------------------------------------------------------
Street address of home office
- --------------------------------------------------------------------------------
City State ZIP
- --------------------------------------------------------------------------------
Authorized signature of dealer
- --------------------------------------------------------------------------------
Agency/branch office number
- --------------------------------------------------------------------------------
Street address of agency/branch office servicing account
- --------------------------------------------------------------------------------
City State ZIP
- --------------------------------------------------------------------------------
Registered representative's name and number
If this application is for an account introduced through the above-named Dealer,
the Dealer further agrees to all applicable provisions in this application and
in the Prospectus. The Dealer warrants that this application is completed in
accordance with the shareholder's instructions and agrees to indemnify the
Transfer Agent, the Fund, any other eligible Funds, State Street Research
Shareholder Services, the Investment Manager or the Distributor for any loss or
liability from acting or relying upon such instructions and information. The
terms and conditions of the currently effective Selected Dealer Agreement or
sales agreement are included by reference in this section. The dealer represents
that it may lawfully sell shares of the designated Fund(s) in the state
designated as the Applicant's address of record, and that it has a currently
effective selected dealer agreement with a Distributor authorizing the Dealer to
sell shares of the Fund and the Eligible Funds.
- --------------------------------------------------------------------------------
Optional Shareholder Services
- --------------------------------------------------------------------------------
A Telephone Exchange Privilege
To exchange Fund shares over the telephone--available only for shares held on
deposit with Agent.
Telephone Exchange By Shareholder OR DEALER
State Street Research Shareholder Services may effect exchanges for my account
according to telephone instructions FROM ME OR MY DEALER as set forth in the
Prospectus, and may register the shares of the fund to be acquired exactly the
same as my existing account. Authorizing an exchange constitutes an
acknowledgment that I have received the current prospectus of the Fund to be
acquired.
I will not hold the Transfer Agent, the Fund, any other Eligible Funds, State
Street Research Shareholder Services, the Investment Manager or the Distributor
liable for any loss, injury, damage or expense as a result of acting upon any
telephone instructions or responsible for the authenticity of any telephone
instructions. I understand that all telephone calls are tape recorded. My
liability shall be subject to the use of reasonable procedures to confirm that
instructions communicated by telephone are genuine.
The account will automatically have this privilege unless you expressly decline
it by providing your initials below.
I do not want the Telephone Exchange Privilege.
(initial here.)
-----------------
B Do You Qualify For Reduced Sales Charges?
(Applies to Class A shares only)
/ / Right of Accumulation:
I apply for Right of Accumulation reduced sales charges for Class A share
purchases because the combined holdings for me and my family members in the
Eligible Funds (listed below) totals $100,000 or more. I understand the Transfer
Agent must confirm the holdings listed below.
Name on account Account number
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
/ / Letter of Intent:
I intend to invest / / $100,000, / / $250,000, / / $500,000, or
/ / $1,000,000 in any combination of the Eligible Funds
over a 13-month period beginning _________________ 19__
(purchase date not more than 90 days prior to this letter). If
the amount indicated is not invested within 13 months,
reduced sales charges do not apply.
<PAGE>
C Investamatic Check Program
To arrange automatic additional investments from a bank account into Fund
accounts. Accounts must first meet minimum initial investment requirements.
(Total annual contribution should not exceed $2,000 for an individual IRA.)
- --------------------------------------------------------------------------------
Fund name Account number
$ / / A / / B / / D
- --------------------------------------------------------------------------------
Amount (See prospectus for minimum) Share class*
- --------------------------------------------------------------------------------
Fund name Account number
$ / / A / / B / / D
- --------------------------------------------------------------------------------
Amount (See prospectus for minimum) Share class*
* Investments in Money Market Fund will purchase
Class E shares.
- --------------------------------------------------------------------------------
Account registration (exactly as it appears on Fund records)
Frequency of investment
/ / Monthly / / Quarterly
Investment date (if you don't choose a date, the 5th will be
chosen automatically)
/ / 5th business day / / 20th business day
I hereby request and authorize the bank named in this section ("the Bank") to
pay and charge checks drawn on, or debits against, my account initiated by and
payable to the transfer agent designated by the Distributor. I agree that the
Bank's rights in respect to each such check or debit shall be the same as if it
were a check drawn on or debit against my account authorized personally by me.
This authority is to remain in effect until revoked by me, and until the Bank
actually receives such notice, I agree that the Bank shall be fully protected in
honoring any such check or debit authorization. I further agree that if any
check or debit authorization be dishonored, whether with or without cause and
whether intentionally or inadvertently, the Bank shall be under no liability
whatsoever, unless the nonpayment is because of insufficient funds. I understand
that this Program may be revoked by the Agent or the Distributor without prior
notice if any check is not paid upon presentation, and that this Program may be
discontinued by the Distributor, the Agent or me upon thirty (30) business days'
notice prior to the due date of any deposit.
State Street Bank and Trust Company, Trustee:
You are hereby authorized and appointed on behalf of the above-signed dealer
to execute the purchase transactions in accordance with the terms and
conditions of this Application, and to confirm each purchase.
Acceptance by the Trustee:
This plan shall be deemed to have been accepted by the Trustee, State Street
Bank and Trust Company, after all necessary forms, properly completed, are
received by State Street Research Shareholder Services, and delivered by
Shareholder Services to the agent for the Trustee.
Type of bank account:
/ / Checking / / NOW or Money Market / / Savings
- --------------------------------------------------------------------------------
Account title (print exactly as it appears on bank records)
- --------------------------------------------------------------------------------
Bank routing number Bank account number
- --------------------------------------------------------------------------------
Bank name
- --------------------------------------------------------------------------------
Bank street address
- --------------------------------------------------------------------------------
City State ZIP
1944
4-122/100
________________ 19____
______________________________________________________________/ $
______________________________________________________________ DOLLARS
Staple a blank check marked "VOID" here
_________________________________________________________________________
1505
================================================================================
Once completed, send application and check (if you are making a contribution at
this time) made payable to "State Street Bank and Trust Company, Trustee" to:
State Street Research Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
================================================================================
[LOGO] STATE STREET RESEARCH
<PAGE>
- --------------------------------------------------------------------------------
[LOGO] State Street Research IRA
Lump Sum Profile
- --------------------------------------------------------------------------------
Registered Representative Information
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
Firm name
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City State ZIP
- --------------------------------------------------------------------------------
Telephone Fax
================================================================================
Registered representative, return form to:
State Street Research Investment Services
Attn: Marketing Analysis Department
One Financial Center, 3rd Floor
Boston, MA 02111
Or fax to: 1-617-261-0288
================================================================================
Client Information
- --------------------------------------------------------------------------------
Name
/ /
- --------------------------------------------------------------------------------
Date of lump-sum distribution Age Date of birth
- --------------------------------------------------------------------------------
Spouse's age Age to start income payments (maximum age 70 1/2)
Exempt from early distribution penalty? / / yes / / no
$
- --------------------------------------------------------------------------------
Year you entered plan Total taxable distribution
$
- --------------------------------------------------------------------------------
Number of exemptions Other taxable income in year of distribution
(income after deductions and exemptions)
$
- --------------------------------------------------------------------------------
Other taxable income during payout period
(income after deductions and exemptions)
Tax filing status / / single / / joint / / head of household
%
- --------------------------------------------------------------------------------
Inflation rate (for 15% penalty tax exclusion)
(3% assumed unless otherwise indicated)
%
- --------------------------------------------------------------------------------
Federal income tax bracket (if none elected, 28% assumed)
%
- --------------------------------------------------------------------------------
Your state income tax rate
- --------------------------------------------------------------------------------
Rate of return to assume (5% unless otherwise indicated)
Investment Information
What is your investment objective? (check all that apply)
/ / Aggressive growth
/ / Growth
/ / Growth and income
/ / Current income
[LOGO] STATE STREET RESEARCH
<PAGE>
- --------------------------------------------------------------------------------
[[LOGO] State Street Research IRA
IRA Distribution Form
- --------------------------------------------------------------------------------
1 IRA owner information
(Please print or type.)
- --------------------------------------------------------------------------------
Today's date
- --------------------------------------------------------------------------------
IRA account number
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
Daytime phone number
- --------------------------------------------------------------------------------
Address (P.O. Boxes may not be used)
- --------------------------------------------------------------------------------
City State ZIP
/ /
- --------------------------------------------------------------------------------
Social security number/taxpayer identification number Date of birth
2 Oldest primary designated beneficiary
(If you wish to add beneficiaries, please attach a separate list.)
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
Relationship
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City State ZIP
/ /
- --------------------------------------------------------------------------------
Social security number/taxpayer identification number Date of birth
3 Account balance on December 31:
If you transferred or rolled over your IRA from another
retirement plan this year, please provide its account
balance as of December 31 of the prior year.
$______________
4 Type of Distribution
(Choose one. For Class "B" or "D" shares, a contingent
deferred sales charge may apply.)
/ / A. Regular distribution
I am age 59 1/2 or older and wish to withdraw $_____________
(To establish a Systematic Withdrawal Plan, fill out
section 5.)
/ / B. Disability
I wish to withdraw $_____________
I have attached a copy of Schedule R from my tax return
or a confirmation letter from my physician.
(To establish a Systematic Withdrawal Plan, fill out section 5.)
/ / C. Death of IRA shareholder
Withdrawal amount: $______________
The beneficiary should complete this form and enclose a
certified copy of the shareholder's death certificate.
(To establish a Systematic Withdrawal Plan, fill out section 5.)
/ / D. Withdrawal of excess contribution
Year excess contribution was made: 19_____.
Withdrawal amount: $______________
/ / E. Pre-59 1/2 distribution
I wish to withdraw $
I understand that a 10% tax penalty may apply on the
amount of the withdrawal includable in income.
/ / F. Pre-59 1/2 distribution with substantially equal
periodic payments
(If you have any questions, contact your investment
representative or tax adviser, or call State Street Research
at 1-800-562-0032. State Street Research does not guarantee
or give any assurance that the pre-59 1/2 distribution with
"substanially equal periodic payments" will qualify for an
exception to the 10% penalty tax.)
/ / I have made the calculations to determine substantially
equal periodic payments from my IRA account. I understand
that if I modify the withdrawal plan before the end of
5 years, or before I reach age 59 1/2, whichever occurs later,
the IRS may impose a retroactive 10% penalty on
payments includable in income with interest.
Payment amount $__________________
Payment frequency:
/ / Monthly / / Quarterly / / Semiannually / / Annually
/ / Make the calculations for me based on:
/ / My individual life expectancy.
/ / Joint life expectancy with my designated beneficiary.
Payment frequency:
/ / Monthly / / Quarterly / / Semiannually / / Annually
/ / G. Post-70 1/2 - Required minimum distribution
(choose one.)
/ / I wish to receive my entire IRA account balance.
/ / I am already taking the required minimum distribution
from another IRA. Please take no action.
/ / I have calculated the amount of my required distribution.
Payment amount $__________________
Payment frequency:
/ / Monthly / / Quarterly / / Semiannually / / Annually
/ / Make the calculations for me based on:
/ / My individual life expectancy.
/ / Joint life expectancy with my designated beneficiary.
/ / A fixed number of years:_____________ years
Payment frequency:
/ / Monthly / / Quarterly / / Semiannually / / Annually
Payments to begin:____________________(month/year)
Note: to begin payments in the month indicated,
State Street Research must receive this form at least
three weeks prior to the first payment.
/ / H. Income distributions
Choose only one. (Not available if you are under age 59 1/2.
If you choose this option, you may not choose a Systematic
Withdrawal Plan. Please note: this may not be enough to satisfy
minimum distribution rules if you are over age 70 1/2.)
/ / Dividends in cash
/ / Dividends and capital gain distributions in cash
<PAGE>
5 Systematic Withdrawal Plan
Please base my systematic withdrawal payments on
the following (choose only one). For Class "B" or "D"
shares, a contingent deferred sales charge may apply.
/ / My individual life expectancy.
Do you wish us to recalculate this each year? / / Yes / / No
/ / Joint life expectancy with my designated beneficiary.
Do you wish us to recalculate this each year? / / Yes / / No
/ / A fixed number of years:_________________years
Do you wish us to recalculate this each year? / / Yes / / No
/ / A fixed dollar amount: $____________________
/ / A fixed number of shares:___________________
/ / A fixed percentage:_________________________%
Payment frequency:
/ / Monthly / / Quarterly / / Semiannually / / Annually
Payments to begin:___________________________(month/year)
Note: to begin payments in the month indicated, State Street
Research must receive this form at least three weeks prior to
the first payment.
6 Distribute To:
/ / Mail to IRA owner, at address of record
/ / Deposit to the following (non-retirement) State Street
Research mutual fund account
- --------------------------------------------------------------------------------
Fund name:
- --------------------------------------------------------------------------------
Account number:
/ / Open a new (non-retirement) account in the following
mutual fund from State Street Research:
- --------------------------------------------------------------------------------
Fund
/ / A / / B / / D
- --------------------------------------------------------------------------------
Share class*
/ / Other payee:
- --------------------------------------------------------------------------------
Name of bank (Automatic Bank Connection) or payee
- --------------------------------------------------------------------------------
Bank account number (if applicable)
- --------------------------------------------------------------------------------
Street address
- --------------------------------------------------------------------------------
City State ZIP
Attach a blank check marked "Void" if distribution
is to be made to your bank.
* Investments in Money Market Fund will purchase
Class E shares.
7 Substitute Form W-4P
Withholding Election:
(This section must be completed.)
Instructions: Check the first box if you do not want federal
tax withheld from each IRA distribution. If you elect no withholding,
your election will remain in effect until revoked; you
may change your election by writing to State Street Research
Shareholder Services. Check the second box to have withholding
apply. Even if you elect not to have federal tax withheld,
you are liable for payment of federal tax on the taxable portion
of your IRA distribution. You may also be subject to tax penalties
under the estimated tax payment rules if your payments
of estimated tax and withholding are not adequate. Some
states may also require us to withhold state income tax from
these withdrawals.
We encourage you to consult with your tax adviser regarding
your IRA distributions.
/ / I elect not to have tax withheld from each distribution.
/ / I elect to have 10% tax withheld from each distribution.
Also, please withhold an additional________________% or $____________
from each distribution.
- --------------------------------------------------------------------------------
Signature of IRA owner Date
8 Authorizations and signatures:
I authorize the Transfer Agent to act upon my
instructions for both the options I have checked
on this form and the withholding elections I
have indicated:
- --------------------------------------------------------------------------------
Signature of IRA owner
- --------------------------------------------------------------------------------
Printed name of IRA owner
Signature Guarantee
- --------------------------------------------------------------------------------
Name of bank or eligible guarantor
- --------------------------------------------------------------------------------
Authorized signature of bank or eligible guarantor
- --------------------------------------------------------------------------------
Title
A signature guarantee is required if you are directing a
distribution to an address other than your address of record or
to a payee other than yourself. Signatures may be guaranteed
by a bank, a member of a domestic stock exchange, or other
eligible guarantor. Notarizations are not acceptable.
================================================================================
Return this signed and dated form to:
State Street Research Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
================================================================================
[LOGO] STATE STREET RESEARCH
<PAGE>
- --------------------------------------------------------------------------------
[LOGO] State Street Research IRA
Pre-59 1/2 Distribution Information Request Form
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Client's Name
/ / / /
- --------------------------------------------------------------------------------
Date Date of Birth
$
- --------------------------------------------------------------------------------
Current Account Balance(1)
Payout Mode (Circle) A S Q M
/ /
- --------------------------------------------------------------------------------
Beneficiary's Date of Birth (Optional)(2)
================================================================================
Registered representative, return form to:
State Street Research Investment Services
Attn: Marketing Analysis Department
One Financial Center, 3rd Floor
Boston, MA 02111
Or fax to: 1-617-261-0288
================================================================================
- --------------------------------------------------------------------------------
Representative's Name
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
( )
- --------------------------------------------------------------------------------
Telephone Number
( )
- --------------------------------------------------------------------------------
Fax Number
Unless otherwise indicated, response will be to the
fax number above.
Comments:
(1) Account balance at end of prior month or current balance
for this month. Factors are valid for current balances and
current month only. However, factors can be used for
planning purposes for withdrawals in the future. When actual
withdrawals are to commence, the client's age, account
balance and actual month will be used for factor calculations.
(2) While the age of the beneficiary can be used for factor
calculations, usually a single life quotation will maximize
the payouts.
[LOGO] STATE STREET RESEARCH P59TT (2/95)
<PAGE>
[LOGO] STATE STREET RESEARCH
(C)1995 State Street Research Investment Services, Inc. Boston, MA 02111
CONTROL NUMBER: 2251-950331(0496)SSR-LD IR-082E-395
<PAGE>
- --------------------------------------------------------------------------------
[LOGO] State Street Research IRA
Transfer of Assets/Direct Rollover Form
- --------------------------------------------------------------------------------
Once completed, send the top two copies of this form and a State Street Research
IRA Application to: State Street Research Shareholder Services, P.O. Box 8408,
Boston, MA 02266-8408. Do not rollover or transfer any amounts required to be
paid to you under the minimum distribution rules that apply after you reach age
70 1/2.
1 Your name and address
(Please print.)
- --------------------------------------------------------------------------------
Your name
- --------------------------------------------------------------------------------
Street address
- --------------------------------------------------------------------------------
City State ZIP
- --------------------------------------------------------------------------------
Home telephone number Business telephone number
/ /
- --------------------------------------------------------------------------------
Social security number/taxpayer identification number Date of birth
2 Your fund selections at
State Street Research
Fund Name Account number Share class* Amount
(if applicable)
/ / A / / B / / D
- --------------------------------------------------------------------------------
/ / A / / B / / D
- --------------------------------------------------------------------------------
/ / A / / B / / D
- --------------------------------------------------------------------------------
*Money Market Fund investments will purchase Class E shares.
3 Direct Rollover of Eligible Rollover
Distributions (complete if applicable)
(Sent trustee-to-trustee, from a retirement plan
elsewhere to an IRA at State Street Research)
Type of current plan:
/ / 403(b) / / 401(k) / / Pension plan / / Other
- --------------------------------------------------------------------------------
Account number
- --------------------------------------------------------------------------------
Name and address of current trustee/custodian
4 Transfer of Assets (complete if applicable)
(From an IRA at another company to an
IRA at State Street Research)
- --------------------------------------------------------------------------------
Name and address of current trustee/custodian
- --------------------------------------------------------------------------------
Fund name IRA account number
- --------------------------------------------------------------------------------
Fund name IRA account number
5 Authorization
(To authorize your current Trustee/custodian to
transfer/rollover your qualified plan or IRA assets to
State Street Research)
Please redeem / / all or / / part ($__________ ) of my present
account and transfer the redemption proceeds to my State
Street Research IRA account / / immediately / / at maturity.
- --------------------------------------------------------------------------------
Your signature Date
- --------------------------------------------------------------------------------
Employer's signature (if required) Date
6 Signature guarantee
(Ask your current custodian/trustee if it requires
your signature to be guaranteed.)
Signature guaranteed by:
- --------------------------------------------------------------------------------
Name of bank/eligible guarantor
- --------------------------------------------------------------------------------
Authorized signature of bank or eligible guarantor
Please do not fill out the lower portion of this form.
- --------------------------------------------------------------------------------
For current trustee/custodian use: Instructions for delivery to State Street
Research IRA.
- --------------------------------------------------------------------------------
Please liquidate and transfer on a fiduciary-to-fiduciary basis all or part of
the designated account as instructed above and make check payable to: State
Street Bank and Trust Company, Trustee.
================================================================================
Please include account number and FBO on the check.
Mail to: State Street Research Shareholder Services, P.O. Box 8408, Boston,
MA 02266-8408
Please remember to include a copy of this form, along with a check, for
proper credit to the accounts. State Street Research Shareholder Services
will deliver the items to the agent for State Street Bank and Trust Company,
who serves as Trustee.
================================================================================
For successor trustee/custodian use: Successor Trustee's acceptance of
Individual Retirement Account assets.
State Street Bank and Trust Company will accept the transfer described above
once this form has been completed and signed by you.
- --------------------------------------------------------------------------------
Authorized signature of acceptance by Agent for State Street Bank and Trust
Company, Trustee.
CONTROL NUMBER: 2237-950331(0496)SSR-LD IR 139E-395
[LOGO] STATE STREET RESEARCH
<PAGE>
[Logo] STATE STREET RESEARCH
[LOGO]
STATE STREET RESEARCH
IRA
YOUR GUIDE TO PLANNING FOR
A COMFORTABLE RETIREMENT
o o o o o o o o o o o o o o
o Regular/accumulation IRA
o Rollover IRA
o Transfer of assets IRA
o Lump-Sum distribution IRA
o IRA distributions and withdrawals
<PAGE>
GONE
FISHIN'
[Graphic -- Fish]
CONTENTS PAGE
Introduction.................................1
What is an IRA...............................3
IRA at a glance..............................4
Choosing your IRA
o regular/accumulation IRA ...............5
o rollover/transfer of assets...............7
o lump-sum distribution.....................9
State Street Research
IRA services
o Distributions/withdrawals ...........12-13
IRA basics
Answers to common
questions................................15
Why invest with
State Street Research.......................18
Your investment
options.............................Back Cover
A RELAXED
RETIREMENT
REQUIRES
CAREFUL
PLANNING
o o o o o o o o o o o o o o o o o o o o o
Many of us look forward to retirement as
a time when we can do the things we've
wanted to do for years. But in order for
your "golden years" to shine, you need
to start planning today.
The Financial Challenges
of Retirement
When planning for something as important
as your retirement, it's crucial that
you know the facts:
o Many people are retiring earlier and
living longer; retirement assets may
have to last 20, even 30, years. Yet
half of all retirees during the late
1980s entered their retirement years
with less than $10,000 in savings.(1)
Outliving retirement income is a
serious concern.
(1) Source: Rep. William J. Hughes,
statement before the Subcommittee on
Retirement Income and Security, House
Select Committee on Aging, U.S. House
of Representatives, July 10, 1991.
1
<PAGE>
How Long Will Your
Money Last...
$100,000 earning hypothetical rates of
return with monthly withdrawals of $800
(compounded monthly)
Years of withdrawals before principal is exhausted
[The table below was represented as a bar graph in the printed material.]
4% 13.5 yrs.
6% 16.2 yrs.
8% 22.1 yrs.
Rate of return before inflation
These figures are for illustration only
and are not a projection of investment
performance. There is no guarantee that
any available fund managed by State
Street Research or its affiliates will
achieve any particular rate of return.
Results do not take into account the
effect of taxes or inflation on income.
o Estimates indicate that most retirees
need 70% to 80% of their
pre-retirement income to maintain
their standard of living. In most
cases, Social Security and pension(s)
provide only a portion of the income
needed. A third or more may have to
come from personal savings and
investments.
o Retirees should not count on Social
Security as a sole means of
retirement income. Consider that the
average Social Security payment is
$7,836 per year (that's only $653 per
month),(2) fine as a supplement, but
not as a primary source of income.
(2) Source: Social Security
Administration
Where Will The Money
Come From
THE PERCEPTION
Where will many pre-retirees think
the money will come from
[The table below was represented as pie graph in the printed material.]
Savings* 18%
Pensions** 43%
Social Security 25%
Earnings 4%
Other/Unsure 10%
Source: Merrill Lynch
* Includes IRA, payroll reduction plan,
401(k), life insurance, annuities,
investments, other savings on hand
and savings to be added.
** Includes employer's pension plan,
profit sharing plan, government
pension, Keogh/SEP.
THE REALITY
Actual sources of
Retirement Income
[The table below was represented as a pie graph in the printed material.]
Pensions 20%
Earned Income 27%
Investment/Savings 33%
Social Security 18%
Other Benefits 2%
Source: Social Security Administration.
For retirees with at least $28,714 in
annual income in 1990.
o Most Americans change jobs numerous
times over their careers; frequent
job changes can mean reduced income
from company pension plans. Similar
to Social Security, pension plans
should be viewed as a supplementary
source of retirement income.
o Taxes and inflation. They don't go
away, even for retirees. In fact, the
portion of Social Security benefits
that may be subject to tax has
increased from 50% to 85%! And when
you consider that an annual inflation
rate of 4% cuts purchasing power in
half in just 15 years, the
combination of taxes and inflation
can make a serious dent in any
retirement nest egg.
Remember When...
A dollar was worth a dollar.
Thanks to inflation, your 1974 dollar is
worth only 29 cents in today's economy.
[The table below was represented as a line graph in the printed material.]
1974 $1.00
1994 $0.29
Source: Consumer Price Index
You Need A
Substantial Nest Egg
To comfortably meet retirement and
health care costs, you'll probably need
more income than Social Security and
your pension plan alone will provide.
Unfortunately, taxable savings plans may
not be adequate either. Both the money
you set aside and the interest it earns
are taxed at current rates, and that tax
bite can make a real difference over the
long term. Fortunately, there is an easy
way to help insure a more comfortable
retirement. It's called an IRA.
2
<PAGE>
[Graphic -- What is an IRA?]
An Individual Retirement Account,
commonly referred to as an "IRA," is a
savings or investment plan that lets you
set aside money specifically for your
retirement. An IRA offers three
important advantages:
o Tax-deferred earnings--you pay no
taxes on your investment earnings
until you begin taking distributions
from your account. Generally,
withdrawals begin after retirement,
when you may be in a lower tax
bracket--ultimately, your tax bill
might be smaller.
[BAR CHART]
Build For Tomorrow
Tax-deferred growth can help make a
comfortable retirement a reality.
Tax deferred $202,144
28% $140,539
31% $135,297
36% $127,048
39.6% $121,511
Tax-deferred annual investments of
$2,000 over 30 years, earning a 7%
hypothetical rate of return versus the
same investments taxed at the 28%, 31%,
36%, and 39.6 federal tax rates.
For illustration only. Not intended to
imply or guarantee a rate of return on
any investment.
o Power of tax-deferred
compounding--compounding is the money
you earn on your IRA contributions
(dividends, interest, appreciation
and capital gains). Because earnings
are tax-deferred, your retirement
nest egg has the potential to build
even more quickly than a taxable
investment earning the same rate of
return. This can make a significant
difference, particularly over the
long-term.
o Potential tax deduction--you may be
eligible to deduct some or all of
your IRA contributions on your
current federal income tax return.
But even if your contributions aren't
deductible, you still benefit from
tax-deferred growth--a key component
to a sound retirement plan.
In addition to these incentives, a State
Street Research IRA offers you other
advantages, including--a wide choice of
mutual funds and services, and all the
information you need in an easy-to-use,
easy-to-read format. With help from this
guide and the accompanying forms
booklet, you can choose any type of IRA
transaction you need. Open an IRA, take
distributions from your IRA, or just
call to find out more.
Mutual Funds Can Help
The American public has become more
focused than ever on the importance of
investing for retirement. And mutual
funds have taken center stage. Currently
33% (approximately $284 billion) of all
IRA assets are invested in mutual funds.
Why? Because mutual funds offer a
variety of features that appeal to
investors accumulating assets for the
future, including--
o professional management
o diversification
o flexibility
o convenience
o affordability
Source: Investment Company Institute,
1994 Mutual Fund Fact Book
CONSIDER
the potential benefits
if your earnings
could grow tax-deferred...
3
<PAGE>
Mutual Funds and
IRA Investing --
A Natural Fit
An increasing number of investors are
choosing mutual funds to help meet their
future retirement needs.
Number of Mutual Fund
IRA Accounts
1993
29,300,000
1981
500,000
Source: Investment Company Institute,
1994 Mutual Fund Fact Book
We want to
MAKE IT EASY
to plan for retirement...
All the forms you need
are in the forms booklet
that accompanies
this brochure.
And, remember
to consult your
investment representative
and tax adviser.
STATE STREET RESEARCH
IRA
AT A GLANCE
State Street Research offers an IRA to meet your needs.
Included in this brochure:
Regular/Accumulation IRA--see page 5
Open a State Street Research IRA and build your
retirement assets over time through periodic
contributions.
Rollover & Transfer of Assets IRA--see page 7
Rollovers and Transfers are great for
consolidating your finances. They potentially
reduce your IRA fees and simplify your
record-keeping, while continuing to let your
assets build for tomorrow.
Lump-Sum Distribution IRA--see page 9
Retiring or leaving your job? If so, you may be
expecting a lump-sum distribution. Let us show you
what your options are. Making the wrong decision
could cost you thousands. Help avoid tax penalties
with a State Street Research IRA.
Distributions and withdrawals--see page 12
If you're approaching 70 1/2, it's almost time to
begin taking mandatory IRA withdrawals. The IRS
has rules about how much you must withdraw based
on your age, life expectancy and account balance.
State Street Research can help with the
calculations for your review.
4
<PAGE>
YOUR IRA OPTIONS
REGULAR
IRA
IS THIS THE
IRA FOR YOU?
o o o o o o o o o o o o o o o o o o o o
Consider a Regular/Accumulation IRA if
you are:
o Interested in a tax-advantaged way to
save for retirement.
o Concerned about future retirement and
health care expenses and the real
danger of outliving your retirement
assets.
o Employed, but do not have the benefit
of an employer-sponsored retirement
plan.
o Employed and covered by a retirement
plan at work, but want additional
tax-deferred growth potential.
[Graphic]
CONTRIBUTIONS
TO AN IRA
With a regular IRA, you can contribute
up to $2,000 per year or 100% of earned
income, whichever is less.
THE BENEFITS
Without the added boost of personal
retirement savings, many retirees must
make marked cuts in their standard of
living. Establishing an IRA today is a
great way to help build for the future.
You'll benefit from:
o Tax deferral--
Pay no taxes on your investment
earnings until you begin taking
distributions from your account. Once
you reach retirement age, you may be
in a lower tax bracket--which may
mean you pay less in taxes!
o Tax-deferred compounding--
Compounding is the money you earn on
your IRA contributions plus
accumulated investment earnings
(interest, dividends and capital
gains). Because your earnings grow
tax-deferred, your assets have the
potential to accumulate even more
quickly.
o Current tax deduction--
You may be eligible to take a full or
partial tax deduction for
contributions to an IRA.*
* See your tax adviser for details.
[Graphic]
CAN'T DEDUCT
YOUR IRA
CONTRIBUTION?
Don't worry, over time, it's the tax
deferral, not the tax deduction, that
can make the real difference. And, it's
available to all IRA investors.
[PIE CHART]
Benefits of Tax Deduction
Contribute a total of $60,000
to an IRA...
...and your
tax deductions
total $21,600
$60,000
For illustration only. Assumes
individual in 36% federal tax bracket
contributes $2,000 annually over 30
years.
5
<PAGE>
THE FORMS
YOU NEED
1. IRA Terms & Conditions
2. IRA Application
3. Fund Prospectus(es)
Benefits of Tax Deferral
You gain a significant edge when
your investment is tax-deferred
[The table below was represented as a graphic in the printed material.]
$2,000/yr. tax-deferred $202,144
$2,000/yr. taxable 36% bracket $127,048
$75,096 tax advantage
For illustration only. Not intended to imply or guarantee a rate of return on
any investment. Assumes individual in 36% federal tax bracket; annual
contributions of $2,000 for 30 years; and a hypothetical 7% rate of return.
How To Open
Your IRA
o o o o o o o o o o o o o o o o o o o o
A o Sit down with your investment
representative to map out a solid
plan for preparing for retirement.
Choose the State Street Research
funds that best suit your goals and
risk tolerance.
o Read the prospectus for each fund
you're considering before you
invest.
B o Familiarize yourself with the IRA
Terms & Conditions.
o Complete the IRA Application--be
sure to specify which mutual funds
you would like to invest in (Section
3).
o Attach a check made payable to State
Street Bank & Trust Co.*
C o Keep a copy of your signed documents
for your files.
o Mail your completed application in
the envelope provided.
o You will receive written
confirmation that your account has
been established.
* Note: you may contribute up to
$2,000 annually to your IRA. Once
you invest the minimum initial
investment of $2,000 to open your
IRA, you may choose either a
lump-sum investment or periodic
contributions in following years. If
you'd like your IRA contributions
made automatically from your
checking account--each month or
every quarter--fill out the
Investamatic section of the IRA
Application. If you use
Investamatic, you may invest as
little as $50 once the $2,000
minimum investment requirement is
met.
That's all there is to it!
If you have any questions, call toll-free:
1-800-562-0032.
6
<PAGE>
YOUR IRA OPTIONS
ROLLOVER
IRA
IS THIS THE
IRA FOR YOU?
o o o o o o o o o o o o o o o o o o o o
Consider a rollover or a transfer of
assets if you:
o Have IRA(s) at other financial
institution(s) and want to transfer
your assets to consolidate your
accounts for easier record keeping
and potentially lower fees.
o Already have an IRA, but are
dissatisfied with your current level
of service or want a wider array of
investment options.
"TRANSFER"
"ROLLOVER"
What's The Difference?
While the terms are often used
interchangeably, there are important
differences between a "transfer" and a
"rollover:"
o Transfer--moves your IRA assets
directly from one custodian to
another. One of the key differences
between a transfer and a rollover is
with a transfer you never take
receipt of your assets. There is no
limit to the number of IRA transfers
you can make in a given year.
o Rollover--moves your retirement
assets from one place to another.
Unlike a transfer, which occurs
between two custodians, with no
direct involvement by you, choosing
a rollover means you receive an
actual distribution from the first
IRA and it is your responsibility to
reinvest it in another IRA within 60
days. Aside from certain exceptions,
if you are under age 59 1/2 and do
not complete the rollover within 60
days, you will pay ordinary income
tax on your withdrawal, plus a
possible 10% tax penalty. While you
can make an unlimited number of
transfers, you are entitled to only
one IRA rollover between IRAs in a
12-month period. For more
information on direct rollovers,
please see the Lump Sum Distribution
IRA on pages 9-11. Also, remember
that whether a transfer or rollover
of assets, sales charges may apply
to investments in a mutual fund.
THE BENEFITS
o Easier record keeping
o Help avoid tax penalties
o Continue to build for retirement
o Potentially lower fees
Sales charges may apply; please consult
the Fund prospectus(es) for more
details.
CASE STUDY
o o o o o o o o o o o o o o o o o o o o
Transferring
Assets For Easier
Record Keeping
Over the years, Fred Viola and his wife
Florence had established IRAs with a
number of financial institutions. It was
becoming a record-keeping nightmare,
particularly at tax time. The Violas,
long-time investors with State Street
Research, called their investment
representative to see whether their IRAs
could be consolidated into one IRA.
Their representative assured them that
this could be easily accomplished. The
transaction was simply called a
"transfer of assets." After the transfer
was complete, the Violas were pleased to
finally have their IRA assets "under one
roof" and found that State Street
Research's consolidated IRA statement
made tax time much easier.
Note: consolidation of rollover IRAs
(which contain assets from 403(b)
contracts or qualified plans other than
IRAs), with an existing IRA may have
adverse tax consequences such as
limiting future rollovers into qualified
plans other than IRAs.
7
<PAGE>
THE FORMS
YOU NEED
1. IRA Terms & Conditions
2. IRA Application
3. Transfer of Assets/
Direct Rollover Form
4. Fund Prospectus(es)
o o o o o o o o o o o o o o o o o o o o
STATE STREET RESEARCH IRA
How To
Rollover
Or Transfer
Assets To
An IRA
o o o o o o o o o o o o o o o o o o o o
A o Sit down with your investment
representative; he or she will help
you select the funds for your IRA
that are best suited to your
retirement goals.
o Read the prospectus for each fund
you're considering before you
invest.
B o Familiarize yourself with the IRA
Terms & Conditions.
o Complete the IRA Application--be
sure to specify which mutual funds
you would like to invest in (Section
3).
For Rollovers Only:
o Attach a check made payable to State
Street Bank & Trust Co., or, if the
check representing your assets was
made payable to you, please endorse
it to State Street Bank & Trust Co.
For Transfers of Assets &
Direct Rollovers Only:
C o Complete the Transfer of
Assets/Direct Rollover Form. This
will authorize your present IRA
trustee (or the plan administrator
of your employer's plan) to
transfer/rollover your assets
directly to State Street Research.
D o Keep a copy of your signed documents
for your files
o Mail your completed application and
the transfer of assets/direct
rollover form in the envelope
provided.
o You will receive written
confirmation that the transfer, or
rollover, has occurred and your IRA
has been established.
That's all there is to it!
If you have any questions, call toll-free:
1-800-562-0032.
8
<PAGE>
YOUR IRA OPTIONS
LUMP-SUM
IRA
IS THIS THE
IRA FOR YOU?
o o o o o o o o o o o o o o o o o o o o
Consider a Lump-Sum Distribution IRA if
you are leaving your job for any reason:
o You have reached retirement age, or
you've decided to retire early.
o You have accepted a new job with
another employer.
o Your industry is consolidating and
layoffs are inevitable.
o Your company has recently been
acquired or taken over.
o You're starting your own business.
Avoid the 20% withholding and keep your
retirement money working by rolling your
eligible rollover distribution directly
into an IRA from State Street Research.
What's A Lump-Sum
Distribution?
To qualify as a lump-sum, the
distribution from your company's
retirement plan must:
o Represent your entire vested account
balance
o Be paid as a result of separation
from service; attainment of
age 59 1/2; disability; or death
o Be paid in one or more payments
within one calendar year
Facing Major Decisions
If your employer has a retirement plan
that you've participated in, when you
leave your job, you may receive a
lump-sum distribution from that plan.
You need to decide--in advance--how to
deal with those assets or you may face
some serious tax consequences:
o how much will you owe in taxes?
o do you qualify for income averaging?
o is your best option a direct
rollover into an IRA?
o what are the tax consequences if you
keep the money?
YOUR OPTIONS
Take a cash distribution and pay
your tax bill now
If you don't roll your money into an
IRA (or other tax-qualified
retirement plan) within 60 days, or
don't qualify for income averaging,
you may face a hefty tax bill that
could include penalties if you are
under age 59 1/2.
Use income averaging to minimize the
taxes you pay now(4)
If you keep your distribution,
current taxes are due on your entire
distribution. It's possible to reduce
your taxes by using 5- or 10-year
income averaging, if you qualify:
5-year averaging--you must be at
least 59 1/2 when you receive your
lump-sum distribution and have been
an active participant in your former
employer's retirement plan for at
least five years.
10-year averaging--you can use this
method if you were 50 or older on
January 1, 1986 (this rule applies
to 5-year averaging as well).
(4) Income averaging can only be used
once.
Choose a direct rollover to defer
taxes
A direct rollover into an IRA or
your new employer's qualified
retirement plan will defer taxes on
all or part of your distribution. By
continuing to benefit from
tax-deferred growth, a direct
rollover IRA may provide the
opportunity to substantially
increase your retirement assets over
time.(5)
(5) If you receive a check and the
rollover is not done directly
(institution-to-institution), you
will be subject to 20% income tax
withholding (mandatory under IRA
rules). This applies even if you
comply with the 60-day rollover
deadline.
Another option is to begin periodic
withdrawals of substantially equal
amounts for at least 10 years. You
pay tax as you receive distributions
but avoid the 20% withholding tax
and the 10% penalty tax if rolled
over within 60 days.
9
<PAGE>
How To Choose
Your Best Distribution
Option
State Street Research offers a free
personalized program called Lump Sum to
help you get the most from your
retirement plan distributions. Lump Sum
will show you--in real dollar
terms--what each distribution option
means, given your age, tax bracket and
income needs.(6) In an
individually-prepared analysis, Lump Sum
shows:
1 How your distribution can grow in a
tax-deferred IRA.
2 How 5- or 10-year income averaging
can lower your tax bill (if you are
eligible).
3 Expected income and taxes for each
of your distribution options.
4 Hypothetical performance
illustration on selected mutual
funds that correspond with the
investment objective that you
indicate on the Lump Sum Profile
form.
(6) Lump Sum Illustrations are based on
past performance only and are not
meant to imply or guarantee future
performance of any funds managed by
State Street Research or its
affiliates.
o o o o o o o o o o o o o o o o o o o o
STATE STREET RESEARCH IRA
NEW TAX LAW
$
COULD COST YOU $$$
20% Withholding Law--
Effective January 1, 1993
The 20% withholding rule applies to all
eligible rollover distributions and not
just the taxable portion of a lump sum
distribution.
If you accept a check--made payable to
you--your employer must withhold 20% of
the total for taxes. This rule applies
even if you have every intention of
rolling the money over within 60 days.
Exempt From 20%
Withholding Rule
In general, eligible rollover
distributions are all distributions from
a qualified retirement plan except the
following:
o Distributions from IRAs
o Substantially equal periodic payments
(made not less frequently than
annually) with a term of 10 years or
more.
o Substantially equal payments (made not
less frequently than annually) made
for your lifetime or over a period not
exceeding your life expectancy; or for
the joint lives of you and your
beneficiary or over a period not
exceeding your joint life
expectancies.
o Minimum required distributions
o Distributions of previously taxed
amounts.
CASE STUDY
o o o o o o o o o o o o o o o o o o o o
20% Law In Action
George Mills, age 50, has accepted a new
job and is eligible for a $100,000
lump-sum distribution from his former
employer's retirement plan. Thinking he
has 60 days to decide to roll all, or a
portion, into an IRA, George accepts the
distribution check. Later, when George
looks at the check, he sees that it is
for $80,000 not $100,000. He immediately
calls the benefits department at his
former employer. They explain that the
lump-sum distribution was in IRS-terms
an "eligible rollover distribution,"
hence, it is subject to the new 20%
withholding. Now what?
o George decides to roll the $80,000
into an IRA.
o The $20,000 withheld is treated as a
premature distribution and will be
included in his annual income for tax
purposes.
o George is in the 36% tax
bracket--income tax due on the $20,000
is $7,200.
o The remainder of the $20,000 withheld
will be refunded after he files his
tax return.
o And it gets worse. George is under
59 1/2, so he has to pay an additional
penalty tax of 10%. Already his tax
bill is up to $9,200--and that doesn't
include state or local taxes!
If George wants to roll over the entire
$100,000, is it still possible? Yes. But
he must come up with the additional
$20,000 from his other assets. And, the
rollover must be completed within 60
days from the date he received the
$80,000. This will not get back the
$20,000 withheld for tax purposes (he'll
have to wait for his IRS refund), but it
will avoid a 10% premature withdrawal
penalty and the $7,200 income tax.
TURN PAGE FOR MORE INFO ON LUMP-SUM IRA
10
<PAGE>
THE FORMS
YOU NEED
1. IRA Terms & Conditions
2. IRA Application
3. Lump Sum Profile
4. Transfer of Assets/Direct
Rollover Form
5. Fund Prospectus(es)
How To Open An
IRA With Your
Lump-Sum
Distribution
o o o o o o o o o o o o o o o o o o o o
A o Complete the Lump Sum Profile form
and mail, or fax, it to State Street
Research.
o With your investment representative,
review the Lump Sum Illustration
provided by State Street Research
and select the distribution option
that best suits your needs.
B o If an investment is appropriate,
your representative will help you
select the funds for your IRA that
will best meet your retirement
goals.
o Read the prospectus for each fund
you're considering before you
invest.
C o Familiarize yourself with the IRA
Terms & Conditions.
o Complete the IRA Application--be
sure to specify which mutual funds
you would like to invest in (Section
3).
For an institution-to-institution
rollover:
D o Complete the Transfer of
Assets/Direct Rollover Form.
This will authorize your retirement
plan trustee to transfer/rollover
your assets directly to State Street
Research.
E o Keep a copy of your signed documents
for your files.
o Mail your completed application and
the transfer of assets/direct
rollover form in the envelope
provided.
o You will receive written
confirmation that the transfer, or
direct rollover has occurred and
your IRA has been established.
That's all there is to it!
If you have any questions, call toll-free:
1-800-562-0032.
11
<PAGE>
DISTRIBUTION SERVICES AVAILABLE TO IRA OWNERS
MINIMUM DISTRIBUTION
IRA
Investing for retirement is serious
business, and State Street Research
recognizes that it takes more than
attractive investments to power a
successful IRA. It takes dedicated
service, low cost, and features that
help make investing easier.
MINIMUM
DISTRIBUTION SERVICE
Consider a minimum distribution from
your IRA if you are:
o approaching age 70 1/2.
o Between age 59 1/2 and 70 1/2 and
ready to supplement your retirement
income with distributions from your
IRA.(7)
(7) Minimum withdrawals are not
mandatory until April 1 following
the year you reach age 70 1/2. Also
sales charges may apply to
withdrawals made prior to age
70 1/2. See Fund prospectus for
details.
Withdrawals Are
Mandatory At
Age 70 1/2
You may make withdrawals from an IRA
from age 59 1/2 on. However, if you are
approaching 70 1/2, the IRS requires
that you begin taking a minimum
distribution from your IRA each year. If
you don't make the required withdrawals,
you will be subject to a 50% penalty tax
on the amount that should have been
withdrawn. Therefore, once you reach
70 1/2, it is important that you begin
taking your minimum distributions by
April 1 of the following year.
DID YOU TURN
70 1/2 THIS YEAR?
If so, you MUST begin IRA withdrawals by
April 1 of next year
How Much Do You Need
To Withdraw?
When you're ready to take distributions,
you have two choices for determining the
amount to withdraw to meet the minimum
requirement (based on age, account
balance and life expectancy):
o We will do the calculations for your
State Street Research IRA--for your
review--based on information you
provide. Distributions will be paid
on a periodic basis, and your
minimum distribution amount will be
recalculated automatically each
year.
o You may make your own
calculations--take your IRA
withdrawal in an annual lump-sum or
choose periodic payments.(8)
(8) If you choose to make your own
calculations, you must take all your
IRAs into consideration (State
Street Research and others) in
computing the aggregate amount
required to satisfy the minimum
distribution requirements. However,
the IRS allows you to take the
amount from any one or more of your
IRAs, as you choose. As your account
size changes, the required minimum
distribution will vary each year;
therefore, it is your responsibility
to be sure that the withdrawal
amount you specify does not fall
below the minimum amount required.
If you change beneficiaries, see
your tax adviser. This may affect
your calculations.
o o o o o o o o o o o o o o o o o o o o
STATE STREET RESEARCH IRA
TURN PAGE FOR MORE INFO ON MINIMUM DISTRIBUTION
12
<PAGE>
Cash Or Reinvest--
It's Up To You
Take your IRA distribution(s) in cash or
choose automatic reinvestment:
o Cash--We'll send you one check,
representing your annual minimum
withdrawal amount, or a series of
smaller periodic payments. Or choose
the Automatic Bank Connection (ABC)
option, and your distributions will
automatically be deposited in your
bank checking or NOW account. ABC is
easy and gives you ready access to
your distributions.
o Automatic Reinvestment--Just tell us
which available funds managed by
State Street Research (or its
affiliates) you'd like to invest in,
and we'll automatically reinvest
your minimum distributions for you.9
While no longer tax-sheltered, your
money has the potential to continue
to grow to provide future income for
you or your heirs.
9 See Fund prospectus for minimum
required investments. Also, in
general, contributions--whether in
cash or reinvested--are taxable. If
you have made non-deductible
contributions to your IRA, a portion
of each distribution will not be
taxable.
A WORD ABOUT
PRE-59 1/2
DISTRIBUTIONS
There are several circumstances in which
you might choose to make withdrawals
from your IRA prior to reaching age
59 1/2. Call us if you'd like more
information. Make sure you consult with
your tax adviser first so that you fully
understand the potential tax
consequences. A 10% penalty may apply to
these withdrawals.
THE FORMS
YOU NEED
1. IRA
Distribution
Form
How To Choose
The Minimum Distribution Option
o o o o o o o o o o o o o o o o o o o o
A o Complete the IRA Distribution
Form--be sure to indicate which
distribution option you'd like
(Section 4).
B o Keep a copy of your signed documents
for your files.
o Mail the completed form in the
envelope provided.
That's all there is to it! Your
distributions will begin within one month.
If you have any questions, call toll-free:
1-800-562-0032.
13
<PAGE>
MORE FEATURES
IRA
ONE FEE
$10
ANNUALLY
Choose as many available mutual funds
for your IRA account as you want--you
pay only one fee (Does not include sales
charge).(10)
o Easy-To-Use Brochure/Forms--
We explain your IRA options and give
you step-by-step instructions on how
to open the IRA that's right for you.
Forms are easy to fill
out--everything you need is at your
fingertips.
o Consolidated Statement--
All your State Street Research IRA
information on one statement. You'll
see at a glance what portion of your
investments are tax-qualified and--if
you have non-IRA mutual fund
accounts--what are not. This can be a
big timesaver at tax time. For your
convenience, statements are generated
quarterly.
(10) Applies to annual trustee fee, does
not include applicable sales
charges. See Fund prospectus for
more information.
o Free Hypothetical Illustrations
(based on past performance)--
Tailored to your needs--this
powerful tool shows any number of
investment scenarios all in real
dollar terms. This service can be
invaluable for retirement planning.
See your investment representative
for details.(11)
o DIRECT--
An innovative risk reduction
strategy for lump-sum investments.
Commit a minimum of $10,000 to any
available State Street Research
mutual fund. Smaller sums(12) are then
systematically invested (monthly or
quarterly) into a maximum of four
other funds that you choose. It's a
great solution if you have a
substantial sum of money to invest
but are concerned about committing
it all at once.
o Automatic Reinvestment of Required
Distributions--
If it's time to take required
distributions from your State Street
Research IRA--but you don't
currently need the money--this
option will help your assets
continue to work for you. Although
no longer tax-advantaged, your IRA
distributions will automatically be
reinvested in the fund(s) you
choose. You will generally pay taxes
on the amounts reinvested, and the
earnings on the distributions will
no longer be tax-sheltered.
(11) Illustrations are based on past
performance only and are not
intended to imply or guarantee the
future performance of any available
fund managed by State Street
Research or its affiliates.
(12) See prospectus for minimum required
investments.
o Investamatic--
Invest in your State Street Research
IRA, on a monthly or quarterly
basis, through the Investamatic
check program. You can have as
little as $50 automatically
withdrawn from your checking account
and invested in your IRA. It's a
great way to build for your future
with no inconvenience.(12)
o Automatic Bank Connection (ABC)--
If you're taking distributions from
your IRA, choose this feature and
insure that all investment income is
deposited directly into your bank
checking account. No phone calls or
unnecessary paperwork, it all
happens automatically and gives you
immediate access to your money.
o Overview--
Receive a copy of our shareholder
newsletter four times a year. Each
issue is full of information about
the economy, tips to make investing
easier, what State Street Research
portfolio managers are saying about
the markets, and more!
14
<PAGE>
IRA BASICS
Q/A
ANSWERS TO
FREQUENTLY
ASKED
QUESTIONS
o o o o o o o o o o o o o o o o o o o o
CONTRIBUTIONS
TO YOUR IRA
Q. Who can open an IRA?
A. Anyone with earned income who is
under age 70 1/2.
Q. How much can I contribute to an IRA
each year?
A. Except for rollover contributions,
you can contribute a maximum of $2,000
or 100% of your earned income, whichever
is less.
Q. We're a dual-income household. Can we
each contribute $2,000?
A. Yes. If your spouse is a wage-earner,
he or she can open a separate IRA--the
maximum contribution rules apply
separately to each of you--$2,000 each
for a combined annual total of $4,000 or
100% of compensation, whichever is less.
Q. May I have more than one IRA?
A. Absolutely. Just be sure that total
annual contributions to your IRAs do not
exceed 100% of compensation, up to a
maximum of $2,000. Many investors have
found that by consolidating multiple
IRAs into one IRA, annual account
maintenance fees are reduced and record
keeping is made easier. One note
though--sales charges may apply. Please
consult a Fund prospectus for details.
Q. How do I determine whether my IRA
contribution is deductible on my federal
tax return?
A. Deductibility of IRA contributions
depends on your income and whether you
participate in an employer-sponsored
retirement plan. Generally, you can
fully deduct up to $2,000 if:
o you or your spouse is not covered by
an employer-sponsored retirement
plan;
o you or your spouse participate in an
employer-sponsored retirement plan,
but your adjusted gross income does
not exceed $40,000 ($25,000 if you
are single).
For married couples filing jointly with
earnings of $40,000 to $50,000 (and
single filers who earn $25,000 to
$35,000), contributions may be partially
deductible--the rules can be complex.
Please see your tax adviser for details.
Q. Why contribute to an IRA if I can't
deduct my contribution?
A. You're helping prepare for a
comfortable retirement. And regardless
of whether you are able to deduct your
contribution, contributing to an IRA
gives you the benefit of tax deferral on
your earnings. Earnings are tax-free
until they are distributed to you. When
you're ready to retire, this
tax-deferred compounding may make a
sizable difference in your retirement
savings.
Q. Do I have to contribute to an IRA
every year?
A. You are not required to contribute to
your IRA each year, but it may be wise
to do so. IRA contributions--up to the
maximum annual limit--are completely at
your discretion. Contribute as much or
as little as you choose. However, you
may not make up "missed" contributions
in later years.
Q. Is there a cut-off date for my annual
IRA contribution?
A. You can contribute to your IRA
(deductible and non-deductible
contributions) up to the due date for
filing your federal tax return for the
prior year--generally April 15th.
Q. Do I have to stop contributing to my
IRA once I reach a certain age?
A. Yes. You can make IRA contributions
as long as you are a wage-earner up to,
but not including, the year you reach
age 70 1/2.
15
<PAGE>
DISTRIBUTIONS
FROM YOUR IRA
Q. When will I start to make
withdrawals?
A. You may elect to make withdrawals
from your IRA in the year in which you
reach age 59 1/2. Withdrawals before you
reach age 59 1/2 may be considered
premature and may be subject to a
penalty tax of 10%. However, you must
begin making withdrawals from your IRA
by April 1 of the year following the
year in which you reach 70 1/2.
Q. What if I decide to make withdrawals
before I turn 59 1/2?
A. If you decide to withdraw money from
your IRA before age 59 1/2, you may
incur a 10% tax penalty--on top of your
regular income tax. This penalty is
imposed to encourage people to invest in
an IRA as a future retirement account,
not a short-term savings vehicle.
However, exceptions exist, including
those based on hardships such as death
or disability. (Sales charges may apply
in some circumstances.)
Q. Will I have to pay tax on my IRA
withdrawals?
A. Unfortunately, the answer is yes. IRA
withdrawals are generally taxable as
ordinary income in the year you receive
them. But--and this is part of the
attraction of IRAs--when you reach
retirement, your income may be lower
than it is now, putting you in a lower
tax bracket. So by deferring your tax
bill until retirement, you may pay less
in taxes.
Q. What about tax on withdrawals of
non-deductible contributions?
A. Don't worry, you don't have to pay
taxes twice! If you've made
contributions that you did not deduct on
your tax return, they are returned to
you tax-free because you paid tax on
them in the year they were contributed.
However, for maximum flexibility under
the income tax rules, you may want to
consider keeping rollover IRAs separate
from others.
Q. I'd like to wait as long as possible
before I take withdrawals from my IRA.
What's the latest date I can start?
A. The law requires that you begin
withdrawals no later than April 1
following the year you reach age 70 1/2.
If you have reached this age and choose
to take your withdrawals in installments
(versus a lump-sum payment) you must
satisfy certain minimum distribution
requirements. These calculations are
based on your life expectancy (and those
of your beneficiaries, if any). As part
of our IRA service, we'll provide you
with your minimum distribution
calculation(s) on your State Street
Research IRA, for your review. If you
begin withdrawals after age 70 1/2 and
do not take your minimum required
distribution, you may be assessed a
penalty tax equal to 50% of the
difference between the amount you
received and the amount you should have
received. See your tax adviser for
details.
Q. Will IRA withdrawals affect my Social
Security benefits?
A. No. Your IRA withdrawals are in
addition to other retirement income such
as Social Security and any other
retirement or pension plan benefits you
may receive.
o o o o o o o o o o o o o o o o o o o o
STATE STREET RESEARCH IRA
TURN PAGE FOR MORE Qs & As
16
<PAGE>
Q. Will I have access to my IRA money if
I become disabled?
A. Absolutely. If you become
disabled--as defined in Section 72(m) of
the Internal Revenue Code--you may begin
to receive penalty-free distributions
from your IRA regardless of your age.
Q. What happens to my IRA if I die?
A. Your assets will be distributed to
your designated beneficiary(ies). If you
die after some of your IRA assets have
been distributed to you, your designated
beneficiary may continue to receive
payments under the method you elected
prior to your death. Distributions to
your beneficiary must be made at least
as rapidly as they were made to you.
However, if you die before any IRA
distributions have begun, the rules
change slightly:
o In general, your IRA assets must be
distributed to your estate or
beneficiary within five years after
your death.
o If you have designated a beneficiary
and he or she is someone other than
your spouse, your beneficiary may
begin distributions no later than
one year after the date of your
death, and such distributions must
be made over your beneficiary's life
or over a period not exceeding your
beneficiary's life expectancy.
o If your designated beneficiary is
your spouse, he or she may defer any
distributions until December 31st of
the year in which you would have
reached age 70 1/2. Distributions
must then be made over your spouse's
life or over a period not exceeding
his or her life expectancy. Or, your
spouse may roll your IRA assets over
into his or her own IRA; the assets
would then be subject to the same
distribution rules as any IRA.
INVESTING
YOUR IRA
Q. Are there any rules about how IRA
contributions can be invested?
A. You have a number of investment
options to choose from,
including--individual stocks and bonds,
mutual funds, certain types of
annuities, endowment policies and
savings accounts. These options vary in
risk and potential rate of return, so be
sure to consult your investment adviser.
He or she can help you select the asset
mix that's right for you. The law
prohibits IRAs from investing in life
insurance.
Q. I keep reading about IRAs and mutual
fund investing--what is a mutual fund?
A. A mutual fund is a company that pools
the money of many shareholders,
investing it in a variety of securities
chosen by a full-time, professional
money manager, for the purpose of
meeting a stated financial objective.
The flexibility and diversification of
mutual funds have wide appeal--currently
over $284 billion (approximately 33%) of
all IRA assets are invested in mutual
funds.
Source: Investment Company Institute,
1994 Mutual Fund Fact Book
Q. If I own mutual funds in my IRA, what
happens to any dividends and capital
gains?
A. Dividends and capital gain
distributions are automatically
reinvested in additional shares. These
additional shares do not affect the
amount you may contribute. It is
important to understand that the value
of a fund's portfolio will fluctuate
with changes in market conditions;
therefore, the amount available when you
are ready to take your distributions
cannot be projected or guaranteed.
Q. What about fees? Is it expensive to
open an IRA with State Street Research?
A. State Street Research offers some of
the most competitive pricing for IRAs
that you'll find anywhere. You'll pay a
$10 annual account administration
(trustee) fee. This $10 (per IRA) fee
allows you to choose any number of our
available mutual funds. You pay per IRA,
not per fund! Remember though, sales
charges may also apply to the mutual
funds that you invest in for your IRA.
JUST THE
ABCs
OF IRAs
These are the IRA basics. You may have
further questions which your investment
representative and/or tax adviser can
answer.
17
<PAGE>
WHY INVEST WITH
STATE STREET RESEARCH
PROVEN
MANAGEMENT
SINCE 1924
o o o o o o o o o o o o o o o o o o o o
State Street Research & Management
Company has a history that dates to
1924, when Paul Cabot and his
Boston-based colleagues opened America's
second mutual fund. Over the years,
State Street Research has built a
reputation for top-notch research and
prudent investment management. Today,
the Company is well-respected in many of
the nation's most powerful board rooms
and is best known as the institutional
asset manager for some of the most
successful and renowned companies in the
United States. The knowledge, resources
and experience of over seven decades are
available to individual investors
through the State Street Research IRA.
Investment
Flexibility
Choose the mutual fund, or combination
of funds, which best suits your
investment objectives. If your financial
goals change, you can easily exchange
shares of one available mutual fund
managed by State Street Research or its
affiliates for shares of another with no
fee. Exchanges may be subject to
applicable sales charges, and the
privilege may be changed or discontinued
at any time.
A Wealth of Experience
An investment as important as your
retirement plan--and that's what an IRA
is--shouldn't be entrusted to anyone but
experts. To manage its assets, State
Street Research employs some of the best
in the business. The Company currently
has 22 portfolio managers on staff--they
average 20 years of investment
experience--and 25 analysts--with an
average 15 years of experience.
o o o o o o o o o o o o o o o o o o o o
STATE STREET RESEARCH IRA
18
<PAGE>
[Graphic]
OPTIONS
YOUR
INVESTMENT
OPTIONS
o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o
Whichever IRA you choose, State Street
Research offers a family of mutual funds
from which to choose. Each fund is
managed to achieve a specific objective
such as growth, income, or growth and
income combined.
Consult your investment representative
for the fund(s) best suited to your
goals and risk tolerance.
- --------------------------------------------------------------------------------
Please note that neither State Street Research, Metropolitan Life Insurance
Company nor any of their agents give legal or tax advice. The brief discussion
of taxes in this brochure is neither complete nor necessarily up-to-date--it is
intended strictly as a guide. The laws and regulations are complex and subject
to change.
For complete details, consult your attorney or tax adviser.
- --------------------------------------------------------------------------------
[Logo] STATE STREET RESEARCH
A MetLife Company
When used as sales material, this brochure must be preceded or accompanied by a
current, relevant fund prospectus which provides more complete information
including investment policies, sales charges and expenses. Please read the
prospectus(es) carefully before you invest.
(C)1995 State Street Research Investment Services, Inc., Boston, MA 02111
CONTROL NUMBER: 2074-950302(0496)SSR-LD
IR-081E-395
Exhibit (17)
Multiple Class Expense Allocation Plan
Adopted Pursuant to Rule 18f-3
WHEREAS, MetLife - State Street Equity Trust, an
unincorporated association of the type commonly known as a
business trust organized under the laws of the Commonwealth of
Massachusetts (the "Trust"), engages in business as an open-end
management investment company and is registered as such under the
Investment Company Act of 1940, as amended (the "Act");
WHEREAS, the Trust is authorized to (i) issue shares of
beneficial interest ("Shares") in separate series, with the
Shares of each such series representing the interests in a
separate portfolio of securities and other assets, and
(ii) divide the Shares within each such series into two or more
classes;
WHEREAS, the Trust has established one or more portfolio series
as of the date hereof (such portfolios being referred to
collectively herein as the "Initial Series", such series,
together with all other series subsequently established by the
Trust and made subject to this Plan, being referred to herein
individually as a "Series" and collectively as the "Series"), and
four classes thereof, and of series of affiliated investment
companies, have been designated as "Class A," "Class B," "Class
C," and "Class D" shares, except for the MetLife - State Street
Research Money Market Fund, which issues four classes thereof
designated as Class B, Class C, Class D, and Class E shares);
WHEREAS, prior to the adoption of Rule 18f-3 by the
Securities and Exchange Commission the Trust received an Order
from the Securities and Exchange Commission under Section 6(c) of
the Act for an exemption from Sections 2(a)(32), 2(a)(35), 18(f),
18(g), 18(i), 22(c) and 22(d) of the Act and Rule 22c-1
thereunder to permit the Trust to issue multiple classes of
shares representing interests in the same portfolio of
securities, assess a contingent deferred sales charge (CDSC) on
certain redemptions of shares, and waive the CDSC in certain
cases; and
WHEREAS, the Trustees have determined to operate under Rule
18f-3 and pursuant to such Rule the Board of Trustees as a whole,
and the Trustees who are not interested persons of the Trust (as
defined in the Act) (the "Qualified Trustees"), having determined
in the exercise of their reasonable business judgment this Plan
is in the best interest of each class of the Initial Series
individually and the Initial Series as a whole, have accordingly
approved this Plan.
NOW, THEREFORE, Trust hereby adopts this Plan in accordance
with Rule 18f-3 under the Act, on the following terms and
conditions:
1. Class Differences. Each class of Shares of each
Initial Series shall represent interests in the same portfolio of
investments of Initial Series and shall be identical in all
respects, and except as otherwise set forth in this Plan, shall
differ solely with respect to: (i) arrangements for shareholder
services or the distribution of Shares, or both, as provided for
in Sections 2 and 3 of this Plan; (ii) the exclusive right of a
Class to vote on certain matters relating to the Plan of
Distribution Pursuant to Rule 12b-1 adopted by the Trust with
respect to such Class; (iii) such differences relating to
purchase minimums, sales charges and eligible investors as may be
set forth in the Prospectuses and Statement of Additional
Information of the Initial Series, as the same may be amended or
supplemented from time to time (the "Prospectuses" and "SAI");
(iv) the different exchange privileges of the classes of Shares;
(v) the fact that only certain classes will have a conversion
feature; and (iv) the designation of each Class of shares.
2. Differences in Distribution and Shareholder Services.
Each Class of Shares of the Initial Series shall have a different
arrangement for shareholder services or the distribution of
Shares, or both, as follows:
Class A Shares shall be sold subject to a front-end
sales charge as set forth in the Prospectuses and SAI with
respect to the applicable Initial Series. Class A, Class B and
Class D Shares shall be sold subject to a contingent deferred
sales charge as set forth in the Prospectuses and SAI with
respect to the applicable Initial Series. Class A, B and D
Shares shall be subject to a service fee of up to 0.25% of the
nets assets of the Initial Series allocable to such Class of
Shares. Class B and D Shares shall also be subject to an annual
distribution fee of up to 0.75% of the nets assets of the Initial
Series allocable to such Class of Shares. Such service and
distribution fees may be used to finance activities in accordance
with Rule 12b-1 under the Act and the Plan of Distribution
pursuant to Rule 12b-1 adopted by the Trust.
3. Allocation of Expenses. Expenses of the Series shall
be allocated as follows:
(a) Class Expenses. Expenses relating to different
arrangements for shareholder services or the distribution of
Shares, or both, shall be allocated to and paid by that class. A
class may pay a different share of other expenses, not including
advisory or custodial fees or other expenses related to the
management of a Series assets, if such expenses are actually
incurred in a different amount by that class, or if the class
receives services of a different kind or to a different degree
than other classes.
(b) Other Allocations. All expenses of the Series not
allocated to a particular class pursuant to Sections 2 and 3(a)
of this Plan shall be allocated to each class on the basis of the
net asset value of that class in relation to the net asset value
of the Series. Notwithstanding the foregoing, the underwriter,
adviser, or other provider of services to a Series may waive or
reimburse the expenses of a specific class or classes to the
extent permitted under Rule 18f-3 under the Act; provided,
however, that the Board shall monitor the use of such waivers or
reimbursements intended to differ by class.
4. Term and Termination.
(a) Initial Series. This Plan shall become effective
with respect to the Initial Series as of the date hereof, and
shall continue in effect with respect to each Class of Shares of
the Initial Series (subject to Section 4(c) hereof) until
terminated in accordance with the provisions of Section 4(c)
hereof.
(b) Additional Series or Classes. This Plan shall
become effective with respect to any class of the Initial Series
other than Class A, Class B, Class C, and Class D, and in the
case of the MetLife - State Street Money Market Fund, Class E,
and with respect to each additional Series or class thereof
established by the Trust after the date hereof and made subject
to this Plan, upon commencement of operations thereof or as
otherwise determined, and shall continue in effect with respect
to each such additional Series or class (subject to Section 4(c)
hereof) until terminated in accordance with the provisions of
Section 4(c) hereof. An addendum hereto setting forth such
specific and different terms of such additional series of classes
shall be attached to this Plan.
(c) Termination. This Plan may be terminated at any
time with respect to the Trust or any Series or class thereof, as
the case may be, by vote of a majority of both the Trustees of
the Trust and the Qualified Trustees. The Plan may remain in
effect with respect to a Series or class thereof even if it has
been terminated in accordance with this Section 4(e) with respect
to such Series or class or one or more other Series of the Trust.
5. Amendments. Any material amendment to this Plan shall
require the affirmative vote of a majority of both the Trustees
of the Trust and the Qualified Trustees.
Dated: May 5, 1995
Exhibit (18)
POWER OF ATTORNEY
We, the undersigned MetLife - State Street Equity Trust
("Trust"), a Massachusetts business trust, its trustees, its
principal executive officer and its principal financial and
accounting officer, hereby severally constitute and appoint
Francis J. McNamara III and Darman A. Wing, as our true and
lawful attorneys, with full power to each of them alone to sign
for us, in our names and in the capacities indicated below, any
Registration Statements and any and all amendments thereto of the
Trust filed with the Securities and Exchange Commission and
generally to do all such things in our names and in the indicated
capacities as are required to enable the Trust to comply with
provisions of the Securities Act of 1933, as amended, and/or the
Investment Company Act of 1940, as amended, and all requirements
and regulations of the Securities and Exchange Commission, hereby
ratifying and confirming our signatures as they have been and may
be signed by our said attorneys to said Registration Statements,
and any and all amendments thereto.
IN WITNESS WHEREOF, we have hereunto set our hands, on this
24th day of August, 1995.
SIGNATURES
METLIFE - STATE STREET EQUITY TRUST
By: /s/ Ralph F. Verni
Ralph F. Verni, Chief Executive
Officer and President
/s/ Ralph F. Verni /s/ Thomas L. Phillips
Ralph F. Verni, Trustee and Thomas L. Phillips, Trustee
principal executive officer
/s/ Gerard P. Maus /s/ Toby Rosenblatt
Gerard P. Maus, Principal financial Toby Rosenblatt, Trustee
and accounting officer
/s/ Edward M. Lamont /s/ Michael S. Scott Morton
Edward M. Lamont, Trustee Michael S. Scott Morton, Trustee
/s/ Robert A. Lawrence /s/ Jeptha H. Wade
Robert A. Lawrence, Trustee Jeptha H. Wade, Trustee
/s/ Dean O. Morton
Dean O. Morton, Trustee
Exhibit (19)
METLIFE - STATE STREET EQUITY TRUST
Certificate of Resolution
I, the undersigned Darman A. Wing, hereby certify that I am
Assistant Secretary of MetLife - State Street Equity Trust (the
"Trust"), a Massachusetts business trust duly authorized and
validly existing under Massachusetts law, and that the following
is a true, correct and complete statement of a vote duly adopted
by the Trustees of said Trust on May 5, 1995:
"VOTED: That Francis J. McNamara III and
Darman A. Wing be, and each hereby is,
authorized and empowered, for and on
behalf of the Trust, its principal
financial and accounting officer, and in
their name, to execute, and file a Power
of Attorney relating to, the Trust's
Registration Statements under the
Investment Company Act of 1940 and/or
the Securities Act of 1933, and
amendments thereto, the execution and
delivery of such Power of Attorney,
Registration Statements and amendments
thereto, to constitute conclusive proof
of such authorization."
I further certify that said vote has not been amended or
revoked and that the same is now in full force and effect.
IN WITNESS WHEREOF, I have hereunto set my hand this 24th
day of August, 1995.
/s/ Darman A. Wing
Assistant Secretary
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<PERIOD-END> JUL-01-1994
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<INVESTMENTS-AT-VALUE> 507,247,508
<RECEIVABLES> 8,935,653
<ASSETS-OTHER> 31,975
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 516,215,136
<PAYABLE-FOR-SECURITIES> 14,342,379
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,577,923
<TOTAL-LIABILITIES> 15,920,302
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 382,174,839
<SHARES-COMMON-STOCK> 25,734,098
<SHARES-COMMON-PRIOR> 25,397,240
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 8,649,836
<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 500,294,834
<DIVIDEND-INCOME> 2,434,824
<INTEREST-INCOME> 401,245
<OTHER-INCOME> 0
<EXPENSES-NET> 6,556,129
<NET-INVESTMENT-INCOME> (3,720,060)
<REALIZED-GAINS-CURRENT> 12,149,840
<APPREC-INCREASE-CURRENT> 111,117,329
<NET-CHANGE-FROM-OPS> 119,547,109
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (11,280,742)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,331,406
<NUMBER-OF-SHARES-REDEEMED> 7,177,882
<SHARES-REINVESTED> 1,183,334
<NET-CHANGE-IN-ASSETS> 154,839,563
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 19,323,195
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,124,753
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,612,456
<AVERAGE-NET-ASSETS> 416,633,733
<PER-SHARE-NAV-BEGIN> 9.11
<PER-SHARE-NII> (0.09)
<PER-SHARE-GAIN-APPREC> 2.95
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.45)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.52
<EXPENSE-RATIO> 1.55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
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